Company Quick10K Filing
Sunrise Real Estate
Price0.22 EPS1
Shares69 P/E0
MCap15 P/FCF-2
Net Debt-19 EBIT65
TEV-4 TEV/EBIT-0
TTM 2018-12-31, in MM, except price, ratios
10-Q 2020-06-30 Filed 2021-01-28
10-Q 2020-03-31 Filed 2020-12-29
10-K 2019-12-31 Filed 2020-10-20
10-Q 2019-09-30 Filed 2020-07-31
10-Q 2019-06-30 Filed 2020-07-29
10-Q 2019-03-31 Filed 2020-06-17
10-K 2018-12-31 Filed 2019-08-23
10-Q 2018-09-30 Filed 2018-12-17
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-Q 2017-12-31 Filed 2018-05-15
10-Q 2017-09-30 Filed 2018-05-02
10-Q 2017-06-30 Filed 2018-04-20
10-Q 2017-03-31 Filed 2018-04-20
10-K 2016-12-31 Filed 2018-03-06
10-Q 2016-09-30 Filed 2018-01-03
10-Q 2016-06-30 Filed 2017-12-22
10-Q 2016-03-31 Filed 2017-12-20
10-K 2015-12-31 Filed 2017-10-24
10-Q 2015-09-30 Filed 2017-10-24
10-Q 2015-06-30 Filed 2017-10-23
10-Q 2015-03-31 Filed 2017-10-20
10-K 2014-12-31 Filed 2017-06-20
10-Q 2014-09-30 Filed 2016-03-17
10-Q 2014-06-30 Filed 2016-03-17
10-Q 2014-03-31 Filed 2016-01-13
10-K 2013-12-31 Filed 2014-12-16
10-Q 2013-09-30 Filed 2013-12-06
10-Q 2013-06-30 Filed 2013-08-19
10-Q 2013-03-31 Filed 2013-06-07
10-K 2012-12-31 Filed 2013-05-22
10-Q 2012-09-30 Filed 2012-11-26
10-Q 2012-06-30 Filed 2012-08-20
10-Q 2012-03-31 Filed 2012-05-21
10-K 2011-12-31 Filed 2012-04-16
10-Q 2011-09-30 Filed 2011-11-21
10-Q 2011-06-30 Filed 2011-08-19
10-Q 2011-03-31 Filed 2011-05-20
10-K 2010-12-31 Filed 2011-04-15
10-Q 2010-09-30 Filed 2010-11-17
10-Q 2010-06-30 Filed 2010-08-19
10-Q 2010-03-31 Filed 2010-05-17
10-K 2009-12-31 Filed 2010-04-15
8-K 2020-07-31
8-K 2019-11-08
8-K 2019-01-28
8-K 2018-10-29
8-K 2018-01-30

SRRE 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Organization and Description of Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Restricted Cash
Note 4 - Transactional Financial Assets
Note 5 - Real Estate Property Under Development
Note 6 - Other Receivables and Deposits, Net
Note 7 - Property and Equipment, Net
Note 8 - Investment Properties, Net
Note 9 - Investment in and Amount Due From An Unconsolidated Affiliate
Note 10 - Promissory Notes Payable
Note 11 - Amounts Due To Directors
Note 12 - Other Payables and Accrued Expenses
Note 13 - Account Payable
Note 14 - Amount Due To Affiliates
Note 15 - Customer Deposits
Note 16 - Income Tax Payable
Note 17 - Deferred Government Subsidy
Note 18 - Commitments and Contingencies
Note 19 - Statutory Reserve
Note 20 - Segment Information
Note 21 - Related Party Transactions
Note 22 - Subsequent Event
Item 2 Management's Discussion and Analysis of Finanical Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 tm2039498d1_ex31-1.htm
EX-31.2 tm2039498d1_ex31-2.htm
EX-32.1 tm2039498d1_ex32-1.htm

Sunrise Real Estate Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
2251761277829-202012201420172020
Assets, Equity
352720135-12013201520172019
Rev, G Profit, Net Income
35181-16-33-502012201420172020
Ops, Inv, Fin

10-Q 1 tm2039498d1_10q.htm FORM 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended June 30, 2020

 

¨ 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 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: January 28, 2021–68,691,925 shares of Common Stock

 

 

 

 

 

FORM 10-Q

 

For the Quarter Ended June 30, 2020 

 

INDEX

 

      Page 
PART I.  FINANCIAL INFORMATION   3 
Item 1.  Financial Statements (Unaudited)   3 
   Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019   3 
   Condensed Consolidated Statements of Operations for The Six Months Ended June 30, 2020 and 2019   4 
   Condensed Consolidated Statements of Stockholders’ Equity for The Six Months and Three Months Ended June 30, 2020 and 2019   5 
   Condensed Consolidated Statements of Stockholders’ Equity for The Six Months and Three Months Ended June 30, 2020 and 2019   6 
   Condensed Consolidated Statements of Cash Flows for The Six Months Ended June 30, 2020 and 2019   7 
   Notes to Condensed Consolidated Financial Statements   8 
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations   21 
Item 3.  Quantitative and Qualitative Disclosures About Market Risk   29 
Item 4.  Controls and Procedures   29 
         
PART II.  OTHER INFORMATION   30 
Item 1.  Legal Proceedings   30 
Item 1A  Risk Factors   30 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds   30 
Item 3.  Defaults Upon Senior Securities   30 
Item 4.  Mine Safety Disclosures   30 
Item 5.  Other Information   30 
Item 6.  Exhibits   31 
         
SIGNATURES   32 

 

2

 

 

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, 
   2020   2019 
ASSETS          
           
Current assets          
Cash and cash equivalents  $29,111,019   $15,900,753 
Restricted cash (Note 3)   38,346,579    8,383,359 
Transactional financial assets (Note 4)   26,705,794    27,818,996 
Accounts receivable   26,580    24,407 
Real estate property under development (Note 5)   93,071,511    85,909,986 
Amount due from an unconsolidated affiliate   262,249    257,633 
Other receivables and deposits, net (Note 6)   8,913,863    7,535,801 
Total current assets   196,437,595    145,830,935 
           
Property and equipment, net (Note 7)   1,209,509    1,203,850 
Investment properties, net (Note 8)   25,847,376    26,949,046 
Deferred tax assets (Note 15)   675,479    380,627 
Investment in an unconsolidated affiliate (Note 9)   12,589,030    12,775,441 
Goodwill   1,135,577    - 
Other investments   141,253    143,345 
Total assets  $238,035,819   $187,283,244 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)          
           
Current liabilities          
Promissory notes payable (Note10)   1,412,529    1,433,445 
Accounts payable (Note 13)   5,419,965    4,347,678 
Amounts due to directors (Note 11)   641,820    1,472,995 
Amount due to an affiliate (Note 14)   497,182    504,802 
Customer deposits (Note 15)   79,695,173    21,702,494 
Other payables and accrued expenses (Note 12)   14,709,901    14,531,098 
Other taxes payable   393,461    382,209 
Income taxes payable (Note 16)   856,886    1,037,349 
Total current liabilities   103,626,917    45,412,070 
           
Long-term income tax payable (Note 16)   2,760,761    2,933,308 
Deferred government subsidy (Note 17)   4,681,887    4,751,214 
Total liabilities   111,069,565    53,096,592 
           
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, 2020 and December 31, 2019, respectively   686,919    686,919 
Additional paid-in capital   7,570,008    7,570,008 
Statutory reserve (Note 19)   3,194,604    3,194,604 
Retained Earnings   102,589,868    105,326,252 
Accumulated other comprehensive income   11,312,957    13,676,579 
Total deficit of Sunrise Real Estate Group, Inc.   125,354,356    130,454,362 
Non-controlling interests   1,611,898    3,732,290 
Total shareholders’ equity   126,966,254    134,186,652 
Total liabilities and shareholders’ equity  $238,035,819   $187,283,244 

 

See accompanying notes to consolidated financial statements.

 

3

 

 

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, 
   2020   2019   2020   2019 
Net revenues  $388,298   $60,449   $721,983   $32,033,189 
Cost of revenues   (538,453)   (396,655)   (1,160,969)   (25,750,467)
Gross profit (loss)   (150,155)   (336,206)   (438,986)   6,282,722 
                     
Operating expenses   (1,153,284)   (493,009)   (2,348,025)   (832,663)
General and administrative expenses   (733,384)   (1,297,512)   (1,256,803)   (7,483,796)
Operating profit (loss)   (2,036,823)   (2,126,727)   (4,043,814)   (2,033,737)
                     
Other income (expenses)                    
Interest income   99,860    28,453    159,777    39,668 
Interest expense   16    -    -    - 
Other income (loss), net   376,346    764,448    366,949    1,281,346 
Total other Income   476,222    792,901    526,726    1,321,014 
                     
Income (loss) before income taxes   (1,560,601)   (1,333,826)   (3,517,088)   (712,723)
                     
Income tax benefit (expense)   133,433    34,851    301,551    65,307 
                     
Net income (loss)   (1,427,168)   (1,298,975)   (3,215,537)   (647,416)
Less: Net (income) loss attributable to non-controlling interests   218,577    494,178    479,153    2,586,666 
Net income attributable to shareholders of Sunrise Real Estate Group, Inc.  $(1,208,591)  $(804,797)  $(2,736,384)  $1,939,250 
Net income   (1,427,168)   (1,298,975)   (3,215,537)   (647,416)
Other comprehensive income Foreign currency translation adjustment   (1,810,986)   (284,243)   (4,004,861)   2,267,734 
Discontinuation of the equity method for an investment   -    -    -    21,313,293 
Comprehensive income   (3,238,154)   (1,583,218)   (7,220,398)   22,933,611 
                     
Less: Comprehensive income attributable to non-controlling interests   64,890    (3,551,811)   2,120,392    (1,496,309)
Total comprehensive income attributable to shareholders   (3,173,264)   (5,135,029)   (5,100,006)   21,437,302 
Earnings per share – basic and fully diluted  $(0.02)  $(0.01)  $(0.04)  $0.03 
                     
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.

 

4

 

 

SUNRISE REAL ESTATE GROUP, INC.

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, 2019   68,691,925   $686,919   $7,570,008   $3,194,604   $105,326,252   $13,676,579   $3,732,290   $134,186,652 
Profit (loss) for the year                       (2,736,384)        (479,153)   (3,215,537)
Discontinuation of the equity method for an investment   -    -    -    -    -    -    -    - 
Capital contribution from non-controlling interests of new consolidated subsidiaries   -    -    -    -         -    -      
Translation of foreign operations   -    -    -    -    -    (2,363,622)   (1,641,239)   (4,004,861)
Balance, June 30, 2020   68,691,925    686,919    7,570,008    3,194,604    102,589,868    11,312,957    1,611,898    126,966,254 

 

   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, March 31, 2020   68,691,925   $686,919   $7,570,008   $3,194,604   $103,724,776   $11,554,847   $3,399,571   $130,130,725 
Profit (loss) for the year                       (1,134,908)        (218,577)   (1,353,485)
Translation of foreign operations   -    -    -    -    -    (241,890)   (1,569,096)   (1,810,986)
Discontinuation of the equity method for an investment                            -         - 
Capital contribution to a new consolidated subsidiary                                        
Balance, June 30, 2020   68,691,925    686,919    7,570,008    3,194,604    102,589,868    11,312,957    1,611,898    126,966,254 

 

See accompanying notes to consolidated financial statements.

 

5

 

 

SUNRISE REAL ESTATE GROUP, INC.

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                       1,939,250         (2,586,666)   (647,416)
Discontinuation of the equity method for an investment   -    -    -    -    -    21,313,293    -    21,313,293 
Capital contribution from non-controlling interests of new consolidated subsidiaries   -    -    -    -    (86,589)   -    -    (86,589)
Translation of foreign operations   -    -    -    -    -    (1,815,241)   4,082,975    2,267,734 
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 

 

  

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, March 31, 2019   68,691,925   $686,919   $7,570,008   $3,194,604   $109,389,240   $21,531,005   $(167,308)  $142,204,468 
Profit (loss) for the year                       (804,797)        (494,178)   (1,298,975)
Translation of foreign operations   -    -    -    -    -    (4,832,153)   4,045,989    (777,164)
Discontinuation of the equity method for an investment                            -         - 
Capital contribution to a new consolidated subsidiary                       (3,885)             (3,885)
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 

 

See accompanying notes to consolidated financial statements.

 

6

 

 

SUNRISE REAL ESTATE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Expressed in U.S. Dollars)

 

   Six Months Ended June 30, 
   2020   2019 
Cash flows from operating activities          
Net income  $(3,215,537)  $(647,416)
           
Adjustments to reconcile net income (loss) to net cash used in operating activities          
Depreciation and amortization   2,285,233    172,362 
Loss (Gain) on disposal of property, plant and equipment   2,506    16,008 
Bad debts   -    2,553,437 
Equity in net loss (income) of unconsolidated affiliates   -    - 
Changes in assets and liabilities          
Accounts receivable   (2,544)   77,955 
Promissory deposits   -    - 
Real estate property under development   (8,463,612)   (36,689,016)
Customer Deposits   58,645,675    (24,583,558)
Amount due from unconsolidated affiliates   (8,680)   3,005,569 
Other receivables and deposits   (1,496,603)   964,143 
Deferred tax assets   (302,139)   (65,926)
Net cash from directors   (814,352)   (1,414,698)
Accounts payable   1,142,277    (4,214,306)
Other payables and accrued expenses   393,087    13,859,771 
Other taxes payable   16,926    (8,112)
Income taxes payable   (338,827)   84,554 
Net cash provided by operating activities   47,843,410    (46,889,233)
           
Cash flows from investing activities          
Purchases of property and equipment   (139,333)   (275,326)
Net Cash from Transactional financial assets   711,363    12,448,592 
Acquisition of investment   (1,412,529)     
Dividend distribution of affiliates   -    39,848,406 
Net cash provided by (used in) investing activities   (840,499)   52,021,672 
           
Cash flows from financing activities          
Restricted cash   (30,259,077)   287,215 
Dividends paid to noncontrolling interests   -    (6,965,713)
Net cash used in financing activities   (30,259,077)   (6,678,498)
           
Effect of exchange rate changes on cash and cash equivalents   (3,533,568)   2,333,001 
           
Net increase in cash and cash equivalents   13,210,266    786,942 
Cash and cash equivalents at beginning of period   15,900,753    17,656,165 
Cash and cash equivalents at end of period  $29,111,019   $18,443,107 
           
Supplemental disclosure of cash flow information          
Income taxes paid  $353,176   $- 
Interest paid   -    - 

 

See accompanying notes to consolidated financial statements.

 

7

 

 

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, 2020, 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

 

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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
                   

 

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

 

  2. 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.

 

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

 

  4. We established HATX 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, 2019, 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 Sunrise Real Estate as of June 30, 2020 and the results of operations for the six months ended June 30, 2020 and 2019, and the cash flows for the six months ended June 30, 2020 and 2019. 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, 2019. The results of operations for the six months ended June 30, 2020 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.

 

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The exchange rates as of June 30, 2020 and December 31, 2019 are $1: RMB7.0795 and $1: RMB6.9762, 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.

 

In October 2018, we established HATX for the purpose of for real estate development in Huai’an through HAZB of which we have 78.46% ownership. HAZB purchased the property in Qingjiang Pu District, Huai’an City, Jiangsu Province, 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 first phase development in early 2019 with a gross floor area (“GFA”) of 82,218 sqm totaling 679 units. As of November 30, 2020, the Company pre-sold 672 out of 679 units.

 

In September 2020, LYSY had purchased a land area of 54,314 square meters for RMB228,120,000 (approximately USD32,197,146), which is south to our developed land

 

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.

 

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 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 from local governments in the People's Republic of China (“PRC”).

 

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 June 30, 2020, and December 31, 2019, the deferred government subsidy amounted to $4,681,887 and $4,751,214, 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.

 

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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 June 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amends the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the incurred-loss model with an expected-loss model. Accordingly, these financial assets are now presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the former other-than-temporary-impairment model. We adopted this standard as of January 1, 2020, using a modified-retrospective approach. Adoption of the standard did not have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued a new accounting standard update which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The update eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and introduces a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this new accounting standard on January 1, 2020, using the prospective method, and the adoption did not have a material impact on our consolidated financial statements.

 

In November 2018, the FASB issued Accounting Standards Update No. 2018-18 “Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606” (“ASU 2018-18”). ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606, “Revenue from Contracts with Customers” when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as customer revenue if the counterparty is not a customer for that transaction. On January 1, 2020, we adopted this standard and applied it retrospectively to January 1, 2018 when we initially adopted Topic 606. The adoption did not have an impact on our consolidated financial statements.

 

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, 2020, and December 31, 2019, the Company held cash deposits of $38,346,579 and $8,383,359, respectively.

 

NOTE 4 – TRANSACTIONAL FINANCIAL ASSETS

 

As of June 30, 2020, we have $26,705,794 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 – 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 at 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 pre-sold 118 of 121 Phase 1 villas and pre-sold 82 of 84 Phase 2 villas as of November 30, 2020.

 

 On March 13, 2014, the Company 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. 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 financial statement for the period ended Q2, 2019.

 

In the first quarter of 2019, we purchased the property of HATX with the land use rights. As of June 30, 2020, land use rights included in real estate property under development totaled $93,071,511.

 

In October 2018 we established HATX for the purpose of real estate development in Huaian 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, purchased 78.46% of the shares in HAZB. The Huaian project, named Tianxi Times, started its first phase development in early 2019 with a GFA of 82,218 sqm totaling 679 units. As of November 30, 2020, the Company pre-sold 672 out of 679 units.

 

NOTE 6 – OTHER RECEIVABLES AND DEPOSITS, NET

 

   June 30,   December 31, 
   2020   2019 
Advances to staff  $27,721    19,172 
Rental deposits   41,353    40,575 
Prepaid expense   54,563    318,424 
Prepaid tax   5,389,267    2,378,199 
Other receivables   3,400,959    4,779,431 
   $8,913,863   $7,535,801 

 

Other receivables and deposits as of June 30, 2020 and December 31, 2019 were stated net of allowance for doubtful accounts of $40,451 and $327,739, respectively.

 

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NOTE 7 – PROPERTY AND EQUIPMENT, NET

 

   June 30,   December 31, 
   2020   2019 
Furniture and fixtures  $256,661   $175,170 
Computer and office equipment   199,165    203,581 
Motor vehicles   579,945    588,532 
Properties   2,143,164    2,168,726 
    3,178,935    3,135,990 
Less: Accumulated depreciation   (1,969,426)   (1,932,140)
   $1,209,509   $1,203,850 

 

Depreciation and amortization expense for property and equipment amounted to $78,408 and $147,129 for the six months ended June 30, 2020 and 2019, respectively.

 

NOTE 8 – INVESTMENT PROPERTIES, NET

 

   June 30,   December 31, 
   2020   2019 
Investment properties  $32,826,327   $33,312,403 
Less: Accumulated depreciation   (6,978,951)   (6,363,357)
   $25,847,376   $26,949,046 

 

Depreciation and amortization expense for investment properties amounted to $2,172,415 and $438,387 for the six months ended June 30, 2020 and 2019, respectively.

 

NOTE 9 – 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 June 30, 2020, the investment amount in WHYYL and SHDEW were $0 and $12,515,861, 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 to acquire 49% equity interest in WHYYL to expand its operations to the real estate development business. As of June 30, 2020, 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 ten 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 operates its own online shopping platform where consumers can purchase its n cosmetics and skincare products as well as products imported into China.

 

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NOTE 10 – 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 $1,412,529 and $1,433,445 as of June 30, 2020 and December 31, 2019, respectively.

 

The promissory note with a principal as of June 30, 2020 amounting to $706,265 bears interest at a rate of 0% per annum, is unsecured and has no fixed term of repayment. As of June 30, 2020, and December 31, 2019, the outstanding principal and unpaid interest related to this promissory note amounted to $706,265 and $716,723, respectively.

