Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANICAL CONDITION AND RESULTS OF OPERATIONS

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

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

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

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

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

OVERVIEW

In October 2004, the former shareholders of Sunrise Real Estate Development Group, Inc. (Cayman Islands) ("CY-SRRE") and LIN RAY YANG Enterprise Ltd. ("LRY") acquired a majority of our voting interests in share exchange. Before the completion of the share exchange, SRRE had no continuing operations, and its historical results would not be meaningful if combined with the historical results of CY-SRRE, LRY and their subsidiaries.

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

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

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

RECENT DEVELOPMENTS

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

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

In October 2011, we established LYSY and own 34% of the company. During the first quarter of 2012, we acquired approximately 103,385 square meters for the purpose of developing villa-style residential housing. The LYSY project has divided into three phases. Phase 1 has completed construction of 121 units as of May 2015 and sold 119 units out of all 121 units as of May 15, 2025. Phase 2 was divided into north and south area and completed construction of 84 units at the end of 2020. All units have been sold during phase 2 by the end of May 15, 2025. Phase 3 began construction in the first quarter of 2021 and sold 22 and pre-sold 12 units out of 51 units as of May 15, 2025. In September 2020, the Company expanded the Linyi project by purchasing an additional 54,312 square meters in the amount of 228 million RMB for future development.

SHDEW was established in June 2013 with its business as a skincare and cosmetic company. SHDEW develops its own skincare products as well as improving its online ecommerce platform. SHDEW sells products under its own brands as well as the products from third parties. The products include skincare, cosmetics, personal care products such as soaps, shampoos, skin care devices and children's apparel. SHDEW has an online shopping app, "庭秘密," where consumers can purchase its cosmetics and skincare products as well as products imported into China.

In October 2018, HATX purchased the property in Huai'an, Qingjiang Pu district with an area of 78,030 square meters ("sqm"). In December 2018, we established HAZB with a 78.46% ownership for the purpose of real estate investment, and in March 2019, HAZB purchased 100% of HATX and its land usage rights to the Huai'an property. The Huai'an project, named Tianxi Times, started its first phase development in early 2019 with a gross floor area ("GFA") of 82,218 sqm totaling 679 units, and started its second phase in 2020 with a GFA of 99,123 sqm totaling 873 units. As of April 30, 2026, the Company sold 655 units out of 679 units of the first phase and sold 600 out of 873 of the second phase.

NEW ACCOUNTING PRONOUNCEMENTS

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

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. These financial statements are prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of our assets and liabilities and revenues

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

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

Revenue Recognition

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

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

The Company recognizes revenue from real estate sales at a point in time when the customer obtains control of the property, which is generally upon delivery and acceptance of the completed unit. All revenues represent gross revenues less applicable value-added tax ("VAT") and other sales taxes.

Real Estate Property under Development

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

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

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

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

Income Taxes

The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. Deferred tax assets or liabilities were off-set by a 100% valuation allowance; therefore there has been no recognized benefit as of March 31, 2026 and December 31, 2025.

RESULTS OF OPERATIONS

We provide the following discussion and analyses of our changes in financial condition and results of operations for the period ended March 31, 2026 with comparisons to the period ended March 31, 2025.

Revenue

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

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The net revenue in the first quarter of 2026 was $679,834, which decreased by 93% from $9,787,785 in the first quarter of 2025. In the first quarter of 2026, property management, and house sales represented 45%, and 55% of our total net revenues, respectively. The decrease in net revenue in the first quarter of 2026 was mainly due to the decrease in the recognition of house sales revenue of the HATX project and Linyi project in this quarter.

Property Management

Property management represented 45% of our revenue in the first quarter of 2026 and revenue from property management decreased by 7% compared with the same period in 2025.

House sales

House sales represented 55% of our revenue in the first quarter of 2026. The company has far less recognition the house sales revenue of HATX project and Linyi project in the period compare with the same period in 2025.

Cost of Revenue

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

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The cost of revenue in the first quarter of 2026 was $871,946, an decrease of 91% from $9,888,923 in the same period in 2025. In the first quarter of 2026, property management and house sales represented 53%, and 47% of total cost of revenues, respectively. The

decrease in cost of revenue in first quarter of 2026 was mainly due to the decrease in the recognition of the cost of revenue of the HATX project and Linyi project in this period.

Property management

The cost of revenue for property management in the first quarter of 2026 was $463,999, an increase of 4% from $443,572 in the same period in 2025.

House sales

House sales represented 47% of our cost of revenue in the first quarter of 2026. The Company had recognized at zero its house sales of HATX project in the period.

Operating Expenses

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

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The operating expenses in the first quarter of 2026 were $268,762, a decrease of 22% from $346,541 compared with the same period of 2025. This was mainly due to the decrease in expenses in consulting service. In the first quarter of 2026, the expenses related to property management and house sales represented 50% and 50% of the total operating expenses, respectively.

Property management

The operating expenses for property management in the first quarter of 2026 were $135,330, which increased 2% from $132,345 in the same period in 2025.

House sales

The operating expenses for house sales in the first quarter of 2026 were $133,432, which decreased 37% from $214,196 in the same period in 2025.

General and Administrative Expenses

The general and administrative expenses in the first quarter of 2026 were $569,427, a decrease of 6.8% from $607,870 in the same period in 2025.

Major Related Party Transaction

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

The disclosed dividends due from SHDEW at the amount of $15,691,664 is still not announced the specific time to allocation.

Amounts Due To Directors

The amounts due to directors as of March 31, 2026 were $772,287. The amounts due are as follows:

Amount Due to Lin Chi-Jung

The amount due to Lin Chi-Jung as of March 31, 2026 was $751,341, which includes unpaid loan.

Amount Due to Lin Hsin-Hung

The balance due to Lin Hsin-Hung as of March 31, 2026 was $20,947, which is unsecured, interest-free and payable on demand.

LIQUIDITY AND CAPITAL RESOURCES

In the first quarter of 2026, our principal sources of cash were revenues from our house sales and property management business. Most of our cash resources were used to fund our property development investment and revenue related expenses, such as salaries and commissions paid to the sales force, daily administrative expenses and the maintenance of regional offices.

We ended the period with a cash position of $14,460,268.

The Company's operating activities used cash in the amount of $3,547,146, which was primarily attributable to the repayment to unconsolidated affiliates.

The Company's investing activities provided cash resources of $2,796,169, which was primarily attributable to the withdrawal of transactional financial assets.

The Company's financing activities used cash resources of $1,445,212, which was primarily attributable to the repayment to an affiliate.

The potential cash needs for 2026 would include the investment of transactional financial assets, the rental guarantee payments and promissory deposits for various property projects as well as our development of the Linyi project.

Capital Resources

Taking into account our cash position, available credit facilities and cash generated from operating activities, we believe that we have sufficient funds to operate our existing business for the next twelve months. If our business otherwise grows more rapidly than we currently predict, we plan to raise funds through the issuance of additional shares of our equity securities in one or more public or private offerings. We will also consider raising funds through credit facilities obtained with lending institutions. There can be no guarantee that we will be able to obtain such funds through the issuance of debt or equity or obtain funds that are with terms satisfactory to management and our board of directors.

OFF BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements.