NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION
OF BUSINESS
Sunrise Real Estate Group, Inc. (“SRRE”)
was incorporated in Texas on October 10, 1996 under the name of Parallax Entertainment, Inc. SRRE, together with its subsidiaries
and equity investment described below, are collectively referred to as “the Company”, “we”, “our”
or “us”. The Company is primarily engaged in the provision of property brokerage services, which include property marketing,
leasing and management services, and real estate development in the People’s Republic of China (the “PRC”).
As
of September 30, 2019, the Company has the following major subsidiaries and equity investment.
Company
Name
|
|
Date
of
Incorporation
|
|
Place
of
Incorporation
|
|
%
of Ownership
held by the
Company
|
|
Relationship
with the
Company
|
|
Principal
Activity
|
Sunrise Real Estate Development Group, Inc. (CY-SRRE)
|
|
April 30, 2004
|
|
Cayman Islands
|
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Lin Ray Yang Enterprise Limited (“LRY”)
|
|
November 13, 2003
|
|
British Virgin Islands
|
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Shanghai Xin Ji Yang Real Estate Consultation Company Limited (“SHXJY”)
|
|
August 20, 2001
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Shanghai Shang Yang Real Estate consultation Company Limited (“SHSY”)
|
|
February 5, 2004
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Suzhou Shang Yang Real Estate Consultation Company Limited (“SZSY”)
|
|
November 24, 2006
|
|
PRC
|
|
|
75.25%1
|
|
Subsidiary
|
|
Property brokerage and management services
|
Suzhou Xi Ji Yang Real Estate Consultation Company Limited (“SZXJY”)
|
|
June 25, 2004
|
|
PRC
|
|
|
75%
|
|
Subsidiary
|
|
Property brokerage services
|
Linyi Shangyang Real Estate Development Company Limited (“LYSY”)
|
|
October 13, 2011
|
|
PRC
|
|
|
34%2
|
|
Subsidiary
|
|
Real estate development
|
Shangqiu Shang Yang Real Estate Consultation Company Limited (“SQSY”)
|
|
October 20, 2010
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Wuhan Gao Feng Hui Consultation Company Limited (“WHGFH”)
|
|
November 10, 2010
|
|
PRC
|
|
|
60%
|
|
Subsidiary
|
|
Property brokerage services
|
Sanya Shang Yang Real Estate Consultation Company Limited (“SYSY”)
|
|
September 18, 2008
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Shanghai Rui Jian Design Company Limited (“SHRJ”)
|
|
August 15, 2011
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Property brokerage services
|
Linyi Rui Lin Construction and Design Company Limited (“LYRL”)
|
|
March 6, 2012
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Wuhan Yuan Yu Long Real Estate Development Company Limited (“WHYYL”)
|
|
December 28, 2009
|
|
PRC
|
|
|
49%
|
|
Equity investment
|
|
Real estate development
|
Shanghai Xin Xing Yang Real Estate Brokerage Company Limited (“SHXXY”)
|
|
September 28, 2011
|
|
PRC
|
|
|
20%
|
|
Equity investment
|
|
Property brokerage services
|
Xin Guang Investment Management and Consulting Company Limited (“XG”)
|
|
December 17, 2012
|
|
PRC
|
|
|
49%
|
|
Equity investment
|
|
Investment management and consulting
|
Shanghai Da Er Wei Trading Company Limited (“SHDEW”)
|
|
June 6, 2013
|
|
PRC
|
|
|
19.91%3
|
|
Equity investment
|
|
Import and export trading
|
Shanghai Hui Tian (“SHHT”)
|
|
July 25, 2014
|
|
PRC
|
|
|
100%
|
|
Subsidiary
|
|
Investment holding
|
Huaian Zhanbao Industrial
Co., Ltd. (“HAZB”)
|
|
December 6, 2018
|
|
PRC
|
|
|
78.46%4
|
|
Subsidiary
|
|
Investment holding
|
Huaian Tianxi Real Estate
Development Co., Ltd (“HATX”)
|
|
October, 2018
|
|
PRC
|
|
|
100%4
|
|
Subsidiary
|
|
Investment holding
|
|
1
|
The Company and a shareholder of SZSY, which holds 12.5% equity interest in SZSY, entered into a voting agreement under which the Company is entitled to exercise the voting rights in respect of the shareholder’s 12.5% equity interest in SZSY. The Company effectively holds 75.25% voting rights in SZSY and therefore considers SZSY as a subsidiary of the Company.