 

The promissory note with a principal as of June 30, 2020 amounting to $706,265 bears interest at a rate of 0% per annum, is unsecured and has no fixed term of repayment. As of June 30, 2020, and December 31, 2019, the outstanding principal and unpaid interest related to this promissory note amounted to $706,265 and $716,723, respectively.

 

For the six months ended June 30, 2020, the interest expense related to these promissory notes was $NIL.

 

NOTE 11 – AMOUNTS DUE TO DIRECTORS

 

   June 30,   December 31, 
   2020   2019 
Lin Chi-Jung  $621,347   $1,469,315 
Pan, Yu-Jen   -    (28,669)
Lin Hsin-Hung   20,473    32,349 
   $641,820   $1,472,995 

 

(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 12 – OTHER PAYABLES AND ACCRUED EXPENSES

 

   June 30,   December 31, 
   2020   2019 
Accrued staff commission and bonus  $221,572   $221,674 
Rental deposits received   119,979    117,328 
Bid bond   122,890    222,184 
Dividends payable to non-controlling interest   190,063    192,877 
Other payables   14,055,397    13,777,035 
   $14,709,901   $14,531,098 

 

NOTE 13 – ACCOUNT PAYABLE

 

Account payable was mostly derived from our property development of Linyi project and the HATX project. As of June 30, 2020, and December 31, 2019, the Company’s account payable amounted to $5,419,965 and $4,347,678.

 

NOTE 14 – AMOUNT DUE TO AFFILIATES

 

The temporary borrowing, in the amount of $497,182 from JXSY is intercompany transfers for day to day operation.

 

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NOTE 15 – CUSTOMER DEPOSITS

 

Customer deposits consisted of the sales from real estate development project (the Linyi project and the HATX project) which cannot be recognized as revenue at the accounting period and deposits received for rental.

 

The Linyi project has started pre-sales in November 2013 and in the year of 2019, the Project has recognized its revenue along with customer deposit, as of June 30, 2020, the pre-sales amounted to $26,454,895. The HATX project has started pre-sales in December 2019, as of June 30, 2020 the pre-sales amounted to $53,237,301.

 

NOTE 16 – 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 17 – 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 June 30, 2020 and December 31, 2019, the Company’s deferred government subsidy amounted to $4,681,887 and $4,751,214, respectively. The subsidy is given to reimburse the land acquisition costs and certain construction costs incurred for the Company’s property development project and is 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 18 – 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 six months ended June 30, 2020 and 2019 were $18,165 and $205,743, respectively.

 

As of June 30, 2020, the Company had the following operating lease obligations.

 

   Amount 
Within one year  $186,191 
Two to five years   - 
   $186,191 

 

NOTE 19 – 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.

 

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

 

In addition to the general reserve, the Company’s PRC subsidiaries are required to obtain approval from the local PRC government prior to distributing any registered share capital. Accordingly, both the appropriations to general reserve and the registered share capital of the Company’s PRC subsidiary are considered as restricted net assets and are not distributable as cash dividends. As of June 30, 2020, and December 31, 2019, the Company’s statutory reserve fund was $3,194,604 and $3,194,604, respectively.

 

NOTE 20 – 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 June 30, 2020 
   Property                 
   Brokerage   Real Estate   Investment         
   Services   Development   Transaction   Others   Total 
Net revenues  $318,713   $69,585   $-   $-   $388,298 
Cost of revenues   (287,097)   (251,356)   -    -    (538,453)
Gross profit   31,616   (181,771)   -    -    (150,155)
                          
Operating expenses   (556,671)   (596,613)   -    -    (1,153,284)
General and administrative expenses   (384,325)   (260,168)   -    (88,891)   (733,384)
Operating loss   (909,380)   (1,038,552)        (88,891)   (2,036,823)
                          
Other income (expenses)                         
Interest income   19,631    78,799    -    1,430    99,860 
Interest expense   16    -         -    16 
Other income, Net   8,327    2,405    365,614         376,346 
Total other (expenses) income   27,974    81,204    365,614    1,430    476,222 
                          
Income (loss) before income taxes   (881,406)   (957,348)   365,614    (87,461)   (1,560,601)
Income tax   133,433    -    -    -    133,433 
Net Income( loss)  $(747,973)  $(957,348)  $365,614   $(87,461)  $(1,427,168)

 

18

 

 

   Six Months Ended June 30, 2020 
   Property                 
   Brokerage   Real Estate   Investment         
   Services   Development   Transaction   Others   Total 
Net revenues  $622,812   $99,171   $-   $-   $721,983 
Cost of revenues   (616,048)   (544,921)   -    -    (1,160,969)
Gross profit   6,764    (445,750)   -    -    (438,986)
                          
Operating expenses   (1,070,730)   (1,277,295)   -    -    (2,348,025)
General and administrative expenses   (674,888)   (487,190)   -    (94,725)   (1,256,803)
Operating loss   (1,738,854)   (2,210,235)   -    (94,725)   (4,043,814)
                          
