10KSB

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-KSB

(Mark One)

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the fiscal year ended: December 31, 2007

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

Commission file number: 000-32585

SUNRISE REAL ESTATE GROUP, INC.

(Name of Small Business Issuer in its Charter)

Texas	6351	75-2713701
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

Suite 701, No. 333, Zhaojiabang Road

Shanghai, PRC 200032

(Address of Principal Executive Offices) (Zip Code)

Issuer's telephone number: + 86-21-6422-0505

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value

Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x

The issuer's net revenues for its most recent fiscal year ended December 31, 2007 were US$8,101,324.

As of May 9, 2008 the aggregate market value of the Common Stock held by non-affiliates, 14,334,375 shares of Common Stock, was $8,421,445 based on an average of the bid and ask prices of $0.5875 per share of Common Stock on such date.

The number of shares outstanding of the issuer's Common Stock, $0.01 par value, as of May 9, 2008 was 23,691,925 shares.

Transitional Small Business Disclosure Format (check one): Yes o No x

SUNRISE REAL ESTATE GROUP, INC.

FORM 10-KSB

TABLE OF CONTENTS

		Page
PART I
Item 1.	Description of Business	2
Item 2.	Description of Property	8
Item 3.	Legal Proceedings	8
Item 4.	Submission of Matters to a Vote of Security Holders	8
PART II
Item 5.	Market for Common Equity and Related Stockholder Matters	9
Item 6.	Management's Discussion and Analysis or Plan of Operation	9
Item 7.	Financial Statements	23
Item 8.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	39
Item 8A.	Controls and Procedures	39
Item 8B.	Other Information	40
PART III
Item 9.	Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(A) of the Exchange Act	41
Item 10.	Executive Compensation	44
Item 11.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	45
Item 12.	Certain Relationships and Related Transactions and Director Independence	45
Item 13.	Exhibits	46
Item 14.	Principal Accountant Fees and Services	46

1

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Corporate History

Sunrise Real Estate Group, Inc. ("SRRE") was incorporated in the State of Texas on October 10, 1996, under the name of Parallax Entertainment, Inc (“Parallax”). On October 28, 2003, Olympus Investment Corporation, a Brunei corporation, based in Taipei, Taiwan, purchased all of the 78,400 shares of common stock owned by Yarek Bartosz, and then became the majority, 51% shareholder of SRRE. Effective December 12, 2003, the name of SRRE, Parallax Entertainment, Inc., was changed to Sunrise Real Estate Development Group, Inc. Also effective in December 2003, the outstanding shares of common stock, 153,262 shares, underwent a reverse split of one for five, resulting in 30,614 shares being issued and outstanding, post reverse split. Thereafter, on December 27, 2003, SRRE sold in a private placement to non-US persons 6,600,000 shares of common stock for $0.025 per share, for an aggregate amount of $165,000. SRRE relied on the Regulation S exemption from the registration requirements of the Securities Act of 1933 in connection with this private placement. On April 25, 2006, Sunrise Estate Development Group, Inc. filed Articles of Amendment with the Texas Secretary of State, changing the name of Sunrise Real Estate Development Group, Inc. to Sunrise Real Estate Group, Inc., effective from May 23, 2006.

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

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

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

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

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

2

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

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

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

General Business Description

SRRE was incorporated on October 10, 1996 as a Texas corporation and was formerly known as Parallax Entertainment, Inc. SRRE has gone through a series of transactions leading to the completion of a reverse merger on October 5, 2004. Prior to the closing of the exchange agreements described in “Corporate History” above, SRRE was an inactive "shell" company. Following the closing, SRRE, through its two wholly owned subsidiaries, CY-SRRE and LRY, has engaged in the property brokerage services, real estate marketing services, property leasing services and property management services in the PRC.

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

The Company recognizes that in order to differentiate itself from the market, it should avoid direct competition with large-scale property developers who have their own marketing departments. Our objective is to develop a niche position with marketing alliances with medium size and smaller developers, and become their outsourcing marketing and sales agents.

SRRE operates through a tier of wholly owned subsidiaries of Sunrise Real Estate Development Group, Inc., a Cayman Islands corporation ("CY-SRRE") and LIN RAY YANG Enterprise, Ltd., a British Virgin Islands company ("LRY"). Neither CY-SRRE nor LRY have operations but conduct operations in Mainland China through their respective subsidiaries that are based in the PRC. CY-SRRE operates through its wholly owned subsidiary, SHXJY. LRY operates through its two wholly owned subsidiaries, SHSY and SZGFH. SHXJY is a property agency business earning commission revenue from marketing and sales services to developers. SHSY is a property investment company, through this subsidiary we ventured into a higher risk business model whereby our commission is equivalent to the price difference between the final selling price and underwriting price (the “Underwriting Model”). The main business of SZGFH is to render property rental service, buildings management and maintenance service for office buildings and service apartments. Our company organization chart is as follows:

Figure 1: Company Organization Chart

3

Celebrity-turned-entrepreneur, Lin Chi Jung, and the founder of Taiwan's top property sales agency, Lin Chao Chin, established SHXJY in August 2001 in Shanghai jointly. SHXJY combined professional strengths from Taiwan and Mainland China to venture into Mainland China's property marketing and sales brokerage sector, whereby SHXJY was contracted by property developers to market and sell their newly developed property units, in return we earned a commission fee calculated as a percentage of the sales price.

SHXJY has focused its sales in the whole China market, especially in the secondary cities. To expand our agency business, SHXJY has established branches in NanChang, YangZhou, NanJing and ChongQing; subsidiaries in Suzhou and Beijing. Each agency sales company is comprised of three major divisions: research and development, planning, and sales divisions. Because of our diverse market locations, the current macro economic policies had little impact on our business operations in SHXJY in 2007, and we plan to establish additional subsidiaries and branches to achieve stable growth trend in future years.

SHSY was established in February 2004 as a property development advisory company, which identifies, evaluates and negotiates development projects. SHSY is comprised of professional project planning, property investment evaluation and project marketing teams.

In 2004, through SHSY, we entered into a property underwriting agreement with an independent property developer to underwrite a commercial building located in Suzhou, PRC, at a fixed underwriting price. Pursuant to the agreement, our commission was not calculated as a percentage of the sales price, instead, our commission revenue is equal to the price difference between the final sales price and the underwriting price. In this model, we negotiate with the developer for an underwriting price that is as low as possible, with the guarantee that all units will be sold by a specific date. In return, we have the flexibility to establish the final sales price, and earn the price difference between the final sales price and the underwriting price. The risk in this kind of agreement is that, if there are any unsold units on the expiry date, we may have to absorb the unsold units from the developers at the underwriting price, and hold these units in our inventory or as investments.

During 2005 SZGFH launched a promotional package by entering into leasing agreements with certain buyers to lease the properties for them. These leasing commitments on the Sovereign Building are for 62% of the floor space that was sold to third party buyers. We are expecting that the rental revenue from this subsidiary will help our group to have a more diversified revenue base. Our historical revenue stream has mainly been in the form of commission-based revenues, which may expose us to developer-related risks, such as fluctuation in property price, cyclical collections of receivables and project management issues. We expect that the continuing and cumulative rental revenue stream will provide us a cushion against the cyclical nature of the real estate sales industry.

4

With a relatively short history and smaller capital base, we recognize that in order to differentiate ourselves from the market, we need to avoid direct competition with large-scale property developers, who have their own marketing departments. We plan to utilize our professional experience to carve a niche and position by developing marketing alliances with medium size and smaller developers. This strategic plan is designed to expand our activities beyond our existing revenue base, enabling us to assume higher investment risk and giving us flexibility in collaborating with partnering developers. The plan is aimed at improving our capital structure, diversifying our revenue base, creating higher values and equity returns.

In the past six years, 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.

Business Activities

Since 2001, our main operating subsidiary, SHXJY, has engaged in sales and marketing agency work for newly built property units. We also have developed a good network of landowners and earned the trust of developers, allowing us to explore opportunities in property investments.

As part of this investment goal, we established a new operating subsidiary, SHSY, with an experienced management team to focus on developing a new strategic plan for property investment activities. This plan is designed to expand Company activities beyond our existing revenue base, to assume a higher risk with investments and to give us flexibility in structuring collaborative models with partnering developers.

In order to build a cushion against the cyclical nature of the real estate industry and have a more diversified revenue base, we established another new operating subsidiary, SZGFH, to deal with property management and rental operations.

Commission Based Services

Commission based services refer to marketing and sales agency operations, that provide the following services:

a. Integrated Marketing Planning

b. Advertising Planning & Execution

c. Sales Planning and Execution

In this type of business, we sign a marketing and sales agency agreement with property developers to undertake the marketing and sales activities of a specific project. The scope of service varies according to clients' needs; it could be a full package of all the above services, a combination of any two of the above services or any single service.

A major part of our existing revenue comes from commission-based services. We secure these projects via bidding or direct appointments. As a result of our relationships with existing clients and our sales track record, we have secured a number of cases from prior clients on subsequent phases of projects.

Normally, before a developer retains us, we will evaluate and determine the Average Sales Value of a project. This value will be proposed to the developer, and the parties will determine and agree on an Average Sales Value as the basis of our agency agreement. The actual sales price of the project is generally priced higher than the Average Sales Value depending on market conditions. On average, we have been to sell the property at a small premium over Average Sales Value.

Our normal commission structure is a combination of the following:

a) Base Commission of 1.0% - 1.5% based on the Average sales value.

b) Surplus Commission of 10% - 30% based on the difference between Average Sales Value and actual sales price.

Our wholly owned subsidiary, SHXJY, engages in this sales and marketing phase of our business.

Mainland China's Property Sector

The industry's macro environment is opening up, and the property sector is gradually developing to be a more regulated market. Stable economic growth provides a solid and secure base for investment returns in the property sector.

GDP Growth of PRC for the period of 2003 through 2007

	GDP GROWTH
2003		10.0	%
2004		10.1	%
2005		10.4	%
2006		10.7	%
2007		11.4	%

5

Government regulation

The Law on the Protection Investments from Taiwan Compatriots ensures that the PRC Government shall under no circumstances interfere in the economic cooperation between the Mainland China and Taiwan because of political differences. Under this law, the PRC Government may not discriminate and must protect the legal rights of Taiwan compatriots' investments in Mainland China. This policy allows Taiwan businesses to safely operate in Mainland China without government discrimination.

On August 31, 2003, the State Council of the PRC issued Guo Fa (2003) No.18, State Council's notice regarding the accelerating real estate market in the direction of continuous and healthy development. The items that benefit real estate developers under such notice are the following:

- Increase the supply of middle and low-income housing.

- Control construction of upscale commodity apartments.

- Stimulate the secondary housing market.

- Increase the collection of housing accumulation funds, and exert more efforts in granting loans.

- Strengthen the supervision and management of mortgages, and provide more credit support to qualifying real estate development projects.

In March and May 2005, the State Council of the PRC issued two proposals for stabilizing the housing prices. The purpose of these proposals was to stabilize housing prices, to adjust and improve the structure of the real estate market, to adjust supply and demand in the market, to decrease financing risk, and to enhance the supervision of the real estate market.

On May 17, 2006, the State Council issued six principles of China’s real estate policy to regulate China’s real estate market. On May 29, 2006, nine ministerial departments of State Council jointly came up with 15-point regulation to strengthen State Council's new policy. The six principles issued by the State Council are the following:

-Practically restructure the housing supply.

-Further exert controls through tax, bank credit and the agrarian policy.

-Reasonably control the speed of urban housing relocation.

-Further normalize the real estate market.

-Speed up the construction of urban housing at low prices and low rentals, and have planned development of affordable housing.

-Improve the statistics system and information distribution system on real estate.

On January 16, 2007, State Administration of Taxation of China issued Provisional Regulations of The People’s Republic of China on Land Appreciation Tax. These Regulations are formulated in order to regulate the order of land and real estate market transactions, to reasonably adjust the benefit from land appreciation and to safeguard the rights and interests of the State.

On September 27, 2007, the People’s Bank of China and China Banking Regulatory Commission issued Notice on Strengthening the Administration of Commercial Real Estate Credit Loans. Measures included strict administration of loans for real estate development, strict and standard administration of land reserve loans, strict administration of loans for housing consumption.

On December 11, 2007, the People’s Bank of China and China Banking Regulatory Commission issued Supplementary Notice on Strengthening the Administration of Commercial Real Estate Loans. The Notice confirmed the number of loans to a borrower should be determined on the basis of loans to the borrower’s family.

Environmental matters

None

6

Employees

As of December 31, 2007, we had the following number of employees:

SRRE	Employees
Administration Dept.	4
Accounting Dept.	4
Investor Relations Dept.	2
SHXJY
Administration Dept.	16
Accounting Dept.	4
Research & Development Dept.	9
Advertising & Communication Planning Dept.	8
Marketing Dept.	52
Nanchang Branch of SHXJY
Administration Dept.	11
Accounting Dept.	1
Marketing Dept.	25
Yangzhou Branch of SHXJY
Administration Dept.	3
Accounting Dept.	1
Marketing Dept.	17
Chongqing Branch of SHXJY
Marketing Dept.	10
SZXJY and Nanjing Branch
Administration Dept.	14
Accounting Dept.	3
Research & Development Dept.	11
Advertising & Communication Planning Dept.	6
Marketing Dept.	60
SZSY
Marketing Dept.	19
SZXJYB
Administration Dept.	4
Marketing Dept.	10
BJXJY
Administration Dept.	1
SHSY
Administration Dept.	6
Accounting Dept.	2
Marketing Dept.	3
SZGFH
Administration Dept.	8
Accounting Dept.	2
Marketing Dept.	5
Total	321

7

ITEM 2. DESCRIPTION OF PROPERTY

We currently rent our facilities at 7^th Floor, No.333, Zhaojiabang Road, Shanghai, PRC. We also have regional field support offices in various cities in Mainland China, namely Suzhou, Beijing, Nanchang, Yangzhou, Chongqing and Nanjing. We lease the facilities that house our regional field support offices.

During the past three years, the Company has also acquired two floors and six units of the Sovereign Building in Suzhou, PRC. The properties under development were completed on March 31, 2006, and we have paid the full purchase price to the property developer. In 2007, the title for these properties were transferred to the Company. The Company decided that one floor will be held for the Company’s own use, and the remaining properties will be held for long-term investment purposes. On September 19, 2007, Bank of Jiangsu, Suzhou Branch and SHSY entered into an agreement for the sale of two units of the Suzhou Sovereign Building. As of December 31, 2007, the title of these two units has been transferred to the purchaser. Following the disposal, the investment property included one floor and four units acquired by the Company for long-term investment purposes. Accordingly, the costs of the properties for the Company’s own use was $2,071,225 and the investment properties was $8,092,319.

As of December 31, 2007, the bank loan secured by the investment properties was $5,464,286, which is repayable before August 2, 2010 and bears interest at 8.217% per annum. The bank loan secured by the properties for the Company’s own use was $574,980, which is repayable before December 15, 2010 in monthly installments and bears interest at 6.48% per annum.

ITEM 3. LEGAL PROCEEDINGS

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

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

None.

8

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is quoted on the Over-the-Counter Bulletin Board system under the symbol “SRRE.” The following table sets forth the high and low bid quotations of our common stock reported by the OTCBB system for the periods indicated.

Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commissions, and may not necessarily represent actual transactions.

(Expressed in US Dollars)

	2007				2006
	High		Low		High		Low
First quarter	$	1.98	$	1.65	$	3.00	$	0.51
Second quarter	$	2.15	$	1.02	$	2.40	$	1.15
Third quarter	$	1.95	$	0.25	$	1.85	$	0.25
Fourth quarter	$	0.80	$	0.15	$	2.00	$	0.30

As of May 9, 2008, we had approximately 1,295 record holders of our common stock. On May 9, 2008, the closing price of our common stock was $0.52.

No cash dividends were declared on our common stock in 2007 and 2006. The major reason for not declaring any cash dividends is that we are still a growing company and require sufficient liquidity to fund our business activities. In the future, in the event we have funds available for distribution, we may consider paying cash dividends on our common stock.

The Company did not repurchase any of its outstanding equity securities during the year ended December 31, 2007.

No securities of the Company were issued pursuant to any equity compensation plan during the year ended December 31, 2007.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 a share exchange. Before the completion of the share exchange, SRRE had no continuing operations, and its historical results would not be meaningful if combined with the historical results of CY-SRRE, LRY and their subsidiaries.

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

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

9

RECENT DEVELOPMENTS

Before 2004, our major business was an agency business, whereby our only subsidiary at the time, SHXJY, contracted with property developers to market and sell their newly developed property units. For these services we earned a commission fee calculated as a percentage of the sales prices. SHXJY has focused its sales on the whole China market, especially in secondary cities. To expand our agency business, SHXJY has established branches in NanChang, YangZhou, NanJing and ChongQing, and subsidiaries in Suzhou and Beijing.

In 2004, through another subsidiary, SHSY, we ventured into a higher risk business model (the “Underwriting Model”) whereby our commission is not calculated as a percentage of the sales price but is equal to the price difference between the final sales price and the underwriting price. In this model, we negotiate with the developer for an underwriting price that is as low as possible, with the guarantee that all or a majority of the units will be sold by a specific date. In return, we have the flexibility to establish the final sales price, and earn the price difference between the final sales price and the underwriting price. The risk in this kind of agreement is that if there are any unsold units with sales guarantees on the expiry date, we may have to buy them from developers at the underwriting price. If that occurs we would hold these units in our inventory or as investments.

In February 2004, SHSY entered into a property underwriting agreement with an independent property developer to underwrite the Sovereign Building Project, a commercial building located in the Suzhou Industry Park in Suzhou, PRC, at a fixed underwriting price. As the sole distribution agent for this office building, SHSY committed to a sales target of $56.53 million, representing all of the units of the building. We started selling units in January, 2005. As of the end of February, 2007, we have sold or acquired all of the units in the building and achieved the sales target by selling 47,093 square meters with a total sales price of $75.96 million. The properties under development were completed on March 31, 2006, and titles to the properties have been transferred to the respective buyers.

During the past three years, SHSY has also made some property investments in Suzhou by acquiring one floor and six units of the Sovereign Building. The properties under development were completed on March 31, 2006, and we have paid the full purchase price to the property developer. The Company decided that these properties will be held for long-term investment purposes. In 2007, the title for these properties has been transferred to the Company. On September 19, 2007, Bank of Jiangsu, Suzhou Branch and SHSY entered into an agreement for the sale of two units of the Suzhou Sovereign Building. As of December 31, 2007, the title of these two units has been transferred to the purchaser.

During 2005 SZGFH launched a promotional package by entering into leasing agreements with certain buyers to lease the properties for them. These leasing agreements on the Sovereign Building are for 62% of the floor space that was sold to third party buyers. In accordance with the leasing agreements, the owners of the properties can enjoy an annual rental return at 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. The leasing period started in the second quarter of 2006, and as of December 31, 2007, 97 sub-leasing agreements were signed. The area represented by the signed sub-leasing agreements represents 76% of the total area represented by lease commitments. As of May 10, 2008, 120 sub-leasing agreements have been signed, the area of these signed sub-leasing agreements represent 93% of total area that have lease commitments.

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

In addition to historical information, this Form 10-KSB contains forward-looking statements. Forward-looking statements are based on our current beliefs and expectations, information currently available to us, estimates, 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-KSB. 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.

10

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurement. This statement simplifies and codifies fair value related guidance previously issued and is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not believe that SFAS 157 will significantly impact its financial statements.

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of SFAS No. 115”(“SFAS 159”), which permits companies to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis (the fair value option). Adoption of SFAS 159 is optional and it may be adopted beginning in the first quarter of 2007. The Company does not believe that SFAS 159 will significantly impact its financial statements.

In June 2007, the EITF reached a consensus on EITF 06-11: "Accounting for Income Tax Benefits on Dividends on Share-Based Payment Awards". EITF 06-11 addresses share-based payment arrangements with dividend protection features that entitle employees to receive (a) dividends on equity-classified non-vested shares, (b) dividend equivalents on equity-classified non-vested share units, or (c) payments equal to the dividends paid on the underlying shares while an equity-classified share option is outstanding, when those dividends or dividend equivalents are charged to retained earnings under SFAS No. 123(R) and result in an income tax deduction for the employer. A realized income tax benefit from dividends or dividend equivalents that are charged to retained earnings are paid to employees for equity-classified non-vested shares, non-vested equity share units, and outstanding equity share options should be recognized as an increase in additional paid in capital. The amount recognized in additional paid-in capital for the realized income tax benefit from dividends on those awards should be included in the pool of excess tax benefits available to absorb potential future tax deficiencies on share-based payments. The Company does not believe the adoption of EITF 06-11 will have a material impact on its financial position or results of operation.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements (SFAS 160). SFAS 160 requires all entities to report non-controlling (minority) interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 requires that transactions between an entity and non-controlling interests are treated as equity transactions. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the effect of SFAS 160 on its consolidated financial statements and results of operation and is currently not yet in a position to determine such effects.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations,” (“SFAS 141R”) to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies to all transactions or other events in which an entity obtains control of one or more businesses, and combinations achieved without the transfer of consideration. SFAS No. 141 (revised 2007) is effective for prospectively to business combinations for which the acquisition date is in on or after December 15, 2008. An earlier adoption is not permitted. The Company is still considering that impact of SFAS 141R, if any, will depend on the nature and size or business combinations the Company consummates after the effective date to its financial statements.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies for us include impairment of goodwill, accounting for income taxes, revenue recognition and equity instruments issued to non-employees.

Goodwill

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

11

Income Taxes

SFAS No. 109, “Accounting for Income Taxes,” establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in our financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our financial position or results of our operations.

Revenue Recognition

Agency commission revenue from property brokerage is recognized when the property developer and the buyer complete a property sales transaction, and the property developer grant confirmation to us to be able to invoice them accordingly, which is normally at the time when the property developer receives from the buyer a portion of the sales proceeds in accordance with the terms of the relevant property sales agreement, or the balance of the bank loan to the buyer has been funded, or recognized under the sales schedule or other specific items of the agency sales agreement with developer.

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

Commission revenue from underwriting service is recognized when the property developer and the buyer complete a property sales transaction, which is normally at the time when the property developer has confirmed that the predetermined level of sales proceeds have been received from buyers.

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

All revenues represent gross revenues less sales and business taxes.

Equity Instruments Issued to Non-Employees

According to EITF 96-18, the cost for the warrants issued for services was expensed at either the fair value of the services rendered or the fair value at the warrant grant dates.

Guarantee Liability

According to Interpretation No. (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), the Company’s liability for its obligations under a guarantee is recognized as a liability at the fair value of the guaranteed obligation at the inception of the guarantee, even if the likelihood of performance under the guarantee is remote. As of December 31, 2007, the guarantee liability was $157,812.

RESTATEMENT OF 2006 FIGURES

As discussed in Note 1, the Company has restated the 2006 financial statements. The financial statements for the year ended December 31, 2006 were restated to correct errors relating to the unprovided commission accrual of US$335,873 and the under-provision for China taxes of US$566,879. As a result of correction of these errors, the retained earnings for 2007 were reduced by $902,752.

12

RESULTS OF OPERATIONS

We provide the following discussion and analyses of our changes in financial condition and results of operations for the year ended December 31, 2007, with comparisons to the historical year ended December 31, 2006.

Revenue

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

	Years ended December 31,
	2007		% to total		2006		% to total		% change
Agency sales		6,655,582		82		7,166,294		44		(7	)
Underwriting sales		275,465		3		9,196,271		56		(97	)
Property management		1,170,277		15		54,906		-		2031
Net revenue		8,101,324		100		16,417,471		100		(51	)

The net revenues for 2007 were $8,101,324, which decreased 51% from $16,417,471 of 2006. In 2007, agency sales represented 82% of the total net revenues, underwriting sales represented 3% and property management represented 15%. The decrease in 2007 was mainly due to the decrease in our underwriting sales revenue.

Agency sales

In 2007 82% of our net revenue was due to agency sales, which were from the business activities of SHXJY and its subsidiaries and branches. As compared with 2006, net revenue of agency sales in 2007 decreased 7%. Primary reasons for this change were the following:

i) In 2006 there were two projects that contributed net revenue in the aggregate amount of $1.55million to SHXJY, and in 2007 there was one project that contributed comparable net revenue.

ii) In 2006 there were 38 agency sales projects as compared to 35 agency sales projects in 2007.

Because of our diverse market locations, the current macro economic policies had little impact on our business operations in SHXJY in 2007, and we are seeking stable growth in our agency sales business in 2008. However, there can be no assurance that we will be able to do so.

Underwriting sales

In February 2004, SHSY entered into an agreement to underwrite an office building in Suzhou, known as Suzhou Sovereign Building. Being the sole distribution agent for this office building, SHSY committed to a sales target of $56.53 million. Property underwriting sales are comparatively a higher risk business model compared to our pure commission based agency business. Under this higher risk business model, the Underwriting Model, our commission is not calculated as a percentage of the selling price; instead, our commission revenue is equivalent to the price difference between the final selling price and underwriting price. We negotiate with a developer for an underwriting price that is as low as possible, with the guarantee that all or a majority of the units will be sold by a specific date. In return, we are given the flexibility to establish the final selling price and earn the price difference between the final selling price and the underwriting price. The risk of this kind of arrangement is that if there is any unsold unit on the expiration date of the agreement, we may have to absorb the unsold property units from developers at the underwriting price and hold them in our inventory or as investments.