|
|
2
|
The Company and a shareholder of LYSY, which holds 46% equity interest in LYSY, entered into a voting agreement that the Company is entitled to exercise the voting rights in respect of her 46% equity interest in LYSY. The Company effectively holds 80% voting rights in LYSY and therefore considers LYSY as a subsidiary of the Company. On May 27, 2020, LYRL received 10% of the issued and outstanding shares of LYSY from Nanjing Longchang Real Estate Development Group. LYRL owned 34% of LYSY following the purchase.
|
|
3
|
In December 2019, SHDEW had an employee stock bonus where its employees received their issued shares. This resulted in the dilution of our ownership of SHDEW from 20.38% to 19.91%.
|
|
4
|
We established HATX for the purpose of for real estate development in Huai’an through HAZB of which we have 78.46%
ownership.
|
The
accompanying condensed consolidated balance sheet as of December 31, 2018, which has been derived from the audited consolidated
financial statements and the accompanying unaudited condensed consolidated financial statements, has been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures
normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations and the Company
believes that the disclosures made are adequate to make the information not misleading.
In
the opinion of management, these condensed consolidated financial statements reflect all adjustments which are of a normal recurring
nature and which are necessary to present fairly the financial position of the Company as of September 30, 2019 and the
results of operations for the nine months ended September 30, 2019 and 2018, and the cash flows for the nine months ended September
30, 2019 and 2018. These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s
annual report on Form 10-K for the fiscal year ended December 31, 2018. The results of operations for the nine months ended September
30, 2019 are not necessarily indicative of the results which may be expected for the entire fiscal year.
The preparation of condensed consolidated
financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 –SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis
of Accounting and Principles of Consolidation
The
condensed consolidated financial statements include the financial statements of Sunrise Real Estate Group, Inc. and its
subsidiaries. All significant inter-company accounts and transactions have been eliminated on consolidation.
Investments in business entities, in which
the Company does not have control but has the ability to exercise significant influence over operating and financial policies,
are accounted for using the equity method.
We change our evaluation of SHDEW investment
from the equity method to the measurement alternative method due to our ownership of SHDEW was decreased to 19.91% and the Company
does not have significant control of SHDEW. This change in evaluation method will negatively affect our financial statement in
items such as equity in net gain of an affiliate, net profit in our statement of operations and investment in unconsolidated affiliate
in our balance sheet statement. Our equity in net gain of an affiliate decreased to $0 which lowered our net profit and thus lowering
our earnings per share. A one-time effect in our financial line item is discontinuation of equity method for an investment as of
three months and nine months ended September 30, 2019 was -$1,090,172 and $20,716,042 respectively, in our statement of operations.
Foreign Currency Translation and Transactions
The functional currency of SRRE, CY-SRRE
and LRY is U.S. dollars (“$”) and their financial records and financial statements are maintained and prepared in U.S.
dollars. The functional currency of the Company’s subsidiaries and affiliates in China is Renminbi (“RMB”) and
their financial records and statements are maintained and prepared in RMB.
Foreign currency transactions during the
period are translated into each company’s denominated currency at the exchange rates ruling at the transaction dates. Gains
and losses resulting from foreign currency transactions are included in the consolidated statement of operations. Assets and liabilities
denominated in foreign currencies at the balance sheet date are translated into each company’s denominated currency at period-end
exchange rates. All exchange differences are dealt with in the consolidated statements of operations.
The financial statements of the Company’s
operations based outside of the United States have been translated into U.S. dollars in accordance with ASC830. Management has
determined that the functional currency for each of the Company’s foreign operations is its applicable local currency. When
translating functional currency financial statements into U.S. dollars, period-end exchange rates are applied to the condensed
consolidated balance sheets, while average exchange rates as to revenues and expenses are applied to consolidated statements of
operations. The effect of foreign currency translation adjustments is included as a component of accumulated other comprehensive
income in shareholders’ equity.
The
exchange rates as of September 30, 2019 and December 31, 2018 are $1: RMB7.0729 and $1: RMB6.8632, respectively.
The RMB is not freely convertible into
foreign currency and all foreign exchange transaction must take place through authorized institutions. No representation is made
that the RMB amounts could have been, or could be, converted into U.S. dollars at the rate used in translation.