Other income (expenses)                         
Interest income   32,932    123,899    -    2,946    159,777 
Interest expense   -    -    -    -    - 
Other income, Net   843    3,046    363,057    -    366,949 
Total other (expenses) income   33,775    126,948    363,057    2,946    526,726 
                          
Income (loss) before income taxes   (1,705,079)   (2,083,287)   363,057    (91,779)   (3,517,088)
Income tax   301,551    -    -    -    301,551 
Net Income (loss)  $(1,403,528)  $(2,083,287)  $363,057   $(91,779)  $(3,215,537)

 

   Three Months Ended June 30, 2019 
   Property                 
   Brokerage   Real Estate   Investment         
   Services   Development   Transaction   Others   Total 
Net revenues  $60,449   $-   $-   $-   $60,449 
Cost of revenues   (396,655)   -    -    -    (396,655)
Gross profit   (336,206)   -    -    -    (336,655)
                          
Operating expenses   (217,689)   (275,228)   -    (92)   (493,009)
General and administrative expenses   (899,939)   (276,558)   -    (121,015)   (1,297,512)
Operating loss   (1,453,834)   (551,786)        (121,015)   (2,126,727)
                          
Other income (expenses)                         
Interest income   2,570    20,055    -    5,828    28,453 
Interest expense   -    -         -      
Other income, Net   (2,322)   (783)   767,553         764,448 
Equity in net income (loss) of unconsolidated affiliates   -    -         -    - 
Total other (expenses) income   248    19,272    767,553    5,828    792,901 
                          
Income (loss) before income taxes   (1,453,586)   (989,772)   767,553    (115,279)   (1,333,826)
Income tax   34,851    -    -    -    34,851 
Net Income( loss)  $(1,418,735)  $(989,772)  $767,553   $(115,279)  $(1,298,975)

 

19

 

 

   Six Months Ended June 30, 2019 
   Property                 
   Brokerage   Real Estate   Investment         
   Services   Development   Transaction   Others   Total 
Net revenues  $890,370   $2,607,700   $-   $-   $3,498,070 
Cost of revenues   (490,703)   (1,596,897)   -    -    (2,087,600)
Gross profit   399,667    1,010,803    -    -    1,410,470 
                          
Operating expenses   (690,421)   (401,524)   -    (182)   (1,092,127)
General and administrative expenses   (426,358)   (379,389)   -    (312,157)   (1,117,904)
Operating loss   (717,112)   229,890    -    (312,339)   (799,561)
                          
Other income (expenses)                         
Interest income   20,556    4,743    -    5,095    30,394 
Interest expense   -    (142,710)   (2,159,586)   -    (2,302,296)
Other income, Net   (174,476)   (144,972)   606,109    (263)   286,398 
Equity in net income (loss) of unconsolidated affiliates   -    -    31,336,158    -    29,350,654 
Total other (expenses) income   (153,920)   (282,939)   29,782,680    4,832    28,551,093 
                          
Income (loss) before income taxes   (871,031)   (53,049)   29,782,680    (307,507)   28,551,093 
Income tax   (52,383)   71,320    -    -    18,937 
Net Income (loss)  $923,414   $18,271   $29,782,680   $(307,507)  $28,570,030 

 

   Property                 
   Brokerage   Real Estate   Investment         
   Services   Development   Transaction   Others   Total 
As of June 30, 2020                         
Real estate property under development  $-   $93,071,511   $-   $-   $93,071,511 
Total assets   5,466,658    128,586,174    39,436,077    64,546,910    238,035,819 
                          
As of June 30, 2019                         
Real estate property under development   -    82,205,761    -    -    82,205,761 
Total assets  $10,670,092   $61,481,808   $50,147,062   $61,392,273   $183,691,235 

 

NOTE 21 – RELATED PARTY TRANSACTIONS

 

We rented an office of nearly 192 square meters in downtown Shanghai for displaying purpose from Mrs. Zhang Shuqing, our related party in the year of 2020.

 

NOTE 22 – SUBSEQUENT EVENT

 

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

 

In September 2020, LYSY had purchased an land area of 54,314 square meters for RMB228,120,000 (approximately USD32,197,146), which is attached to the south border of our developed land.

 

20

 

 

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”.

  

21

 

 

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 real estate agency sales, real estate marketing services, real estate investments, property leasing services, property management services, and real estate development in the PRC. Additionally, we expand our business to the field of financial activities such as entity investment, fund management, financial services and so on.

 

Since we started our agency sales operations in 2001, we have established a reputation as a sales and marketing agency for new projects. With our accumulated expertise and experience, we intend to take a more aggressive role by participating in property investments. We plan to select property developers with outstanding qualifications as our strategic partners, and continue to build strength in design, planning, positioning and marketing services.