We started selling units in the Sovereign Building in January, 2005. As of the end of February, 2007, we have sold or acquired all of the units in the building, and we have achieved the sales target by selling 47,093 square meters with a total sales price of $75.96 million and this underwriting project has contributed total net revenue of $13,949,683 to the Company from January, 2005 through February, 2007.

The above is an one-off transaction but the Company continues to seek opportunities in underwriting sales.

As of December 31, 2007, the guarantee liability arising from the above transaction in accordance with FIN45 was $157,812.

Property Management

SZGFH launched a promotional package by entering into leasing agreements with certain buyers to lease the properties for them. These leasing agreements on the Sovereign Building are for 62% of the floor space that was sold to third party buyers. The leasing period started in the second quarter of 2006, and in the leasing period SZGFH has the right to sublease the leased properties to earn rental income. As of December 31, 2007, 97 sub-leasing agreements were signed. The area of these sub-leasing agreements represents 76% of total area under these lease commitments. We expect that the income from the sub-leasing business will be on a stable growth trend in 2008 and that it can cover the lease commitments in the leasing period as a whole. However there can be no assurance that we will achieve these objectives.

13

Cost of Revenues

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

	Years ended December 31,
	2007		% to total		2006		% to total		% change
Agency sales		3,212,473		48		3,330,662		46		(4	)
Underwriting sales		214,559		3		2,354,786		32		(91	)
Property management		3,284,672		49		1,561,485		22		110
Cost of revenue		6,711,704		100		7,246,933		100		(7	)

The cost of revenues for 2007 was $6,711,704, this was a decrease of 7% from $7,246,933 in 2006. In 2007, agency sales represented 48% of total cost of revenues, underwriting sales represented 3% and property management represented 49%. The decrease in cost of revenues in 2007 was mainly due to the decrease in our underwriting sales.

Agency sales

As compared with 2006, cost of revenue of agency sales in 2007 decreased 4%. The primary reason for the change was the decrease in our staff cost. In 2007, our staff cost decreased $120,756 compared to 2006.

Underwriting sales

Since all of the units under the Sovereign Building underwriting project were sold by the end of February, 2007, we incurred very few sales cost relating to this project in 2007.

Property management

In order to distribute all of the properties of the Sovereign Building underwriting project, during the year of 2005, SZGFH launched a promotional package by entering into leasing agreements with certain buyers to lease the properties for them. In accordance with the leasing agreements, the owners of the properties can enjoy an annual rental return at 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively.

The leasing period started in the second quarter, 2006, and we recognized the rental coverage that we pay under these leasing agreements as our cost. As certain properties under this promotion package were not leased out in 2007, the Company recorded a negative gross profit margin for 2007. We expect that these properties will be leased out in 2008, the gross margin will be improved. However, no assurance can be given that this will be the case.

Operating Expenses

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

	Years ended December 31,
	2007		% to total		2006		% to total		% change
Agency sales		853,309		75		865,180		85		(1	)
Underwriting sales		99,385		9		84,610		8		17
Property management		177,318		16		69,014		7		157
Operating expenses		1,130,012		100		1,018,804		100		11

The operating expenses of 2007 were $1,130,012; these increased 11% from $1,018,804 in 2006. In 2007, agency sales represented 75% of the total operating expenses, underwriting sales represented 9% and property management represented 16%. The increase in operating expenses in 2007 was mainly due to the increase in our property management.

Agency sales

When compared to 2006, the operating expenses for agency sales in 2007 decreased 1%. The primary reason for the decrease in 2007 was the decrease in lease expenses. In 2007, the lease expenses decreased $39,499, compared to 2006.

14

Underwriting sales

When compared to 2006, the operating expenses for underwriting sales in 2007 increased 17%. The primary reason for the change was the increase in our staff expenses. In 2007, our staff expenses increased $20,175 over 2006 levels.

Property management

When compared to 2006, the operating expenses for property management in 2007 increased 157%. The main reason for the increase was the payment of agency commissions of SZGFH. In 2007, the agency commissions increased $100,462, compared to 2006.

General and Administrative Expenses

The general and administrative expenses in 2007 were $4,654,995, increasing 52% from $3,064,138 in 2006. Primary reasons for the change were the following:

i) The increase in our depreciation expenses. In 2007, our depreciation expenses increased $233,235, compared to 2006. The increase in our depreciation expenses by $500,365 is mainly due to the increase of our property investments. Also, the increase in property investments resulted that the building management fees in 2007 were higher than 2006 by approximately $204,000.

ii) The legal and professional fees in 2007 were increased by approximately $265,000 due to more corporate finance consultancy services acquired.

iii) The Company accounted for the acquisition of BJXJY as described in Note 1 in accordance with SFAS No. 141 "Business Combinations", which resulted in the recognition of goodwill. Goodwill represents the excess of acquisition cost over the estimated fair value of the net assets acquired as of December 24, 2004. The portion of the purchase price allocated to goodwill was $193,995. The Company has tested goodwill of BJXJY for impairment annually during the forth quarter of each fiscal year using a fair value approach, in accordance with the provisions of SFAS 142. As of December 31, 2007, the Company completed the annual impairment test. Based on the result of impairment test, the Company wrote off the whole amount of goodwill arising from BJXJY.

Interest Expenses

When compared to 2006, the interest expenses in 2007 increased 88%. The interest expense relates to bank loans and promissory notes payable.

Major Related Party Transaction

During the year, SHSY paid a portrait fee of approximately $411,000 to Ms Chang Shu-Ching. Ms Chang is an ex-director of the Company and the portrait fee was agreed on an arm length basis.

LIQUIDITY AND CAPITAL RESOURCES

In 2007, our principal sources of cash were revenues from our agency sales business and proceeds from disposal of investment properties we acquired. We expect these sources of revenues will continue to meet our cash requirements, including debt service, operating expenses and promissory deposits for various property projects.

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

We ended the period with a cash position of $4,723,095 (including cash and cash equivalents of $2,281,516 and restricted cash of $2,441,579). The Company’s operating activities used cash in the amount of $948,983, which was primarily attributable to the Company’s net loss in the amount of $4,765,749 and the decrease in income taxes payable.

The Company’s investing activities provided cash resources of $1,660,783 in 2007, which was primarily attributable to the proceeds from disposal of investment properties offset by the amounts paid for investment properties.

The Company’s financing activities obtained cash resources of $202,932 in 2007, which was primarily attributable to the refinancing of bank loans and promissory notes.

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

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

15

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

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.

RISK FACTORS

SRRE has identified a number of risk factors faced by the Company. These factors, among others, may cause actual results, events or performance to differ materially from those expressed in this 10-KSB or in press releases or other public disclosures. You should be aware of the existence of these factors.

RISKS RELATING TO THE GROUP

SRRE is a holding company and depends on its subsidiaries’ cash flows to meet its obligations.

SRRE is a holding company, and it conducts all of its operations through its subsidiaries. As a result, its ability to meet any obligations depends upon its subsidiaries’ cash flows and payment of funds as dividends, loans, advances or other payments. In addition, the payment of dividends or the making of loans, advances or other payments to SRRE may be subject to regulatory or contractual restrictions.

Our invoicing for commissions may be delayed.

Generally, we recognize our commission revenues after the contracts signed with developers are completed and confirmations are received from the developers. However, sometimes we do not recognize income even when we have rendered our services for any of the following reasons:

a. The developers have not received payments from potential purchasers who have promised to pay the outstanding sum by cash;

b. The purchasers, who need to obtain mortgage financing to pay the outstanding balance due, are unable to obtain the necessary financing from their banks;

c. Banks are sometimes unwilling to grant the necessary bridge loan to the developers in time due to the developers’ relatively low credit rating;

d. The developers tend to be in arrears with sales commissions; therefore, do not grant confirmation to us to be able to invoice them accordingly.

Development of new business may stretch our cash flow and strain our operation efficiency.

Business expansion and the need to integrate operations arising from the expansion may place a significant strain on our managerial, operational and financial resources, and will further contribute to a needed increase in our financial needs.

Risks associated with a Guaranteed Rental Return Promotion.

During 2005, we launched a promotional package that allows property buyers and investors to enjoy a 5 or 8 year guaranteed rental return at 8.5% or 8.8% of the property purchase costs per annum for a leasing period of 5 or 8 years, respectively. The return is guaranteed by SZGFH, whereby SZGFH’s principal activities are real estate leasing and property management services. However, we may not successfully sublease the targeted properties at prices higher than what we committed in the promotional package. Our failure to do so could adversely affect our financial condition.

The Company accounts for its liability for its obligations under a guarantee in accordance with FASB Interpretation No. 45, (FIN45) Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Direct Guarantees of Indebtedness of Others. FIN 45 requires that guarantors recognize a liability for certain guarantees at the fair value of the guaranteed obligation at the inception of the guarantee and the movement in the guaranteed obligation is charged to the income statement in the period in which it incurs.

Our acquisition of new property may involve risks.

These acquisitions involve several risks including, but not limited to, the following:

a. The acquired properties may not perform as well as we expected or ever become profitable.

b. Improvements to the properties may ultimately cost significantly more than we had originally estimated.

16

Additional acquisitions might harm our business.

As part of our business strategy, we may seek to acquire or invest in additional businesses, products, services or technologies that we think could complement or expand our business. If we identify an appropriate acquisition opportunity, we might be unable to negotiate the terms of that acquisition successfully, finance it, or integrate it into our existing business and operations. We may also be unable to select, manage or absorb any future acquisitions successfully. Furthermore, the negotiation of potential acquisitions, as well as the integration of an acquired business, would divert management time and other resources. We may have to use a substantial portion of our available cash to consummate an acquisition. If we complete acquisitions through exchange of our securities, our shareholders could suffer significant dilution. In addition, we cannot assure you that any particular acquisition, even if successfully completed, will ultimately benefit our business.

Our real estate investments are subject to numerous risks.

We are subject to risks that generally relate to investments in real estate. The investment returns available from equity investments in real estate depend in large part on the amount of income earned and capital appreciation generated by the related properties, as well as the expenses incurred. In addition, a variety of other factors affect income from properties and real estate values, including governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels and the availability of financing. For example, new or existing real estate zoning or tax laws can make it more expensive and/or time-consuming to develop real property or expand, modify or renovate properties. When interest rates increase, the cost of acquiring, developing, expanding or renovating real property increases and real property values may decrease as the number of potential buyers decrease. Similarly, as financing becomes less available, it becomes more difficult both to acquire and to sell real property. Finally, governments can, under eminent domain laws, take real property. Sometimes this taking is for less compensation than the owner believes the property is worth. Any of these factors could have a material adverse impact on results of our operations or financial condition. In addition, equity real estate investments, such as the investments we hold and any additional properties that we may acquire, are relatively difficult to sell quickly. If our properties do not generate sufficient revenue to meet operating expenses, including debt servicing and capital expenditures, our income will be reduced.

Competition, economic conditions and similar factors affecting us, and the real estate industry in general, could affect our performance.

Our properties and business are subject to all operating risks common to the real estate industry. These risks include:

a. Adverse effects of general and local economic conditions;

b. Increases in operating costs attributable to inflation and other factors; and

c. Overbuilding in certain property sectors.

These factors could adversely affect our revenues, profitability and results of operations.

We operate in a highly competitive environment.

Our competitors may be able to adapt more quickly to changes in customer needs or to devote greater resources than we can to developing and expanding our services. Such competitors could also attempt to increase their presence in our markets by forming strategic alliances with other competitors, by offering new or improved services or by increasing their efforts to gain and retain market share through competitive pricing. As the market for our services matures, price competition and penetration into the market will intensify. Such competition may adversely affect our gross profits, margins and results of operations. There can be no assurance that we will be able to compete successfully with existing or new competitors.

We may be unable to effectively manage our growth.

We will need to manage our growth effectively, which may entail devising and effectively implementing business and integration plans, training and managing our growing workforce, managing our costs, and implementing adequate control and reporting systems in a timely manner. We may not be able to successfully manage our growth or to integrate and assimilate any acquired business operations. Our failure to do so could affect our success in executing our business plan and adversely affect our revenues, profitability and results of operations.

If we fail to successfully manage our planned expansion of operations, our growth prospects will be diminished and our operating expenses could exceed budgeted amounts.

Our ability to offer our services in an evolving market requires an effective planning and management process. We have expanded our operations rapidly since inception, and we intend to continue to expand them in the foreseeable future. This rapid growth places significant demand on our managerial and operational resources and our internal training capabilities. In addition, we have hired a significant number of employees and plan to further increase our total work force. This growth will continue to substantially burden our management team. To manage growth effectively, we must:

a. Implement and improve our operational, financial and other systems, procedures and controls on a timely basis.

b. Expand, train and manage our workforce, particularly our sales and marketing and support organizations.