Real Estate Property under Development
Real estate property under development,
which consists of residential unit sites and commercial and residential unit sites under development, is stated at the lower of
carrying amounts or fair value less selling costs.
Expenditures for land development, including
cost of land use rights, deed tax, pre-development costs and engineering costs, are capitalized and allocated to development projects
by the specific identification method. Costs are allocated to specific units within a project based on the ratio of the sales value
of units to the estimated total sales value times the total project costs.
Costs of amenities transferred to buyers
are allocated as common costs of the project that are allocated to specific units as a component of total construction costs. For
amenities retained by the Company, costs in excess of the related fair value of the amenity are also treated as common costs. Results
of operations of amenities retained by the Company are included in current operating results.
In accordance with ASC 360, “Property,
Plant and Equipment” (“ASC 360”), real estate property under development is subject to valuation adjustments
when the carrying amount exceeds fair value. An impairment loss is recognized only if the carrying amount of the assets is not
recoverable and exceeds fair value. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to be generated by the assets.
For
the nine months ended September 30, 2019, the Company had recognized the net revenue and cost of revenue of ZJPF project
based on the number of units sold.
In
October 2018 we established HATX for the purpose of for real estate development in Huaian through HAZB of which we have 78.46%
ownership. HAZB purchased the property in Jiangsu Pronvince, Huaian City Qingjiang Pu District, with an area of 78,030 square meters
and the Company, through HATX, invested 78.46% shares in HAZB. The Huaian project, named Tianxi Times, started its 1st
phase development in early 2019 with a gross floor area (“GFA”) of 41,795 sqm totaling 347 units. As of April
30, 2020 the Company pre-sold 255 out of 347 units.
Long Term Investments
The Company accounts for long term investments
in equities as follows:
Investment in Unconsolidated Affiliates
Affiliates are entities over which the
Company has significant influence, but which it does not control. The Company generally considers an ownership interest of 20%
or higher to represent significant influence. Investments in unconsolidated affiliates are accounted for by the equity method of
accounting. Under this method, the Company’s share of the post-acquisition profits or losses of affiliates is recognized
in the income statement and its shares of post-acquisition movements in other comprehensive income are recognized in other comprehensive
income. Unrealized gains on transactions between the Company and its affiliates are eliminated to the extent of the Company’s
interest in the affiliates; unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
When the Company’s share of losses
in an affiliate equals or exceeds its interest in the affiliate, the Company does not recognize further losses, unless the Company
has incurred obligations or made payments on behalf of the affiliate.
The Company is required to perform an impairment
assessment of its investments whenever events or changes in business circumstances indicate that the carrying value of the investment
may not be fully recoverable. An impairment loss is recorded when there has been a loss in the value of the investment that is
not temporary. The Company did not record any impairment losses in any of the periods reported.
Other Investments
Where the Company has no significant influence,
the investment is classified as other assets in the balance sheet and is carried under the measurement alternative which is measured
at cost less impairment, adjusted for observable price changes in orderly transactions for an identical or similar investment of
the same issuer. Investment income is recognized by the Company when the investee declares a dividend and the Company believes
it is collectible. The Company periodically evaluates the carrying value of its investment under the measurement alternative method
in the case of the investment in SHDEW and any decline in value is included in impairment of cost of the investment.
Government Subsidies
Government subsidies include cash subsidies
received by the Company’s subsidiaries in the PRC from local governments.
In recognizing the benefit of government
subsidies in accordance with U.S. GAAP, the Company considers intended use of and restrictions of the subsidy, the requirements
for the receipt of funds, and whether or not the incentive is given for immediate financial support, or to encourage activities
such as land development in specified area. Each grant is evaluated to determine the propriety of classification on the consolidated
statements of operations and consolidated balance sheets. Those grants that are substantively reimbursements of specified costs
are matched with those costs and recorded as a reduction in costs. Those benefits that are more general in nature or driven by
business performance measures are classified as revenue.
Government
subsidy was received in 2012 and the Company recorded it as deferred government subsidy in balance sheets. As of September 30,
2019, and December 31, 2018, the deferred government subsidy amounted to $4,686,255 and $4,829,440, respectively. The subsidy
was used to reimburse the land acquisition costs and certain construction costs incurred for the Company’s property development
project in Linyi, and are repayable if the Company fails to complete the subsidized property development project by the agreed
date.
Revenue Recognition
Most of the Company’s revenue is
derived from real estate sales in the PRC. The majority of the Company’s contracts contain a single performance obligation
involving significant real estate development activities that are performed together to deliver a real estate property to customers.
Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The
control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate
development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over
time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at
a point in time when the customer obtains control of the asset.
All revenues represent gross revenues less
sales and business tax.
ASC 606 requires an entity to recognize
revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. ASC 606 creates a five-step model that requires entities to exercise
judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying
the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction
price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. ASC 606
also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a
contract. In addition, ASC 606 requires extensive disclosures.
The Company adopted ASC 606 on January
1, 2018 using the modified retrospective approach with no restatement of comparative periods and no cumulative-effect adjustment
to retained earnings recognized as of the date of adoption. A significant portion of the Company’s revenue is derived from
development and sales of condominium real estate property in the PRC, with revenue previously recognized using the percentage of
completion method. Under the new standard, to recognize revenue over time similar to the percentage of completion method, contractual
provisions need to provide the Company with an enforceable right to payment and the Company has no alternative use of the asset.
Historically, all contracts executed contained an enforceable right to home purchase payments and the Company had no alternative
use of assets, therefore, the adoption of ASC 606 did not have a material impact on the Company’s consolidated financial
statements.
Net Earnings (Loss) per Common Share
The Company computes net earnings (loss)
per share in accordance with ASC 260, “Earnings per Share” (“ASC 260”). Under the provisions of ASC 260,
basic net earnings (loss) per share is computed by dividing net earnings (loss) available to common shareholders for the period
by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net earnings
(loss) per share recognizes common stock equivalents, however, potential common stock in the diluted EPS computation is excluded
in net loss periods, as their effect is anti-dilutive.
Recently Adopted Accounting Standards
In August 2018, the SEC issued Release
No. 33-10532 that amends and clarifies certain financial reporting requirements. The principal change to our financial reporting
will be the inclusion of the annual disclosure requirement of changes in stockholders’ equity in Rule 3-04 of Regulation
S-X to interim periods. We adopted this new rule on January 1, 2019. Upon adoption, the Company includes its Statements of Stockholders’
Deficit with each interim reporting.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The
standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize
in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to
use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting
policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors
are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. The Company
adopted this ASU on January 1, 2019 with no material impact on the Company’s financial statements.
In June 2018, the FASB issued Accounting Standards Update (“ASU”)
ASU 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting , which simplifies the
accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments
to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019.
Early adoption is permitted. The Company adopted this ASU on January 1, 2019 with no material impact on the Company’s financial
statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases. The
standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize
in its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to
use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting
policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors
are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. The Company
adopted this ASU on January 1, 2019 with no material impact on the Company’s financial statements.
New Accounting Pronouncements
There were no new accounting pronouncements
related to the Company.
NOTE 3– RESTRICTED CASH
The
Company is required to maintain certain deposits with the bank for those home buyers that has applied for a housing loan from their
bank. This deposit is a percentage to each home buyer’s bank loan for the purpose of purchasing in our project. Once we complete
the handover to the buyer, these deposits become unrestricted. As of September 30, 2019, and December 31, 2018, the Company
held cash deposits of $4,967,262 and $1,550,988, respectively.
NOTE 4– TRANSACTIONAL FINANCIAL
ASSETS
As
of September 30, 2019, we have $27,252,091 invested in bank wealth management investment products. The investments are short
termed with maturity periods and can be rolled into a maturity date of our choosing or automatically rolled into subsequent maturity
period. The annualized rate of return may range from 3.15% to 4.4% depending on the amount and time period invested.
NOTE 5- PROMISSORY DEPOSITS
Promissory deposits are paid to property
developers in respect of the real estate projects where the Company has been appointed as sales agent. The balances were unsecured,
interest free and recoverable on completion of the respective projects.
NOTE 6 – REAL ESTATE PROPERTY
UNDER DEVELOPMENT
Real
estate property under development represents the Company’s real estate development project in Linyi, the PRC (“Linyi
Project”), which is located on the junction of Xiamen Road and Hong Kong Road in Linyi City Economic Development Zone, Shandong
Province, PRC. This project covers a site area of approximately 103,385 square meters for the development of villa-style residential
housing buildings. The Company acquired the site and commenced construction of this project during the fiscal year of 2012.