 

In October 2011, we established LYSY and own 24% of the company. On May 27, 2020, LYRL received 10% of the shares of LYSY from Nanjing Longchang Real Estate Development Group. LYRL owns 34% of LYSY as of May 2020. 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 phase 1 and phase 2. The phase 1 has completed construction of 121 units in May 2015 and the phase 2 will complete construction of 84 units at the end of the year of 2020. The sales of phase 1 started in November 2013, we sold 118 units out of all 121 units by November 30, 2020. We also pre-sold 82 units out of all 84 units during phase 2 by November 30, 2020. In September 2020, LYSY had purchased a land of area 54,314 square meters for RMB228,120,000 (approximately USD32,197,146), which is attached to the south border of our developed land.

 

On March 13, 2014, the Company 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 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 apartments. 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, we 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 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 financial statement of the second quarter in 2019.

 

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 ten million members as of June 30, 2020. 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 an online shopping app, “庭秘密,” where consumers can purchase its cosmetics and skincare products as well as products imported into China.

 

In October 2018, we established HATX for real estate development in Huai’an through HAZB of which we have 78.46% ownership. HAZB purchased the property in Qingjiang Pu district, Huai’an city 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 first phase development in early 2019 with a GFA of 82,218 sqm totaling 679 units. As of November 30, 2020, the Company pre-sold 672 out of 679 units.

 

In December 2019, SHDEW issued an employee stock bonus where many of its employees received their vested shares. This issuance 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 regarding 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.

  

22

 

 

RECENTLY ADOPTED ACCOUNTING STANDARDS

 

In June 2016, the Financial Accounting Standards Board (FASB) issued a new accounting standard that amends the guidance for measuring and recording credit losses on financial assets measured at amortized cost by replacing the incurred-loss model with an expected-loss model. Accordingly, these financial assets are now presented at the net amount expected to be collected. This new standard also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the former other-than-temporary-impairment model. We adopted this standard as of January 1, 2020, using a modified-retrospective approach. Adoption of the standard did not have a material impact on our consolidated financial statements.

 

In August 2018, the FASB issued a new accounting standard update which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The update eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and introduces a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this new accounting standard on January 1, 2020, using the prospective method, and the adoption did not have a material impact on our consolidated financial statements.

 

In November 2018, the FASB issued Accounting Standards Update No. 2018-18 “Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606” (“ASU 2018-18”). ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606, “Revenue from Contracts with Customers” when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as customer revenue if the counterparty is not a customer for that transaction. On January 1, 2020, we adopted this standard and applied it retrospectively to January 1, 2018 when we initially adopted Topic 606. The adoption did not have an impact on our consolidated financial statements.

 

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.

 

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.

 

23

 

 

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

 

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. 

 

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.

 

24

 

 

Government Subsidies

 

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

 

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

 

The 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 June 30, 2020 and December 31, 2019.

  

RESULTS OF OPERATIONS

 

We provide the following discussion and analyses of our changes in financial condition and results of operations for the 3 months and 6 months period ended June 30, 2020 with comparisons to the same periods ended June 30, 2019.

 

Revenue

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2020   % to
total
   2019   % to
total
   %
change
   2020   % to
total
   2019   % to
total
   %
change
 
Agency sales   127,726    34    70,688    28    80    237,942    33    165,389    1    44 
Property management   245,152    66    183,450    72    33    484,041    67    282,563    1    71 
House sales   -    0    -    0         -         31,582,237    98    (100)
Net revenues   372,878    100    254,137    100    47    721,983    100    32,033,189    100    (98)

 

The net revenue in the second quarter of 2020 was $372,878, which increased 47% from $254,137 in the second quarter of 2019. The net revenue in the first two quarters of 2020 was $721,983, which represented a decrease of 98% from $32,033,189 in the first two quarter of 2019. In the second quarter of 2020, agency sales, property management, and house sales represented 34%, 66%, and 0% of our net revenues, respectively. For the first two quarters of 2020, agency sales, property management, and house sales represented 33%, 67%, and 0% of our net revenues, respectively. The decrease in net revenue in the first two quarter of 2020 was mainly due to we recognized the sales revenue of the GXL project in the first quarter of 2019.

 

25

 

 

Agency sales

 

For the second quarter and first two quarters of 2020, 34% and 33%, respectively, of our net revenues were attributable to agency sales. As compared with the same period in 2019, net revenue of agency sales increased 80% and 44%, respectively, for the second quarter and the first two quarters of 2020.

 

Property Management

 

Property management represented 67% of our revenue for the first two quarters of 2020 and revenue from property management increased by 71% compared with the same period in 2019.

 

House sales

 

For the first two quarters of 2020, the Company has not recognized any revenue of house sales. House sales represented 0% of our revenue for the first two quarter of 2020.

 

Cost of Revenue

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2020   % to
total
   2019   % to
total
   %
change
   2020   % to
total
   2019   % to
total
   %
change
 
Agency sales   155,280    30    59,149    15    162    258,303    22    116,764    1    121 
Property management   354,407    70    336,521    85    5    902,666    78    445,004    2    103 
House sales   -    -    -    0         -         25,188,699    97    (100)
Cost of revenues   509,687    100    395,670    100    29    1,160,969    100    25,750,467    100    (95)

 

The cost of revenues for the second quarter of 2020 was $509,687, which increased 29% from $395,670 during the second quarter of 2019. The cost of revenues of the first two quarters of 2020 was $1,160,969, which decreased 95% from $25,750,467 during the first two quarters of 2019. For the second quarter of 2020, agency sales, property management, and house sales represented 30%, 70%, and 0% of our cost of revenues, respectively. For the first two quarters of 2020, agency sales, property management, and house sales represented 22%, 78%, and 0% of our cost of revenues, respectively. The increase in the cost of revenue in the second quarter and decrease in the first two quarters of 2020 was mainly no cost of revenue was recognized for house sales.