17

We cannot be certain that our systems, procedures and controls will be adequate to support our current or future operations or that our management will be able to handle such expansion and still achieve the execution necessary to meet our growth expectations. Failure to manage our growth effectively could diminish our growth prospects and could result in lost opportunities as well as operating expenses exceeding the amount budgeted.

We may be unable to maintain internal funds or obtain financing or renew credit facilities in the future.

Adequate financing is one of the major factors, which can affect our ability to execute our business plan in this regard. We finance our business mainly through internal funds, bank loans or raising equity funds. There is no guarantee that we will always have internal funds available for future developments or we will not experience difficulties in obtaining financing and renewing credit facilities granted by financial institutions in the future. In addition, there may be a delay in equity fundraising activities. Our access to obtain debt or equity financing depends on the banks' willingness to lend and on conditions in the capital markets, and we may not be able to secure additional sources of financing on commercially acceptable terms, if at all.

We may need to raise additional capital that may not be available on terms favorable to us, if at all.

We may need to raise additional capital in the future, and we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If we cannot raise additional capital on acceptable terms, we may not be able to develop or enhance our services, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements. To fully realize our business objectives and potential, we may require additional financing. We cannot be sure that we will be able to secure the financing we will require, or that it will be available on favorable terms. If we are unable to obtain any necessary additional financing, we will be required to substantially curtail our approach to implementing our business objectives. Additional financing may be debt, equity or a combination of debt and equity. If equity is used, it could result in significant dilution to our shareholders.

Our operations and growth prospects may be significantly impeded if we are unable to retain our key personnel or attract additional key personnel, particularly since experienced personnel and new skilled personnel are in short supply.

Competition for key personnel is intense. As a small company, our success depends on the service of our executive officers, and other skilled managerial and technical personnel, and our ability to attract, hire, train and retain personnel. There is always the possibility that certain of our key personnel may terminate their employment with us to work for one of our competitors at any time for any reason. There can be no assurance that we will be successful in attracting and retaining key personnel. The loss of services of one or more key personnel could have a material adverse effect on us and would materially impede the operation and growth of our business.

If our partnering developers experience financial or other difficulties, our business and revenues could be adversely affected.

Currently, SHXJY is one of our major contributors in terms of both revenues and net income. As a service-based company, SHXJY greatly depends on the working relationships and agency contracts with its partnering developers. We are exposed to the risks that our partnering developers may experience financial or other difficulties, which may affect their ability or will to carry out any existing development projects or resell contracts, thus delaying or canceling the fulfillment of their agency contracts with SHXJY. Any of these factors could adversely affect our revenues, profitability and results of operations.

If we fail to establish and maintain strategic relationships, the market acceptance of our services, and our profitability, may suffer.

To offer services to a larger customer base, our direct sales force depends on strategic partnerships, marketing alliances, and partnering developers to obtain customer leads and referrals. If we are unable to maintain our existing strategic relationships or fail to enter into additional strategic relationships, we will have to devote substantially more resources to the marketing of our services. We would also lose anticipated customer introductions and co-marketing benefits. Our success depends in part on the success of our strategic partners and their ability to market our services successfully. In addition, our strategic partners may not regard us as significant for their own businesses. Therefore, they could reduce their commitment to us or terminate their respective relationships with us, pursue other partnerships or relationships, or attempt to develop or acquire services that compete with our services. Even if we succeed in establishing these relationships, they may not result in additional customers or revenues.

We are subject to the risks associated with projects operated through joint ventures.

Some of our projects are operated through joint ventures in which we have controlling interests. We may enter into similar joint ventures in the future. Any joint venture investment involves risks such as the possibility that the joint venture partner may seek relief under federal or state insolvency laws, or have economic or business interests or goals that are inconsistent with our business interests or goals. While the bankruptcy or insolvency of our joint venture partner generally should not disrupt the operations of the joint venture, we could be forced to purchase the partner’s interest in the joint venture, or the interest could be sold to a third party. Additionally, we may enter into joint ventures in the future in which we have non-controlling interests. If we do not have control over a joint venture, the value of our investment may be affected adversely by a third party that may have different goals and capabilities than ours. It may also be difficult for us to exit a joint venture that we do not control after an impasse. In addition, a joint venture partner may be unable to meet its economic or other obligations, and we may be required to fulfill those obligations.

18

We are subject to risks relating to acts of God, terrorist activity and war.

Our operating income may be reduced by acts of God, such as natural disasters or acts of terror, in locations where we own and/or operate significant properties and areas from which we draw customers and partnering developers. Some types of losses, such as from earthquake, hurricane, terrorism and environmental hazards, may be either uninsurable or too expensive to justify insuring against. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in any particular property, as well as any anticipated future revenue from such property. In that event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. Similarly, wars (including the potential for war), terrorist activity (including threats of terrorist activity), political unrest and other forms of civil strife as well as geopolitical uncertainty have caused in the past, and may cause in the future, our results to differ materially from anticipated results.

We have limited business insurance coverage in China.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products. As a result, we do not have any business liability or disruption insurance coverage for our operations in China. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

RISKS RELATING TO OUR SECURITIES

Our controlling shareholders could take actions that are not in the public shareholders’ best interests.

As of May 9, 2008, Ace Develop directly controls 38.08% of our outstanding common stock and Lin Chi-Jung, our Chairman, is the principal and controlling shareholder of Ace Develop. Accordingly, pursuant to our Articles of Incorporation and bylaws, Ace Develop and Lin Chi-Jung, by virtue of their controlling ownership of share interests, will be able to exercise substantial influence over our business by directly or indirectly voting at either shareholders meetings or the board of directors meetings in matters of significance to us and our public shareholders, including matters relating to:

a. Election of directors and officers;

b. The amount and timing of dividends and other distributions;

c. Acquisition of or merger with another company; and

d. Any proposed amendments to our Articles of Incorporation.

Future sales of our common stock could adversely affect our stock price.

If our shareholders sell substantial amounts of our common stock in the public market, the market price of our common stock could be adversely affected. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional equity securities.

We are listed on the OTC Bulletin Board, which can be a volatile market.

Our common stock is quoted on the OTC Bulletin Board, a FINRA sponsored and operated quotation system for equity securities. It is a more limited trading market than the Nasdaq Capital Market, and timely and accurate quotations of the price of our common stock may not always be available. Investors may expect trading volume to be low in such a market. Consequently, the activity of only a few shares may affect the market and may result in wide swings in price and in volume.

We may be subject to exchange rate fluctuations.

A majority of our revenues are received, and a majority of our operating costs are incurred, in Renminbi. Because our financial statements are presented in U.S. Dollars, any significant fluctuation in the currency exchange rates between the Renminbi and the U.S. Dollar will affect our reported results of operations. We do not currently engage in currency-hedging transactions.

Trading of our common stock is limited, which may make it difficult for investors to sell their shares at times and prices that investors feel are appropriate.

Trading of our common stock has been extremely limited. This adversely effects the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.

There is a limited market for our common stock and an active trading market for our common stock may never develop.

Trading in our common stock has been limited and has been characterized by wide fluctuations in trading prices, due to many factors that may have little to do with a company’s operations or business prospects.

19

Because it may be a “penny stock,” it will be more difficult for shareholders to sell shares of our common stock.

In addition, our common stock may be considered a “penny stock” under SEC rules because it has been trading on the OTC Bulletin Board at prices lower than $1.00. Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement for the purchaser. Broker-dealers also must provide customers that hold penny stocks in their accounts with such broker-dealers a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold to investors in violation of the penny stock rules, investors may be able to cancel the purchase and get the money back. The penny stock rules may make it difficult for investors to sell their shares of our stock, and because of these rules, there is less trading in penny stocks. Moreover, many brokers simply choose not to participate in penny-stock transactions. Accordingly, investors may not always be able to resell shares of our common stock publicly at times and at prices that investors feel are appropriate.

Our stock price is, and we expect it to remain, volatile, which could limit investors’ ability to sell stock at a profit.

Since the completion of the SRRE – CY-SRRE/LRY share exchange transactions the market price of our common stock has ranged from a high of $3.00 per share to a low of $0.15 per share in the 2006 and 2007. The volatile price of our stock makes it difficult for investors to predict the value of our investment, to sell shares at a profit at any given time, or to plan purchases and sales in advance. A variety of factors may affect the market price of our common stock. These include, but are not limited to:

a. Announcements of new technological innovations or new commercial services by our competitors or us;

b. Developments concerning proprietary rights;

c. Regulatory developments in Mainland China and foreign countries;

d. Period-to-period fluctuations in our revenues and other results of operations;

e. Economic or other crises and other external factors;

f. Changes in financial estimates by securities analysts; and

g. Sales of our common stock.

We will not be able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance.

The stock market in general has experienced extreme price and volume fluctuations that may have been unrelated and disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

Because we have not paid and do not plan to pay cash dividends, investors will not realize any income from an investment in our common stock unless and until investors sell their shares at profit.

We did not pay cash dividends on our common stock in 2007, and we do not anticipate paying any cash dividends in the near future. Investors should not rely on an investment in our stock if they require dividend income. Further, investors will only realize income on an investment in our stock in the event they sell or otherwise dispose of their shares at a price higher than the price they paid for their shares. Such a gain would result only from an increase in the market price of our common stock, which is uncertain and unpredictable.

We intend to retain all of our earnings for use in our business and do not anticipate paying any cash dividends in the near future.

The payment of any future dividends will be at the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, the success of our business activities, general financial condition, future prospects, general business conditions and such other factors as our Board of Directors may deem relevant.

RISKS RELATING TO THE REAL ESTATE INDUSTRY IN YANGTZE DELTA AND OTHER AREAS OF THE PRC

The real estate market in Yangtze Delta and other areas of the PRC is at an early stage of development.

We are subject to real estate market conditions in the PRC generally and Yangtze Delta in particular. Private ownership of property in the PRC is still at an early stage of development. Although there is a perception that economic growth in the PRC and the higher standard of living resulting from such growth will lead to a greater demand for private properties in the PRC, it is not possible to predict with certainty that such a correlation exists as many social, political, economic, legal and other factors may affect the development of the property market.

20

The PRC property market, including the Yangtze Delta property market, is volatile and may experience oversupply and property price fluctuations. The central and local governments frequently adjust monetary and other economic policies to prevent and curtail the overheating of the PRC and local economies, and such economic adjustments may affect the real estate market in Yangtze Delta and other parts of China. Furthermore, the central and local governments from time to time make policy adjustments and adopt new regulatory measures in a direct effort to control the over development of the real estate market in China, including Yangtze Delta. Such policies may lead to changes in market conditions, including price instability and an imbalance of supply and demand of residential properties, which may materially adversely affect our business and financial conditions. Also, there is no assurance that there will not be over development in the property sector in Yangtze Delta and other parts of China in the future. Any future over development in the property sector in Yangtze Delta and other parts of China may result in an oversupply of properties and a fall of property prices in Yangtze Delta or any of our other markets, which could adversely affect our business and financial condition.

We face increasing competition, which may adversely affect our revenues, profitability and results of operations.

In recent years, a large number of property companies have begun undertaking property sales and investment projects in Yangtze Delta and elsewhere in the PRC. Some of these property companies may have better track records and greater financial and other resources than we do. The intensity of the competition may adversely affect our business and financial position. In addition, the real estate market in Yangtze Delta and elsewhere in the PRC is rapidly changing. If we cannot respond to the changes in the market conditions more swiftly or effectively than our competitors do, our business and financial position will be adversely affected.

If the availability or attractiveness of mortgage financing were significantly limited, many of our prospective customers would not be able to purchase the properties, thus adversely affecting our business and financial position.

Mortgages are becoming increasingly popular as a means of financing property purchases in the PRC. An increase in interest rates may significantly increase the cost of mortgage financing, thus reducing the affordability of mortgages as a source of financing for residential property purchases. The PRC government has increased the down payment requirements and imposed certain other conditions that make mortgage financing unavailable or unattractive for some potential property purchasers. There is no assurance that the down payment requirements and other conditions will not be further revised. If the availability or attractiveness of mortgage financing is further significantly limited, many of our prospective customers would not be able to purchase the properties and, as a result, our business and future prospects would be adversely affected.

Our future prospects are heavily dependent on the performance of property sectors in specific geographical areas.

The properties we resell and intend to invest in are mainly based in Yangtze Delta. Our future prospects are, therefore, heavily dependent on the continued growth of the property sector around Yangtze Delta, and our business may be affected by any adverse developments in the supply and demand or housing prices in the property sector around Yangtze Delta.

The current level of property development and investment activity in Yangtze Delta and other markets is substantial. However, there is no assurance that such property resale and investment activity in Yangtze Delta or any of our other markets will continue at this level in the future or that we will be able to benefit from the future growth of these property markets.

Our revenues and operating income could be reduced by adverse conditions specific to our property locations.