We sold 121 of 124 Phase 1 villas and sold 42 villas in Phase 2 North and also 42 villas in Phase 2 South as of April
30, 2020.
On
March 13, 2014, the Company has signed a joint development agreement with Zhongji Pufa Real Estate Co. According to this agreement,
the Company has obtained a right to develop the Guangxinglu (the “GXL”) project, which is located at 182 lane Guangxinglu,
Putuo district, Shanghai, PRC. This project covers a site area of approximately 2,502 square meters for the development of one
building of apartment. In 2016, the government issued a regulation prohibiting the by-unit sale of commercial-use buildings. The
apartment unit sale for the GXL project was put on hold until the government reviewed our project’s status. During that time
rented out any unsold apartment units while not recognizing the units previously sold before the regulation. In March 2018, we
received government confirmation that our project cannot be sold on a unit-by-unit basis going forward. The Company decided to
continue operating the project by renting out the units. These unsold units are recognized as investment in properties in Note
9. We also recognized all the units that were sold before the regulation in our 2019 Q3 financial.
For
the period ended of September 30, 2019, the Company had recognized the net revenue and cost of revenue of the Linyi project
and the GXL project based on the number of units sold. In the first quarter of 2019, we purchased the property of HATX with the
land use rights. As of September 30, 2019, land use rights included in real estate property under development totaled $78,919,736.
In
October 2018, we established HATX for the purpose of real estate development in Huai’an through HAZB of which we have 78.46%
ownership. HAZB purchased the property in Huai’an, Qingjiang Pu district with an area of 78,030 square meters and the Company,
through HATX, invested 78.46% shares in HAZB. The Huai’an project, named Tianxi Times, started its 1st phase development
in early 2019 with a GFA of 41,795 sqm totaling 347 units. As of April 30, 2020, the Company pre-sold 255 out of 347 units.
NOTE 7 - OTHER RECEIVABLES AND DEPOSITS,
NET
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Advances to staff
|
|
$
|
27,393
|
|
|
|
22,864
|
|
Rental deposits
|
|
|
40,021
|
|
|
|
39,085
|
|
Prepaid expense
|
|
|
29,549
|
|
|
|
12,033
|
|
Prepaid tax
|
|
|
1,814,969
|
|
|
|
4,620,338
|
|
Other receivables
|
|
|
4,654,449
|
|
|
|
4,080,833
|
|
|
|
$
|
6,566,381
|
|
|
$
|
8,775,153
|
|
Other
receivables and deposits as of September 30, 2019 and December 31, 2018 were stated net of allowance for doubtful accounts
of $323,258 and $674,478, respectively.
NOTE
8 – PROPERTY AND EQUIPMENT, NET
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Furniture and fixtures
|
|
$
|
213,983
|
|
|
$
|
161,949
|
|
Computer and office equipment
|
|
|
181,124
|
|
|
|
155,395
|
|
Motor vehicles
|
|
|
580,486
|
|
|
|
535,089
|
|
Properties
|
|
|
2,139,076
|
|
|
|
2,204,433
|
|
|
|
|
3,116,116
|
|
|
|
3,056,867
|
|
Less: Accumulated depreciation
|
|
|
(1,891,954
|
)
|
|
|
(1,958,025
|
)
|
|
|
$
|
1,224,162
|
|
|
$
|
1,098,842
|
|
Depreciation
and amortization expense for property and equipment amounted to $1,294,402 and $249,487 for the nine months ended September
30, 2019 and 2018, respectively.
NOTE 9 – INVESTMENT PROPERTIES,
NET
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
Investment properties
|
|
$
|
32,856,959
|
|
|
$
|
9,022,150
|
|
Less: Accumulated depreciation
|
|
|
(5,949,606
|
)
|
|
|
(5,314,670
|
)
|
|
|
$
|
26,907,353
|
|
|
$
|
3,707,480
|
|
Depreciation
and amortization expense for investment properties amounted to $1,164,561 and $924,757 for the nine months ended September
30, 2019 and 2018, respectively.
We recognized $19,364,708 of investment
properties from the unsold apartment units in the GXL project.
NOTE 10 – INVESTMENT IN AND AMOUNT
DUE FROM AN UNCONSOLIDATED AFFILIATE
The
investments in unconsolidated affiliates primarily consist of WHYYL (49%) and SHDEW (19.91%). As of September 30, 2019,
the investment amount in WHYYL and SHDEW were $0 and $12,527,540, respectively.
WHYYL is primarily developing a real estate
project in Wuhan, the PRC on a parcel of land covering approximately 27,950 square meters with a 3-year planned construction period.
SHDEW is a company engaged principally in the manufacture and sales of skincare and cosmetic products. The Company has accounted
for these investments using the measurement alternative method for the periods presented in this report as the Company cannot exercise
significant influence over their activities
In
2011, the Company invested $4,697,686 for acquiring a 49% equity interest in WHYYL to expand its operations to the real estate
development business. As of September 30, 2019, the investment in WHYYL was $0.
SHDEW
was established in June 2013 with its business as a skincare and cosmetic company. SHDEW’s online Wechat stores had a membership
of over five million members as of June 30, 2020. SHDEW is developing its own skincare products as well as improving
its online ecommerce platform. SHDEW sells products under its own brands as well as the products of third parties. The products
include skincare, cosmetics, personal care products such as soaps, shampoos, skin care devices and children’s apparel. SHDEW
is developing its own online shopping platform where consumers can purchase its cosmetics and skincare products as well as products
imported into China. The online shopping platform has been in operation since 2017.
On December 2019, SHDEW had an employee
stock bonus where many of its employees received their vested shares. This resulted in the dilution of our ownership of SHDEW from
20.38% to 19.91% thereby changing the accounting method for the SHDEW investment from the equity method to the measurement alternative
method going forward.
NOTE 11– PROMISSORY NOTES PAYABLE
The
promissory notes payable consists of the following unsecured notes to unrelated parties. Included in the balances are promissory
notes with outstanding principal and unpaid interest of an aggregate of $1,413,847 and $1,457,046 as of September 30, 2019
and December 31, 2018, respectively.
The
promissory note with a principal as of September 30, 2019 amounting to $706,924 bears interest at a rate of 0% per annum,
is unsecured and has no fixed term of repayment. As of September 30, 2019, and December 31, 2018, the outstanding principal and
unpaid interest related to this promissory note amounted to $706,924 and $728,523, respectively.
The
promissory note with a principal as of September 30, 2019 amounting to $706,924 bears interest at a rate of 0% per annum,
is unsecured and has no fixed term of repayment. As of September 30, 2019, and December 31, 2018, the outstanding principal and
unpaid interest related to this promissory note amounted to $706,924 and $728,523, respectively.
For the nine months ended September 30, 2019, the interest expense
related to these promissory notes was $NIL.
NOTE 12– AMOUNTS DUE TO DIRECTORS
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Lin Chi-Jung
|
|
$
|
841,272
|
|
|
$
|
1,769,484
|
|
Pan, Yu-Jen
|
|
|
(56,554
|
)
|
|
|
(58,282
|
)
|
Lin Hsin-Hung
|
|
|
37,613
|
|
|
|
56,407
|
|
|
|
$
|
822,331
|
|
|
$
|
1,767,609
|
|
|
(a)
|
The balance due to Lin Chi-Jung consists of temporary advances.
|
The balances are unsecured,
interest-free and have no fixed term of repayment.
|
(b)
|
The balances due to Lin Hsin-Hung are unsecured, interest-free and have no fixed term of repayment.
|
|
(c)
|
The balances due from Pan Yu-jen are unsecured, interest-free and have no fixed term of repayment.
|
NOTE 13- OTHER PAYABLES AND ACCRUED
EXPENSES
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Accrued staff commission and bonus
|
|
$
|
218,643
|
|
|
$
|
285,506
|
|
Rental deposits received
|
|
|
52,890
|
|
|
|
46,331
|
|
Bid bond
|
|
|
299,736
|
|
|
|
203,986
|
|
Dividends payable to non-controlling interest
|
|
|
190,240
|
|
|
|
196,053
|
|
Other payables
|
|
|
13,488,708
|
|
|
|
198,065
|
|
|
|
$
|
14,250,217
|
|
|
$
|
929,941
|
|
NOTE 14- ACCOUNT PAYABLE
Account
payable was mostly derived from our property development of the Linyi project, the GXL project and the HATX project. As
of September 30, 2019, and December 31, 2018, the Company’s account payable amounted to $2,228,189 and $5,268,437.