  

Agency sales

 

The cost of revenue for agency sales for the first two quarters of 2020 was $258,303, an increase of 121% from $116,754 for the same period in 2019. This increase was mainly due to the increase in our commissions from the increase in agency sales in the first two quarter of 2020.

 

Property management

 

The cost of revenue for property management for the first two quarters of 2020 was $902,666, an increase of 103% from $445,004 for the same period in 2019. This was mainly due to more business for property management.

 

House sales

 

For the first two quarters of 2020, the Company has not recognized any cost of revenue for house sales. House sales represented 0% of our cost of revenue for the first two quarters of 2020.

 

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Operating Expenses

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2020   % to
total
   2019   % to
total
   %
change
   2020   % to
total
   2019   % to
total
   %
change
 
Agency sales   19,917    2    29,544    6    (32)   47,141    2    61,884    7    (23)
Property management   588,540    54    185,886    38    216    1,130,584    48    301,562    36    274 
House sales   489,618    44    275,555    56    77    1,170,300    50    469,216    57    149 
Operating expenses   1,098,075    100    490,986    100    123    2,348,025    100    832,663    100    182 

  

The operating expenses for the second quarter of 2020 were $1,098,075, which increased 123% from $490,986 for the same period in 2019. The total operating expenses for the first two quarters of 2020 were $2,348,025, which increased 182% from $832,663 for the same period in 2019. In the second quarter of 2020, agency sales, property management, and house sales represented 2%, 54%, and 44% of the total operating expenses, respectively. For the first two quarters of 2020, agency sales, property management, and house sales represented 2%, 48%, 50% of the total operating expenses, respectively. The increase in the overall operating expense resulted from the increase in house sales and property management for the second quarter and the first two quarters of 2020.

 

Agency sales

 

The operating expenses for agency sales for the first two quarters of 2020 were $47,141, a decrease of 23% from $61,884 for the same period in 2019.

 

Property management

 

The operating expenses for property management for the first two quarters of 2020 were $1,130,584, an increase of 274% from $301,562 in the same period in 2019. The increase is mainly due to consulting expenses and re-decorating relating to the business.

 

House sales

 

The operating expenses for house sales for the first two quarters of 2020 were $1,170,300 which increased 149% from $469,216 for the same period in 2019.

  

General and Administrative Expenses

 

General and administrative expenses for the first two quarters of 2020 were $1,256,803, which decreased by 83% from $7,483,796 for same periods in 2019.

 

Equity in net gain (loss) of affiliates

 

Equity in net loss for the first two quarters of 2020 was $61,988. The equity in net loss of affiliates was mainly the investment value variety of WHYYL and SHDEW.

 

Other income, net

 

Other income for the first two quarters of 2020 was $428,937, a decrease of 66% from gain of $1,281,346 for the same period in 2019. The income decreased mainly due to the less quantity of transactional financial assets.

 

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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 as of June 30, 2020 was $641,820. The amounts due are as follows:

 

Amount due to Lin Chi-Jung

 

The balances due to Lin Chi-Jung consist of temporary advances in the amount of $621,347 and are unsecured, interest-free and have no fixed term of repayment.

 

Amount due to Lin Hsin Hung

 

The amount of $20,473 represents the salary payable to Lin Hsin Hung.

 

Amount due to affiliate

 

The amount due to JXSY, in the amount of $497,182 were intercompany transfers for day to day operation.

 

LIQUIDITY AND CAPITAL RESOURCES

 

For the first two quarters of 2020, 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 $29,111,019.

 

The Company’s operating activities provided cash in the amount of $47,843,410, which was primarily attributable to the customer deposits and receipts in advance from our real estate project.

 

The Company’s investing activities used cash resources of $840,499, which was primarily attributable to the acquisition of investments.

 

The Company’s financing activities used cash resources of $30,259,077, which was primarily attributable to the restricted cash.

 

The potential cash needs for 2020 include the investment in transactional financial assets, the rental guarantee payments and promissory deposits for various property projects as well as our development of the Linyi project and the Huai’an 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.

 

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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

 

A. Material weaknesses

 

As discussed in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2019, 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.

  

B. Evaluation of Disclosure Controls and Procedures

 

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

 

C. Changes in Internal Control over Financial Reporting

 

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.

 

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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, 2019.

 

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.

 

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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

 

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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: January 28, 2021
By: /s/ Zhang, Jian  
Zhang, Jian, Chief Executive Officer, Principal Executive Officer
 
Date: January 28, 2021
By: /s/ Mi, Yong Jun  
Mi, Yong Jun, Chief Financial Officer, Principal Financial Officer

 

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