The properties we resell and intend to invest in are concentrated geographically and are located predominately in Yangtze Delta. As a result, our business and our financial operating results may be materially affected by adverse economic, weather or business conditions in this area. Adverse conditions that affect these areas such as economic recession, changes in extreme weather conditions and natural disasters, may have an adverse impact on our operations.

RISKS RELATING TO THE PEOPLES REPUBLIC OF CHINA

All of our current prospects and deals are generated in Mainland China; thus all of our revenues are derived from our operations in the PRC. Accordingly, our business, financial condition, results of operations and prospects are subject, to a significant extent, to economic, political and legal developments in the PRC.

PRC economic, political policies and social conditions could adversely affect our business.

The economy of PRC differs from the economies of most developed countries in a number of respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.

The PRC Government has been reforming the PRC economic system from planned economy to market oriented economy for more than 20 years, and has also begun reforming the government structure in recent years. These reforms have resulted in significant economic growth and social progress. Although we believe these reforms will have a positive effect on our overall and long-term development, we cannot predict whether any future changes in PRC’s political, economic and social conditions, laws, regulations and policies will have any adverse effect on our current or future business, results of operations or financial condition.

21

Changes in foreign exchange regulations may adversely affect our ability to pay dividends and could adversely affect our results of operations and financial condition.

Substantially all of our revenues and operating expenses are denominated in Renminbi. Conversion of Renminbi is under strict government regulation in the PRC. The Renminbi is currently freely convertible under the "current account", including trade and service related foreign exchange transactions and payment of dividends, but not under the "capital account", which includes foreign direct investment and loans. Under the existing foreign exchange regulations in the PRC, we will be able to pay dividends in foreign currencies without prior approval from the State Administration for Foreign Exchange by complying with certain procedural requirements. However, there is no assurance that the above foreign policies regarding payment of dividends in foreign currencies will continue in the future.

Fluctuation of the Renminbi could materially affect the value of, and dividends payable on, the common stock.

The value of the Renminbi is subject to changes in the PRC Government’s policies and depends to a large extent on China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to U.S. Dollars has generally been stable, and in 2005 the official exchange rate between U.S. Dollars and Renminbihad a little fluctuation. However, we cannot give any assurance that the value of the Renminbi will continue to remain stable against the U.S. Dollar or any other foreign currency. Since our income and profit are denominated in Renminbi, any devaluation of the Renminbi would adversely affect the value of, and dividends, if any, payable on, our shares in foreign currency terms.

Our operations could be adversely affected by changes in the political and economic conditions in the PRC. The PRC is our main market and accounted for all of our revenue in 2006 and 2007. Therefore, we face risks related to conducting business in the PRC. Changes in the social, economic and political conditions of the PRC may adversely affect our business. Unfavorable changes in government policies, political unrest and economic developments may also have a negative impact on our operations.

Since the adoption of the “open door policy” in 1978 and the “socialist market economy” in 1993, the PRC government has been reforming and is expected to continue to reform its economic and political systems. Any changes in the political and economic policies of the PRC government may lead to changes in the laws and regulations or the interpretation of the same, as well as changes in the foreign exchange regulations, taxation and import and export restrictions, which may, in turn, adversely affect our financial performance. While the current policy of the PRC government seems to be one of imposing economic reform policies to encourage foreign investments and greater economic decentralization, we cannot assure that such a policy will continue to prevail in the future.

The PRC Legal System Embodies Uncertainties

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little value as precedents. In 1979, the PRC Government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past 28 years has significantly enhanced the protections afforded to various forms of foreign investment in Mainland China. Our PRC operating subsidiaries, wholly foreign-owned enterprises (“WFOEs”), are subject to laws and regulations applicable to foreign investment in the PRC in general and laws and regulations applicable to WFOEs in particular. However, these laws, regulations and legal requirements are constantly changing, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to us and other foreign investors. In addition, we cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the pre-emption of local regulations by national laws.

Our shareholders may not be able to enforce U.S. civil liabilities claims.

Our assets are located outside the United States and are held through subsidiaries incorporated under the laws of the Cayman Islands, British Virgin Islands and the PRC. Our current operations are conducted in the PRC. In addition, our directors and officers are residents of the PRC. As a result, it may be difficult for shareholders to implement service of process on these individuals. In addition, there is uncertainty as to whether the courts of China would recognize or enforce judgments of United States courts obtained against the Company or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in these countries against us or such persons predicated upon the securities laws of the United States or any state thereof.

22

ITEM 7. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	24
Consolidated Balance Sheets - December 31, 2007 and 2006	25
Consolidated Statements of Operations - December 31, 2007 and 2006	26
Consolidated Statements of Stockholders' Equity -December 31, 2007 and 2006	27
Consolidated Statements of Cash Flows - December 31, 2007 and 2006	28
Notes to Consolidated Financial Statements	30

23

Report of Independent Registered Public Accounting Firm

To the Board of Directors and stockholders of

Sunrise Real Estate Group, Inc.

We have audited the accompanying consolidated balance sheets of Sunrise Real Estate Group, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sunrise Real Estate Group, Inc. as of December 31, 2007 and 2006 and the results of its consolidated operations and its cash flows for the years ended December 31, 2007 and 2006, in conformity with accounting principles generally accepted in the United States of America.

As described in Note 1 to the financial statements, the Company has restated the 2006 financial statements.

BDO McCabe Lo Limited

Hong Kong, May 15, 2008

24

Sunrise Real Estate Group, Inc.

Consolidated Balance Sheets

(Expressed in US Dollars)

	December 31,			December 31,
	2007			2006
ASSETS					(Restated)
Current assets
Cash and cash equivalents	$	2,281,516		$	945,727
Restricted cash (Note 10)		2,441,579			-
Accounts receivable		842,868			4,824,031
Promissory deposits (Note 3)		273,800			192,093
Amounts due from venturers (Note 4)		79,662			1,939,616
Amount due from related party (Note 12)		312,132			-
Other receivables and deposits (Note 5)		602,373			509,745
Total current assets		6,833,930			8,411,212
Property, plant and equipment – net (Note 6)		2,519,585			2,491,633
Equity investment (Note 7)		78,033			-
Investment properties (Note 8)		7,800,228			-
Deferred tax assets		-			142,842
Deposits for acquisitions of properties		-			10,662,642
Goodwill (Note 9)		13,307			207,302
Total assets	$	17,245,083		$	21,915,631
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Bank loans (Note 10)	$	191,660		$	1,256,282
Promissory notes payable (Note 11)		976,435			740,833
Accounts payable		230,654			528,814
Amounts due to venturers		-			1,410,377
Amount due to director (Note 12)		171,458			180,630
Amount due to related party (Note 12)		159,561			-
Other payables and accrued expenses (Note 13)		2,074,833			1,874,577
Other tax payable (Note 14)		546,873			258,732
Income tax payable (Note 15)		1,238,912			1,933,491
Total current liabilities		5,590,386			8,183,736
Commitments and contingencies (Note 16)
Long-term bank loans (Note 10)		5,847,606			3,927,478
Long-term promissory notes payable (Note 11)		111,112			244,445
Minority interest		542,809			375,406
Shareholders’ equity
Common stock, par value $0.01 per share; 200,000,000 shares authorized; 23,691,925 and 23,001,614 shares issued and outstanding as of December 31, 2007 and December 31, 2006, respectively (Note 17)		236,919			230,016
Additional paid-in capital		3,620,008			2,922,997
Statutory reserve (Note 18)		729,744			716,862
Retained earnings		(741,548	)		4,857,948
Accumulated other comprehensive income (Note 19)		1,308,047			456,743
Total shareholders’ equity		5,153,170			9,184,566
Total liabilities and shareholders’ equity	$	17,245,083		$	21,915,631

See accompanying notes to consolidated financial statements.

25

Sunrise Real Estate Group, Inc.

Consolidated Statements of Operations

(Expressed in US Dollars)

	Years Ended December 31,
	2007			2006
				(Restated)
Net Revenues	$	8,101,324		$	16,417,471
Cost of Revenues		(6,711,704	)		(7,246,933	)
Gross Profit		1,389,620			9,170,538
Operating Expenses		(1,130,012	)		(1,018,804	)
General and Administrative Expenses		(4,654,995	)		(3,064,138	)
Operating (Loss)/Profit		(4,395,387	)		5,087,596
Profit on disposal of investment properties (Note 8)		1,115,025			-
Other Income, Net		14,008			11,139
Interest Income		29,072			7,136
Interest Expenses		(944,824	)		(501,995	)
(Loss)/Income Before Income Tax and Minority Interest		(4,182,106	)		4,603,876
Income Tax (Note 15)		(426,054	)		(1,767,088	)
(Loss)/Income Before Minority Interest		(4,608,160	)		2,836,788
Minority Interest		(157,589	)		(63,478	)
Net (Loss)/Income	$	(4,765,749	)	$	2,773,310
(Loss)/Earnings Per Share – Basic and Fully Diluted	$	(0.20	)	$	0.12
Weighted average common shares outstanding – Basic and Fully Diluted 1		23,691,925			23,631,246

See accompanying notes to consolidated financial statements.

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

26

Sunrise Real Estate Group, Inc.

Consolidated Statements of Stockholders’ Equity

(Expressed in US Dollars)

	Common Stock
	Number of shares issued		Amount		Additional paid-in capital		Statutory reserve		Accumulated other comprehensive income		Retained earnings			Total stockholders’ equity
Balance, December 31, 2005		21,636,614	$	216,366	$	2,233,844	$	241,664	$	147,349	$	2,559,836		$	5,399,059
Issuance of common stock		1,365,000		13,650		689,153		-		-		-			702,803
Profit for the year		-		-		-		-		-		2,773,310			2,773,310
Transfer between reserves		-		-		-		475,198		-		(475,198	)		-
Translation of foreign operations		-		-		-		-		309,394		-			309,394
Balance, December 31, 2006 (Restated)		23,001,614	$	230,016	$	2,922,997	$	716,862	$	456,743	$	4,857,948		$	9,184,566
Issuance of stock dividend		690,311		6,903		697,011		-		-		(703,914	)		-
Profit for the year		-		-		-		-		-		(4,765,749	)		(4,765,749	)
Profit return to minority interest in subsidiary		-		-		-		-		-		(116,951	)		(116,951	)
Transfer between reserves		-		-		-		12,882		-		(12,882	)		-
Translation of foreign operations		-		-		-		-		851,304		-			851,304
Balance, December 31, 2007		23,691,925	$	236,919	$	3,620,008	$	729,744	$	1,308,047	$	(741,548	)	$	5,153,170

See accompanying notes to consolidated financial statements.

27

Sunrise Real Estate Group, Inc.

Consolidated Statements of Cash Flows

Increase/(Decrease) in Cash and Cash Equivalents

(Expressed in US Dollars)

	Years Ended December 31,
	2007			2006
Cash flows from operating activities					(Restated	)
Net income	$	(4,765,749	)	$	2,773,310
Adjustments to reconcile net income to net cash (used in)/provided by operating activities
Depreciation of property, plant and equipment		733,534			112,793
Loss on disposal of property, plant and equipment		9,092			1,292
Loss on disposal of equity interest in subsidiary		14,750			-
Bad debts		114,543			-
Profit on disposal of investment properties		(1,115,172	)		-
Change in fair value of guarantee liability		157,812			-
Impairment of goodwill		199,217			-
Deferred tax credit		-			6,265
Minority interest		157,589			63,478
Change in:
Accounts receivable		4,029,670			(4,806,249	)
Promissory deposits		(65,755	)		62,747
Other receivables and deposits		(355,030	)		(328,794	)
Amount due from related party		(76,525	)		-
Accounts payable		(321,477	)		443,773
Amounts with venturers		543,487			311,547
Amount due to related party		153,278			-
Deferred commission income		-			(40,931	)
Other payables and accrued expenses		(194,814	)		608,239
Interest payable on promissory notes		385,602			7,500
Interest payable on amount due to director		(17,268	)		11,214
Other tax payable		259,643			93,145
Income tax payable		(795,410	)		1,388,049
Net cash (used in)/provided by operating activities		(948,983	)		707,378
Cash flows from investing activities
Acquisition of plant and equipment		(158,346	)		(435,556	)
Proceeds from disposal of plant and equipment		36,116			23,996
Acquisition of equity investment		(74,961	)		-
Proceeds from disposal of equity interest in subsidiary		63,200			-
Acquisition of equity interest in subsidiary		-			(60,000	)
Proceeds from disposal of investment properties		6,470,212			-
Payment for investment properties		(2,233,841	)		(2,095,726	)
Restricted cash		(2,441,597	)		-
Refund of deposits paid for acquisition of properties		-			3,319,987
Net cash provided by investing activities		1,660,783			752,701
Cash flows from financing activities
Bank loans repayment		(8,069,964	)		(3,474,926	)
Bank loan obtained		8,548,133			2,095,726
Repayment of promissory note		(2,849,236	)		(747,715	)
Proceeds from promissory note		2,565,903			600,000
Capital contribution from minority interest		-			125,021
Repayment to director		(241,904	)		-
Advances from director		250,000			-
Net cash generated from (used in) financing activities		202,932			(1,401,894	)

28

Sunrise Real Estate Group, Inc.

Consolidated Statements of Cash Flows

Increase/(Decrease) in Cash and Cash Equivalents

(Continued)

(Expressed in US Dollars)

	Years Ended December 31,
	2007		2006
Effect of exchange rate changes on cash and cash equivalents		421,057		31,954
Net increase in cash and cash equivalents		1,335,789		90,139
Cash and cash equivalents at beginning of year		945,727		855,588
Cash and cash equivalents at end of year	$	2,281,516	$	945,727
Supplemental disclosure of cash flow information
Cash paid during the period:
Income tax paid		1,166,869		366,627
Interest paid		576,490		494,495

See accompanying notes to consolidated financial statements.

29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in US Dollars)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

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

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

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

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

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

30

Figure 1: Company Organization Chart

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

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

Restatement Summary

The financial statements for the year ended December 31, 2006 were restated to correct the errors relating to an unprovided commission accrual of US$335,873 and an under-provision for China-taxes of US$566,879. As a result of the correction of these errors, the financial statements for the year ended 2006 were restated and the Company’s profit for the year ended December 31, 2006 and retained earnings as of December 31, 2007 were reduced by $902,752.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Principles of Consolidation

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

Foreign Currency Translation and Transactions

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

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

31

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

The exchange rate between US$ and RMB had little fluctuation during the periods presented. The rates ruling as of December 31, 2007 and December 31, 2006 are US$1: RMB7.3046 and US$1: RMB7.8087, respectively.

Property, Plant, Equipment and Depreciation

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

	Estimated Useful Life (in years)
Furniture and fixtures	5-10
Computer and office equipment	5
Motor vehicles	5
Properties	20

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

Investment property

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

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

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Advertising Costs

All advertising costs incurred in the promotion of the Company’s real estate projects are expensed as incurred.

Revenue Recognition

Agency commission revenue from property brokerage is recognized when the property developer and the buyer complete a property sales transaction, and the property developer grant confirmation to us to be able to invoice them accordingly, which is normally at the time when the property developer receives from the buyer a portion of the sales proceeds in accordance with the terms of the relevant property sales agreement, or the balance of the bank loan to the buyer has been funded, or recognized under the sales schedule or other specific items of agency sales agreement with developer.

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

Commission revenue from underwriting service is recognized when the property developer and the buyer complete a property sales transaction, which is normally at the time when the property developer has confirmed that the predetermined level of sales proceeds have been received from buyers.

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

32

All revenues represent gross revenues less sales and business tax.

Net Earnings per Common Share

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

Income Taxes

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

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

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

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

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

Guarantees

The Company accounts for its liability for its obligations under a guarantee in accordance with FASB Interpretation No. 45, (FIN45) Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Direct Guarantees of Indebtedness of Others. FIN 45 requires that guarantors recognize a liability for certain guarantees at the fair value of the guaranteed obligation at the inception of the guarantee, even if the likelihood of performance under the guarantee is remote.

Non-employee stock based compensation

The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue ("EITF") 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services" ("EITF 96-18").

Segment Information

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

33

NOTE 3 - PROMISSORY DEPOSITS

The balance of $273,800 represents the deposits placed with several property developers in respect of a number of real estate projects where the Company is appointed as sales agent.

NOTE 4 – AMOUNTS DUE FROM VENTURERS

The Company has entered into co-operation agreements with two venturers (one of them is an independent third party; the other is the Company’s ex-director, Chang Shu-Ching) to jointly carry out a property underwriting project for a commercial building in Suzhou, the PRC. According to the agreements, the Company, Chang Shu-Ching and the other venturer are entitled to share 65%, 10% and 25% of the net results of the project, respectively. On February 14, 2007, the venturers entered into an additional agreement that Chang Shu-Ching obtained 25% of the net results of the project from the other venturer. As a result, the Company and Chang Shu-Ching are entitled to share 65% and 35% of the net results of the project, respectively.

NOTE 5 - OTHER RECEIVABLES AND DEPOSITS

	December 31,		December 31,
	2007		2006
Advances to staff	$	20,486	$	25,912
Rental deposits		101,370		51,333
Prepaid rental		406,833		365,138
Other receivables		73,684		67,362
	$	602,373	$	509,745

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT - NET

	December 31,			December 31,
	2007			2006
Furniture and fixtures	$	133,970		$	105,288
Computer and office equipment		275,988			234,460
Motor vehicles		618,024			607,431
Properties		2,071,225			1,909,671
		3,099,207			2,856,850
Less: Accumulated depreciation		(579,622	)		(365,217	)
	$	2,519,585		$	2,491,633

All above properties as of December 31, 2007 and 2006 were pledged to secure a loan in note 10.

NOTE 7 – EQUITY INVESTMENT

On September 11, 2007, SHSY invested approximately $78,000 for a 19% equity interest in a newly-formed PRC company named Suzhou Bin Fen Nian Dai Administration Consultancy Company Limited (“SZBFND”).

NOTE 8 – INVESTMENT PROPERTY

	December 31,			December 31,
	2007			2006
Investment property	$	8,092,319		$	-
Less: Accumulated depreciation		(292,091	)		-
	$	7,800,228		$	-

During the past three years, the Company made some property investments in Suzhou by acquiring one floor and six units of the Sovereign Building. The properties under development were completed on March 31, 2006 and we paid the full purchase price to the property developer. The Company decided that these properties will be held for long-term investment purposes. As of June 30, 2007, the title for these properties had been transferred to the Company. On September 19, 2007, the Bank of Jiangsu, Suzhou Branch and SHSY entered into an agreement for the sale of two units of the Suzhou Sovereign Building to the Bank of Jiangsu. As of December 31, 2007, the title of these two units had been transferred to the purchaser, and the profit from disposal of these two units was $1,115,025. Following the disposal, the investment property included one floor and four units of a commercial building in Suzhou, the PRC, which was acquired by the Company for long-term investment purposes.

34

As of May 10, 2008, the four units of the Sovereign Building were leased to SZBFND, a related party of the Company, and the remaining one floor of the Sovereign Building was still available for lease.

All above investment properties as of December 31, 2007 were pledged to secure a loan in note 10.

NOTE 9 - GOODWILL

The Company accounted for the acquisition of BJXJY as described in Note 1 in accordance with SFAS No. 141 "Business Combinations", which resulted in the recognition of goodwill. Goodwill represents the excess of acquisition cost over the estimated fair value of the net assets acquired as of December 24, 2004. The portion of the purchase price allocated to goodwill was $193,995. The Company has tested goodwill of BJXJY for impairment annually during the forth quarter of each fiscal year using a fair value approach, in accordance with the provisions of SFAS 142. As of December 31, 2007, the Company completed the annual impairment test. Based on the result of impairment test, the Company wrote off the whole amount of goodwill arising from BJXJY.

The Company accounted for the acquisition of 20% of the equity interest in SZGFH as described in Note 1 in accordance with SFAS No. 141 "Business Combinations", which resulted in the recognition of goodwill. Goodwill represents the excess of acquisition cost over the estimated fair value of the net assets acquired as of May 8, 2006. The portion of the purchase price allocated to goodwill was $13,307. The Company has tested goodwill for impairment annually during the forth quarter of each fiscal year using a fair value approach, in accordance with the provisions of SFAS 142. As of December 31, 2007, the Company completed the annual impairment test. Based on the result of the first step of the test, the Company believes that there was no impairment of goodwill as of December 31, 2007. If an event occurs or circumstances change that would more likely than not reduce the fair value of the Company below its carrying value, goodwill will be evaluated for impairment between annual year-end tests.

NOTE 10 - BANK LOANS

Bank loans as of December 31, 2007 are comprised of two bank loans, as listed below:

First, the balance includes a bank loan of $5,464,286. This bank loan is repayable before August 2, 2010 and bears interest at a rate of 8.217% per annum. This bank loan is secured by the investment properties as mentioned in Note 8 above. The repayment schedule of this bank loan is as follows:

February 1, 2010	$	1,357,285
August 2, 2010	$	4,107,001

Pursuant to the relevant loan agreement, the Company used part of the loan to repay bank loans at the date of the loan agreement but is restricted from using the remaining loan balance for deposits and expenditures incurred in performing any real estate marketing projects of the Company. Additionally, approval from the lending bank is required for any drawings in excess of RMB1 million from the remaining bank balance. Restricted cash as of 31 December 2007 was $2,441,579 (2006: $Nil).

Second, the remaining bank loan bears interest at 6.48% per annum, and is repayable before December 15, 2010 in monthly installments. The bank loan is secured by the properties as mentioned in Note 6 above.

NOTE 11 – PROMISSORY NOTES PAYABLE

There are four promissory notes, as listed below:

First, the balance includes a promissory note of $244,445. This promissory note of $244,445 bears interest at a rate of 5% per annum. The promissory note is unsecured and will be repayable before October 31, 2009.

Second, the balance includes a promissory note of $150,000 and accrued interest of $6,875 thereon. This promissory note of $150,000 bears interest at a rate of 5% per annum. This promissory note is unsecured and the term of repayment is not specifically defined.

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

Four, the balance includes an outstanding balance of $386,227 of a promissory note, which is unsecured, bears interest at a rate of 1.5% per month and repayable by January 14, 2008.

35

NOTE 12 – AMOUNTS WITH RELATED PARTIES AND DIRECTORS

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

Amount due from related party

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

Amount due to related party

The amount represents a rental deposit received from SZBFND.

Amount due to director

Prior to April 25, 2005, the amount due to one of the directors was interest-free. Thereafter, the amount due to this director has borne interest at a rate of 9.6% per annum. As of December 31, 2007, the balance of $171,458 includes principal of $167,122 and accrued interest of $4,336 thereon. The principal is unsecured and the term of repayment is not specifically defined.

NOTE 13 - OTHER PAYABLES AND ACCRUED EXPENSES

	December 31,		December 31,
	2007		2006
Accrued staff commission & bonus	$	1,013,650	$	997,794
Rental deposits received		519,352		240,329
Other payables		541,831		636,454
	$	2,074,833	$	1,874,577

NOTE 14 – OTHER TAX PAYABLE

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

Business tax is charged at a rate of 5% on the revenue from services rendered. At December 31, 2007, the outstanding business tax payable was $248,070 (2006: $258,732).

Urban real estate tax is levied at 1.2% per annum on the standard value of the buildings in accordance with the Provisional Rules on Urban Real Estate Tax in the PRC. At December 31, 2007, the outstanding urban real estate tax payable was $120,472 (2006: Nil).

Land appreciation tax is levied on the gain realized on the transfer of investment properties in the year. Tax is charged in progressive rates ranging from 30% to 60% depending on the percentage gain realised. At December 31, 2007, the outstanding land appreciation tax payable was $178,331 (2006: Nil).

NOTE 15 – INCOME TAX PAYABLE

A.  Adoption of New Accounting Standard

FIN 48 We adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48) on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” The Interpretation prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken within an income tax return. For each tax position, the enterprise must determine whether it is more likely than not that the position will be sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation. A tax position that meets the more likely than not recognition threshold is then measured to determine the amount of benefit to recognize within the financial statements. No benefits may be recognized for tax positions that do not meet the more likely than not threshold. With respect to United States federal and Chinese income taxes, no reclassification was required.

36

B.   Income Taxes Payable

Enterprise Income Tax in the PRC

Enterprise Income Tax ("EIT") in the PRC before December 31, 2007 is generally charged at 33% of the assessable profit. According to the relevant PRC tax rules and regulations, SHXJY and SHSY are companies registered in Shanghai Pudong Development Zone that are entitled to a lower EIT rate of 15%, whereas SZXJY, SZXJYB, SZSY, BJXJY and SZGFH are subject to EIT rate of 33%.

On January 1, 2008, China unified income tax rates for domestic and foreign companies at 25 %. The new law will be phased in five years. Companies that currently face an income tax of 15% will pay 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25 % in 2012.

Income tax represents current PRC income tax, which is calculated at the statutory income tax rate on the assessable income for the years ended December 31, 2007 and 2006.

The provision for China income tax consisted of:

	Years ended December 31,
	2007		2006
			(Restated)
Current PRC corporate income tax	$	426,054	$	1,760,948
Deferred tax debit		-		6,140
	$	426,054	$	1,767,088

Reconciliation between the provision for income taxes computed by applying the statutory tax rate in Mainland China to income before income taxes and the actual provision for income taxes is as follows:

	Years ended December 31,
	2007			2006
				(Restated)
Provision for income taxes at statutory tax rate	$	(1,380,096	)	$	2,832,655
Tax concessions		965,134			(1,189,401	)
Permanent difference		(284,410	)		(11,972	)
Effect of change in FEIT tax rate		202,146			-
Increase in valuation allowances		923,280			135,806
Income tax	$	426,054		$	1,767,088

United States and State of Texas Taxes:

The Company incurred a US federal net operating loss in the amount of $280,000 for calendar 2007. Therefore, it has US federal net operating loss carryforwards in the amount of $280,000 and $564,000 which expire in 2027 and 2025, respectively.