NOTE 15 – AMOUNT DUE TO AFFILIATES
The
temporary borrowing, in the amount of $498,155 from JXSY is intercompany transfers for day to day operation.
NOTE 16 – CUSTOMER DEPOSITS
Customer deposits were mostly derived from our property development
of the Linyi project and the GXL project, which was pre-sale collection from our customers. As of September 30, 2019, and December
31, 2018, the Company’s customer deposits amounted to $15,687,782 and $40,698,987.
NOTE 17 – INCOME TAX PAYABLE
The
2017 Tax Act was enacted on December 22, 2017. Due to the complexities involved in the accounting for the 2017 Tax Act,
the SEC issued SAB 118, which provides guidance on the application of US GAAP for income taxes in the period of enactment. SAB
118 requires companies to include in their financial statements a reasonable estimate of the impact of the 2017 Tax Act, to the
extent such an estimate has been determined. As a result, our financial results reflect the income tax effects of the 2017 Tax
Act for which the accounting is complete, as well as provisional amounts for those impacts for which the accounting is incomplete
but a reasonable estimate could be determined.
NOTE 18– DEFERRED GOVERNMENT SUBSIDY
Deferred government subsidy consists of
the cash subsidy provided by the local government.
Government
subsidy was received in 2012, and as of September 30, 2019 and December 31, 2018, the Company’s deferred government
subsidy amounted to $4,686,255 and $4,829,440, respectively. The subsidy is given to reimburse the land acquisition costs and certain
construction costs incurred for the Company’s property development project, and are repayable if the Company fails to complete
the subsidized property development project before the agreed date. The entire government subsidy is deferred and included as deferred
government subsidy in consolidated balance sheets.
NOTE 19- COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
The
Company leases certain of its office properties under non-cancellable operating lease arrangements. Payments under operating leases
are expensed on a straight-line basis over the periods of their respective terms, and the terms of the leases do not contain rent
escalation, or contingent rent, renewal, or purchase options. There are no restrictions placed upon the Company by entering into
these leases. Rental expenses under operating leases for the nine months ended September 30, 2019 and 2018 were $247,709
and $33,780, respectively.
As
of September 30, 2019, the Company had the following operating lease obligations.
|
|
Amount
|
|
Within one year
|
|
$
|
43,960
|
|
Two to five years
|
|
|
-
|
|
|
|
$
|
43,960
|
|
NOTE 20– STATUTORY RESERVE
According to the relevant corporation laws
in the PRC, a PRC company is required to transfer at least 10% of its profit after taxes, as determined under accounting principles
generally accepted in the PRC, to the statutory reserve until the balance reaches 50% of its registered capital. The statutory
reserve can be used to make good on losses or to increase the capital of the relevant company.
According to the Law of the PRC on Enterprises
with Wholly-Owned Foreign Investment, the Company PRC’s subsidiaries are required to make appropriations from after-tax profits
as determined under accounting principles generally accepted in the PRC (“PRC GAAP”) to non-distributable reserves.
These reserve funds include one or more of the following: (i) a general reserve, (ii) an enterprise expansion reserve and (iii)
a staff bonus and welfare fund. A wholly-owned PRC subsidiary is not required to make appropriations to the enterprise expansion
reserve but annual appropriations to the general reserve are required to be made at 10% of the profit after tax as determined under
PRC GAAP at each year-end, until such fund has reached 50% of its respective registered capital. The staff welfare and bonus reserve
is determined by the board of directors. The general reserve is used to offset future losses. The subsidiary may, upon a resolution
passed by the stockholders, convert the general reserve into capital. The staff welfare and bonus reserve are used for the collective
welfare of the employees of the subsidiary. The enterprise expansion reserve is for the expansion of the subsidiary operations
and can be converted to capital subject to approval by the relevant authorities. These reserves represent appropriations of the
retained earnings determined in accordance with Chinese law.
In
addition to the general reserve, the Company’s PRC subsidiaries are required to obtain approval from the local PRC government
prior to distributing any registered share capital. Accordingly, both the appropriations to general reserve and the registered
share capital of the Company’s PRC subsidiary are considered as restricted net assets and are not distributable as cash dividends.
As of September 30, 2019, and December 31, 2018, the Company’s statutory reserve fund was $3,194,604 and $3,194,604,
respectively.
NOTE 21 - SEGMENT INFORMATION
The Company's chief executive officer and
chief operating officer have been identified as the chief operating decision makers. The Company's chief operating decision makers
direct the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.