The net operating loss generated in 2007 was different from the Sunrise US holding company’s book loss because $530,000 of foreign assets were considered repatriated to and, thus, taxable by the United States through loans made by CY-SRRE and LRY to SRRE.

The net operating loss generated in 2006 was different from the Sunrise US holding company’s book loss because $583,000 of foreign assets was considered repatriated to and, thus, taxable by the United States through loans made directly by CY-SRRE and indirectly by SHSY to SRRE. Another difference between book and tax income in 2006 was the exclusion from income of $165,000 of dividends which were previously taxed as subpart F income.

The realization of deferred tax assets depends upon the existence of sufficient taxable income in the carryforward period. We have considered the following possible sources of taxable income when assessing the realization of the deferred tax assets:

l   Future taxable income exclusive of reversing temporary differences and carryforwards,

l   Future reversals of existing taxable temporary differences,

l   Taxable income in prior carry-back years,

l   Tax planning strategies.

We have not relied upon future taxable income exclusive of temporary differences and carryforwards for the realization of U.S. deferred tax assets. Reliance on this source is difficult when there is negative evidence such as current and cumulative losses in recent years.

37

We have not provided for U.S. deferred income taxes or foreign withholding taxes on undistributed earnings of $12.2 and $9.0 million, at December31, 2007 and 2006, respectively, of our non-U.S. subsidiaries because it is not practicable to estimate the amount of additional taxes that might be payable on such undistributed earnings. The Company intends to distribute only an amount sufficient to meet future expenses of the holding company as they are incurred. Furthermore, distributions are limited under China corporate law to the entity’s earnings in the preceding calendar year and, then, must be approved by China regulators. As noted above, US income tax net operating loss carryovers are available to offset $844,000 of future taxable income.

The Tax Increase Prevention and Reconciliation Act (“TIPRA”) which was signed March 17,2006, modified what income is taxed to the Company as an owner of a controlled foreign corporation (“CFC”). This modification is effective for Sunrise’s 2006 through 2008 tax years. For Sunrise, the TIPRA modification means that certain dividend or interest income received by CY-SRRE or LRY will not trigger income recognition by SRRE US if the funds remain at the CY-SRRE or LRY level. Such dividends and interest must be properly allocable to non-subpart-F income, e.g., active income, of the Chinese level subs of CY-SRRE and LRY.

The SRRE is incorporated in the State of Texas, which does not have a corporate income tax.

NOTE 16- COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

During the years ended December 31, 2007 and 2006, the Company incurred lease expenses amounting to $338,463 and $389,865, respectively. As of December 31, 2007, the Company had commitments under operating leases, requiring annual minimum rentals as follows:

	December 31,		December 31,
	2007		2006
Within one year	$	132,628	$	124,429
Two to five years		133,847		2,349
Operating lease commitments	$	266,475	$	126,778

In order to distribute the properties of the Sovereign Building underwriting project, during the year of 2005, the Company launched a promotional package by entering into leasing agreements with certain buyers to lease the properties for them. These leasing agreements on these properties are for 62% of the floor space that was sold to third party buyers. In accordance with the leasing agreements, the owners of the properties can enjoy an annual rental return of 8.5% and 8.8% per annum for a period of 5 years and 8 years, respectively. The leasing period started in the second quarter, 2006, and the Company has the right to sublease the leased properties to cover these lease commitments in the leasing period. As of December 31, 2007, 97 sub-leasing agreements have been signed, the area of these sub-leasing agreements represented 76% of total area with these lease commitments.

As of December 31, 2007, the lease commitments under the above promotional package are as follows:

	December 31,		December 31,
	2007		2006
Within one year	$	3,047,216	$	2,807,847
Two to five years		8,412,157		10,319,497
Over five years		2,181,446		2,774,208
Operating lease commitments arising from the promotional package	$	13,640,819	$	15,901,552

According to the sub-leasing agreements that have been signed through December 31, 2007, the rental income from these sub-leasing agreements will be $1,991,366 within one year and $1,812,374 within two to five years. However, no assurance can be given that we can collect all of the rental income in 2008.

According to the leasing agreements, the Company has an option to terminate any agreement by paying a predetermined compensation. As of December 31, 2007, the compensation to terminate all leasing agreements is $3,029,111.

NOTE 17 – ISSUE OF COMMON STOCKS

On July 16, 2007, the Board of Directors declared a 3% stock dividend on its outstanding shares of common stock to be paid on August 15, 2007, to shareholders of record as of August 1, 2007. All fractional shares resulting from the stock dividend will be rounded up to the next whole share and will be paid in stock. Following the stock dividend, Sunrise Real Estate Group, Inc. had 23,691,925 shares of common stock outstanding.

38

NOTE 18 – STATUTORY RESERVE

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

NOTE 19– ACCUMULATED OTHER COMPREHENSIVE INCOME

As of December 31, 2007, the only component of accumulated other comprehensive income was translation reserve.

NOTE 20 – CONCENTRATION OF CUSTOMERS

During the years ended December 31, 2007 and 2006, the following customer accounted for more than 10% of total net revenue:

	Percentage of Net Revenue for the years ended December 31,		Percentage of Accounts Receivable as at December 31,
	2007	2006	2007	2006
Customer A	*	56%	*	59%
Customer B	16%	*	12%	*

* less than 10%

NOTE 21 – RELATED PARTY TRANSACTION

During the year ended December 31, 2007, SHSY paid a portrait fee of approximately $411,000 to Ms Chang Shu-Ching. Ms Chang is an ex-director of the Company and the portrait fee was agreed on an arm length basis.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 8A. CONTROLS AND PROCEDURES

Our management has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), or the Exchange Act, as of the end of the fiscal year covered by this report. Based on such evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the fiscal year covered by this report, the Company’s disclosure controls and procedures were partially ineffective in providing reasonable assurance that information required to be disclosed by the Company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. This was due to a significant deficiency that existed in the design and operation of our internal control over financial reporting that adversely affected our disclosure controls relating to the unaccrual of commission and under-provision for China-taxes.

We identified significant deficiencies in our internal controls and disclosure controls related to the failure to accrue for commission and to recognize provision for taxation. These deficiencies, when taken together, resulted in a conclusion that the Company’s controls suffered from material weaknesses.

39

Management's Report of Internal Control over Financial Reporting

The management of the company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

· Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

· Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

· Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The company’s management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2007. In making this assessment, the company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report. However, in connection with its audit of our financial statements, our independent registered public accounting firm reported material weaknesses in our internal controls over our ability to produce financial statements free from material misstatements. Those material weaknesses are the failure to accrue commission and to recognize provision for taxation. We determined that the Company’s controls had material weaknesses.

We have started to formulate a program which we believe will remedy the material weaknesses described above. We also expect to review and, as appropriate, revise our accounting and management information systems software. We also expect to increase the areas to be reviewed and discussed with the board of directors. We will continue these efforts until we are satisfied that all “material weaknesses” have been eliminated. We expect that resolution of all of these issues will take several months.

ITEM 8B. OTHER INFORMATION

None 
 

40

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Date of Appointment	Name of Individual	Age	Position with Company
October 28, 2003	LIN CHI-JUNG	48	Chief Executive Officer, President and Chairman
May 23, 2005	LIN CHAO-CHIN	58	Director and Senior Vice President
November 28, 2006	LIN HSIN-HUNG	53	Executive Director
November 23, 2004	CHEN REN	60	Director
November 23, 2004	FU XUAN-JIE	78	Director
November 23, 2004	LI XIAO-GANG	50	Director
August 23, 2005	ZHANG XI	37	Director

Following is biographical information for each of the 7 directors consisting of the age, principal occupation, and other relevant information. The designation of "Affiliated" noted beside the director’s name indicates that the director is an officer or employee of Sunrise. The designation of “Independent” noted beside the director’s name indicates that the director is considered an independent director with in the meaning of the Marketplace Rules of the Nasdaq Stock Market, Inc., which is the independence standard that we have chosen to report under.

Lin Chi-Jung, CEO, Chairman, and President (Affiliated)

Lin Chi-Jung, age 48, is the Chairman of the Board of Directors of SRRE. He also serves as our President and CEO and the Chairman of all of our operating subsidiaries. Mr. Lin began serving as a Director of SRRE on October 28, 2003, and was appointed Chairman on October 11, 2004. He founded Shanghai Xin Ji Yang Real Estate Consultation Co., Ltd. (“SHXJY”) in late 2001, Shanghai Shang Yang Real Estate Consultation Co., Ltd. (“SHSY”) in early 2004 and Suzhou Gao Feng Hui Property Management Co., Ltd. (“SZGFH”) in early 2005. Under his leadership and management, SHXJY, SHSY and SZGFH have grown rapidly. Prior to establishing this property business, Mr. Lin invested in the film making and publishing businesses. In his younger days, Mr. Lin was a well known actor in Chinese communities around the world, including Mainland China, Taiwan, North America and South East Asia.

Lin Chao-Chin, Director (Affiliated)

Lin Chao-Chin, age 58, was appointed as a director on May 23, 2005, and serves on our Compensation and Governance and Nominating Committees. He is one of the co-founders of SHXJY. Mr. Lin brings with him 28 years of real estate industry experience, particularly in the areas of agency, property investment, and development services. Prior to starting his business in Mainland China, he co-founded Taipei Xin Lian Yang Property Co. Ltd. in Taiwan in the early 1980’s. Under Mr. Lin’s leadership, this business had contracted sales of NTD 120 Billion (approx. US$ 3.4 billion) and 800 employees. In 2001 he joined Lin Chi-Jung to re-establish his career in Mainland China. Currently, Lin Chao-Chin is managing the day-to-day business operation of SHXJY. Lin Chao-Chin graduated from Taiwan Chung Yuan University with a Bachelors Degree in Business Administration.

Lin Hsin-Hung, Executive Director

Lin Hsin Hung, age 53, was appointed as an executive director on November 28, 2006. He graduated from the Economics Department of Taiwan Wen Hua College in 1981. Mr. Lin has served as the Chairman of the Board of Tian Li Manufacture Corporation, Ding Kai Industry Corporation, Hua Wei Development Corporation and an executive Director of Di Heng Capital Management Corporation.

Chen Ren, Director (Independent)

Chen Ren, age 60, was appointed an independent director on November 23, 2004. Mr. Chen is Chairman and General Manager of Shanghai Real Estate Group of Companies. He has been involved in the Shanghai real property market for the past 15 years. Among some of the companies that he has been associated with are: Shanghai She-ye Property Ltd, Shanghai Rui Nan Property Limited, the General Manager of Shanghai Gong Zhi Jing Center and Shanghai An Ju Property Development Center.

41

Fu Xuan-Jie, Director (Independent)

Fu Xuan-Jie, age 78, was appointed an independent director on November 23, 2004, and serves on our Audit, Compensation, and Governance and Nominating Committees. Mr. Fu has been an attorney since February 1980 and has practiced law in his co-founded firm, Fu Xuan-Jie & Associates Law Office since April 1994. Mr. Fu specializes in corporate and international law, especially in the areas of international compensation and other financial matters. Among the clientele that Mr. Fu serves are Coca-Cola, Banque Endosuez, AT&T, and L'Oreal.

Li Xiao-Gang, Director (Independent)

Li Xiao-Gang, age 50, was appointed an independent director on November 23, 2004, and serves on our Audit, Compensation, and Governance and Nominating Committees. Mr. Li graduated from Shanghai Finance and Economics University in 1984, and joined the Shanghai Academy of Social Science. In 1992, he was appointed the deputy director of the Economics Law Consultation Center of the Shanghai Academy. In 2000, he was the Director of the Foreign Investment Research Center of the Academy. From 1992 to the present, Mr. Li has served as a Director cum Deputy Secretary-General of the Shanghai Consultation Association.

Zhang Xi, Director (Independent)

Zhang Xi, age 37, was appointed an independent director on August 23, 2005, and serves as Chairman of our Audit Committee. He has a Doctorate Degree in Economics, and he is a Senior Economist, a Certified Public Accountant and a Certified Public Appraiser. He is working as a Vice President of Shanghai General Building Material Group Corporation. He has also served in Shanghai Zhonghua Audit Company as the manager of the International Department, Shanghai Zhangjiang Hi-tech Zone Development Company, Ltd. as Vice General Manager and Financial Controller, and Shanghai Zhang Jiang Semiconductor Industry Park Co., Ltd. as General Manager.

Other Executive Officers

Art Honanyan, the Company’s Chief Financial Officer, is 63 years old. In 1973, he received an MBA in Accounting and Finance from New York University. He is a Certified Management Accountant and a member of the Institute of Management Accountants. For 10 years he was Manager and Assistant Secretary in the corporate planning and control Department of Continental Corporation, a large New York based international insurance company. For the next 10 years, he held the CFO position at California Central Bank & Trust, a California based trust services bank. After this time, he held adjunct faculty positions in finance and accounting at several Los Angeles area graduate businesses MBA programs. During the past 2 years, he has held the CFO position at the Company. During the four previous years, he was controller of a Southern California based group of engineering companies and held adjunct faculty positions at two MBA programs.

Family Relationships

There are no family relationships among directors, executive officers, or person nominated or chosen to become the directors or executive officers.

Code of Ethics

On October 8, 2005, we adopted a code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. The Company will provide to any person without charge, upon request, a copy of the corporate code of ethics. Any person wishing a copy should write to Alice Wang, Sunrise Real Estate Group, Inc., Suite 701, No. 333, Zhaojiabang Road, Shanghai, PRC 200032.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Copies of these filings must be furnished to the Company. Based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ending December 31, 2007, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners have been met on a timely basis.

42

Information Concerning our Board and Committees of our Board

The Company’s Board has three standing committees: an Audit Committee, a Governance and Nominating Committee, and a Compensation Committee. We have a written Audit Committee Charter, a written Governance and Nominating Committee Charter and a written Compensation Committee Charter. Except for Lin Chao-Chin, all of our directors serving on our committees are “independent” within the meaning of the Marketplace Rules of the Nasdaq Stock Market, Inc., which is the independence standard that we have chosen to report under.

Audit Committee and Audit Committee Financial Expert

Our Board established the Audit Committee on August 23, 2005. The Audit Committee consists of three members, Fu Xuan-Jie, Li Xiao-Gang, and Zhang Xi, all of whom are “independent” within the meaning of the Marketplace Rules of the Nasdaq Stock Market, Inc., which is the independence standard that we have chosen to report under. At least one member of the Audit Committee, Zhang Xi, is a financial expert, as that term is used under Item 407(d)(5) of Regulation S-B.

Governance and Nominating Committee

The Governance and Nominating Committee of the Board consists of Mr. Lin Chao-Chin, Mr. Li Xiao-Gang and Mr. Fu Xuan-Jie. The primary duties of the Governance and Nominating Committee are to identify and review candidates for the Board and recommend candidates for election to the Board, periodically review the skills and characteristics required of Board members in the context of the current Board, and periodically review the Company’s corporate governance policies and recommend modifications to the Board as appropriate. The Governance and Nominating Committee operates pursuant to a charter that was approved by our Board, a current copy of which is available on our website at www.sunrise.shunder the heading “Investor” and subheading “Corporate Governance.”

Our shareholders may recommend director nominees, and the Governance and Nominating Committee will consider nominees recommended by shareholders. We anticipate that nominees recommended by shareholders will be evaluated in the same manner as nominees recommended by anyone else, although the Governance and Nominating Committee may prefer nominees who are personally known to the existing directors and whose reputations are highly regarded. The Governance and Nominating Committee will consider all relevant qualifications as well as the needs of the company in terms of compliance with SEC rules.

While the selection of qualified directors is a complex, subjective process that requires consideration of many intangible factors, the Governance and Nominating Committee and the Board takes into account the following criteria, among others, in considering directors and candidates for the board: judgment, experience, skills and personal character of the candidate, and the needs of the Board.

The Governance and Nominating Committee conducts a process of making a preliminary assessment of each proposed nominee based upon the resume and biographical information, an indication of the individual’s willingness to serve and other background information. This information is evaluated against the criteria set forth above and our specific needs at that time. Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet our needs may be invited to participate in a series of interviews, which are used as a further means of evaluating potential candidates. On the basis of information learned during this process, the Governance and Nominating Committee determines which nominee(s) to recommend to the Board to submit for election at the next annual meeting. The Governance and Nominating Committee uses the same process for evaluating all nominees, regardless of the original source of the nomination.

Compensation Committee

The Compensation Committee of the Board consists of Mr. Lin Chao-Chin, Mr. Li Xiao-Gang and Mr. Fu Xuan-Jie. The primary duties of the Compensation Committee are to annually review and approve the Company’s compensation strategy to ensure that employees are rewarded appropriately; review annually and approve corporate goals and objectives relevant to executive compensation; annually review and determine elements of compensation of the CEO and other officers; and review and recommend compensation for non-employee members of our Board. The Compensation Committee operates pursuant to a charter that was approved by our Board, a current copy of which is available on our website at www.sunrise.shunder the heading “Investor” and subheading “Corporate Governance.”

43

ITEM 10. EXECUTIVE COMPENSATION

The following table reflects the compensation paid to the Company’s Chief Executive Officer and each of the Company’s compensated executive officers whose compensations exceeded $100,000 in fiscal years 2007 and 2006 for services rendered to the Company and its subsidiaries.

Name and Principal Position (a)	Year (b)		Salary ($) (c)		Bonus ($) (d)			Stock Awards ($) (e)		Option Awards ($) (f)		Non-Equity Incentive Plan Compensation ($) (g)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (h)		All Other Compensation ($) (i)			Total ($) (j)
Lin Chi-Jung CEO, President & Chairman Executive Officer of subsidiaries		2007 2006		145,976 146,826		21,950 150,364	(2)		0 0		0 0		0 0		0 0		91,796 92,825	(3)		259,722 390,015
Art Honanyan Chief Financial Officer		2007 2006		55,234 52,707		0 6,852			0 0		0 0		0 0		0 0		12,624 12,047			67,858 71,606
Lin Chao-Chin Senior Vice President Managing director of subsidiaries		2007 2006		145,976 146,826		21,950 150,364	(2)		0 0		0 0		0 0		0 0		91,796 92,825	(3)		259,722 390,015

(1) There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers.

(2) Lin Chi-Jung and Lin Chao-Chin each received a discretionary bonus of $21,950 in 2007. This incentive was attributed to the initial management team members for their valuable contribution to the Company. Each bonus was calculated at 10% of net profit before income tax of SHXJY and subsidiaries in 2007.

(3) Lin Chi-Jung and Lin Chao-Chin each received housing allowance of $86,796 and travel allowance of $5,000 during the year 2007.

Option/SAR Grants

The Company has no stock option plan or other equity incentive plan in place. Accordingly, no individual grants of stock options, whether or not in tandem with Stock Appreciation Rights (“SARs”) and freestanding SARs have been made to any executive officer or any director since the Company’s inception, accordingly, no stock options have been exercised by the Company’s officers or directors in any fiscal year.

44

DIRECTOR COMPENSATION

Name (a)	Fees Earned or Paid in Cash ($) (b)		Stock Awards ($) (c)		Option Awards ($) (d)		Non-Equity Incentive Plan Compensation ($) (e)		Change in Pension Value and Nonqualified Deferred Compensation Earnings (f)		All Other Compensation ($) (g)		Total ($) (h)
LIN CHI-JUNG		15,781		0		0		0		0		0		15,781
LIN CHAO-CHIN		15,781		0		0		0		0		0		15,781
LIN HSIN-HUNG		31,562		0		0		0		0		0		31,562
FU XUAN-JIE		15,781		0		0		0		0		0		15,781
LI XIAO-GANG		15,781		0		0		0		0		0		15,781
CHEN REN		15,781		0		0		0		0		0		15,781
ZHANG XI		15,781		0		0		0		0		0		15,781

(1) There are no stock option, retirement, pension, or profit sharing plans for the benefit of directors.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of May 9, 2008, the number and percentage of our 23,691,925 shares of common stock outstanding that were beneficially owned by (1) each person known to the Company to be the beneficial owner of five percent or more of our common stock, (2) each director and named executive officer, and (3) all of the Company's directors and executive officers as a group. Unless otherwise indicated, the person listed in the table is the beneficial owner of, and has sole voting and investment power with respect to, the shares indicated.

			Amount and Nature of			Percent
Title of Class	Name and Address		Beneficial Ownership			of Class
Common		Lin Chi-Jung		9,022,800	(1)		38.08	%
		Suite 701, No. 333, Zhaojiabang Road
		Shanghai, PRC 200032
Common		Art Honanyan		160,000			1	%
		Suite 701, No. 333, Zhaojiabang Road
		Shanghai, PRC 200032
Common		LIN HSIN-HUNG		334,750	(2)		1	%
		Suite 701, No. 333, Zhaojiabang Road
		Shanghai, PRC 200032

(1) These shares are owned by Ace Develop Properties Limited, of which Mr. Lin Chi-Jung is the sole beneficiary owner

(2)  These shares are owned by Glorystar International Enterprise Limited, of which Mr. Lin Hsing Hung is a minority shareholder and an officer.

Changes in Control

To the knowledge of management, there are no present arrangements or pledges of our securities that may result in a change in control of the Company.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

None

45

ITEM 13. EXHIBITS

Exhibit
Number	Description
31.1	Certification of Lin Chi-Jung, pursuant to Rule 15d-14(a).
31.2	Certification of Art Honanyan, pursuant to Rule 15d-14(a).
32.1	Certifications of Lin Chi-Jung, pursuant to 18 U.S.C. 1350.
32.2	Certifications of Art Honanyan, pursuant to 18 U.S.C. 1350.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed by BDO McCabe Lo Limited for services rendered during the year ended December 31, 2007, 2006 and 2005 are described as follows:

Fees for audit and review services amounted to $141,500 in 2007, $116,500 in 2006 and $82,500 in 2005, respectively. Fees for audit and review services include the annual audit of the consolidated financial statements of the Company and its subsidiaries, and review of the Company's Quarterly Reports on Form 10-QSB.

Audit-Related Fees

Aggregate fees billed for all audit-related services rendered by BDO McCabe Lo Limited consisted of $13,000 for 2007 and $14,500 for 2005. Fees for audit related services include audits required in the Form 8-K and review of related documents. There were no audit-related fees billed by BDO McCabe Lo Limited in 2006.

Tax Fees

There were no tax services fees paid to BDO McCabe Lo Limited; they are not the tax accountants of the Company.

All Other Fees

BDO McCabe Lo Limited did not bill the Company any additional fees for professional services rendered to the Company during fiscal years ended December 31, 2007, 2006 and 2005.

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

According to the charter of the Audit Committee, the Company’s policy on pre-approval of audit and permissible non-audit services of independent auditors is to pre-approve all audit services and permissible non-audit services by the independent accountants, as set forth in Section 10A of the Exchange Act and the rules and regulations promulgated thereunder by the SEC. The Audit Committee may establish pre-approval policies and procedures, as permitted by Section 10A of the Exchange Act and the rules and regulations promulgated thereunder by the SEC, for the engagement of independent accountants to render services to the Company, including but not limited to policies that would allow the delegation of pre-approval authority to one or more members of the Audit Committee, provided that any pre-approvals delegated to one or more members of the Audit Committee are reported to the Audit Committee at its next scheduled meeting.

46

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Sunrise Real Estate Group, Inc.

/s/ Lin Chi-Jung

BY: Lin Chi-Jung

Principal Executive Officer and Director

DATE: May 15, 2008

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Lin Chi-Jung	Principal Executive Officer	May 15, 2008
Lin Chi-Jung	and Director
/s/ Art Honanyan	Chief Financial Officer	May 15, 2008
Art Honanyan
/s/ Lin Chao-Chin	Director	May 15, 2008
Lin Chao-Chin
/s/ Lin Hsin-Hung	Director	May 15, 2008
Lin Hsin-Hung
/s/ Fu Xuan-Jie	Director	May 15, 2008
Fu Xuan-Jie
/s/ Li Xiao-Gang	Director	May 15, 2008
Li Xiao-Gang
/s/ Chen Ren	Director	May 15, 2008
Chen Ren
/s/ Zhang Xi	Director	May 15, 2008
Zhang Xi

47

EX-31.1

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a), AS

ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Principal Financial Officer

I, Art Honanyan, certify that:

1. I have reviewed this annual report on Form 10-KSB of Sunrise Real Estate Group, Inc..

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

  /s/ Art Honanyan

Name:  Art Honanyan

Title:  Chief Financial Officer

Date:  May 15, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Lin Chi-Jung, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based upon a review of the Annual Report on Form 10-KSB for the year ended December 31, 2007 of the Registrant (the "Report"):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request and for the periods indicated.

  /s/ Lin Chi-Jung

Name: Lin Chi-Jung

Date: May 15, 2008

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Art Honanyan, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based upon a review of the Annual Report on Form 10-KSB for the year ended December 31, 2007 of the Registrant (the "Report"):

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant and for the periods indicated.

A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

  /s/ Art Honanyan

Name: Art Honanyan

Date: May 15, 2008