The Company evaluates performance based
on several factors, including net revenue, cost of revenue, operating expenses, and income from operations. The following tables
show the operations of the Company's operating segments:
|
|
Three Months Ended September 30, 2019
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
537,403
|
|
|
$
|
247,242
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
784,645
|
|
Cost of revenues
|
|
|
(847,169
|
)
|
|
|
(294,587
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,141,756
|
)
|
Gross profit
|
|
|
(309,766
|
)
|
|
|
(47,345
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(357,111
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(616,556
|
)
|
|
|
(419,938
|
)
|
|
|
-
|
|
|
|
(67
|
)
|
|
|
(1,036,561
|
)
|
General and administrative expenses
|
|
|
(2,680,324
|
)
|
|
|
(279,395
|
)
|
|
|
-
|
|
|
|
(59,889
|
)
|
|
|
(3,019,608
|
)
|
Operating loss
|
|
|
(3,606,646
|
)
|
|
|
(746,678
|
)
|
|
|
|
|
|
|
(59,956
|
)
|
|
|
(4,413,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
47,045
|
|
|
|
27,392
|
|
|
|
-
|
|
|
|
2,644
|
|
|
|
77,081
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other income, Net
|
|
|
803,640,
|
|
|
|
(57,503
|
)
|
|
|
315,767
|
|
|
|
-
|
|
|
|
1,061,904
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total other (expenses) income
|
|
|
850,685
|
|
|
|
(30,111
|
)
|
|
|
315,767
|
|
|
|
2,644
|
|
|
|
1,138,985
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(2,755,961
|
)
|
|
|
(776,789
|
)
|
|
|
315,767
|
|
|
|
(57,312
|
)
|
|
|
(3,274,295
|
)
|
Income tax
|
|
|
34,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
34,125
|
|
Net Income( loss)
|
|
$
|
(2,721,836
|
)
|
|
$
|
(776,789
|
)
|
|
$
|
315,767
|
|
|
$
|
(57,312
|
)
|
|
$
|
(3,240,170
|
)
|
|
|
Nine Months Ended September 30, 2019
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
588,059
|
|
|
$
|
31,836,014
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
32,424,073
|
|
Cost of revenues
|
|
|
(521,301
|
)
|
|
|
(25,709,956
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,231,257
|
)
|
Gross profit
|
|
|
66,758
|
|
|
|
6,126,058
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,192,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(428,320
|
)
|
|
|
(944,101
|
)
|
|
|
-
|
|
|
|
(253
|
)
|
|
|
(1,372,674
|
)
|
General and administrative expenses
|
|
|
(3,376,886
|
)
|
|
|
(5,481,622
|
)
|
|
|
-
|
|
|
|
(282,892
|
)
|
|
|
(9,141,400
|
)
|
Operating loss
|
|
|
(3,738,448
|
)
|
|
|
(299,665
|
)
|
|
|
|
|
|
|
(283,145
|
)
|
|
|
(4,321,258
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
24,674
|
|
|
|
54,962
|
|
|
|
-
|
|
|
|
8,543
|
|
|
|
88,179
|
|
Interest expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
Other income, Net
|
|
|
35,512
|
|
|
|
(50,854
|
)
|
|
|
1,588,756
|
|
|
|
|
|
|
|
1,573,414
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
Total other (expenses) income
|
|
|
60,186
|
|
|
|
4,108
|
|
|
|
1,588,756
|
|
|
|
8,543
|
|
|
|
1,661,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(3,678,262
|
)
|
|
|
(295,557
|
)
|
|
|
1,588,756
|
|
|
|
(274,602
|
)
|
|
|
(2,659,665
|
)
|
Income tax
|
|
|
64,264
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
64,264
|
|
Net Income( loss)
|
|
$
|
(3,613,998
|
)
|
|
$
|
(295,557
|
)
|
|
$
|
1,588,756
|
|
|
$
|
(274,602
|
)
|
|
$
|
(2,595,401
|
)
|
|
|
Three Months Ended September 30, 2018
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
257,284
|
|
|
$
|
1,407,033
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,664,317
|
|
Cost of revenues
|
|
|
(168,304
|
)
|
|
|
(831,402
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(999,707
|
)
|
Gross profit
|
|
|
88,980
|
|
|
|
575,630
|
|
|
|
-
|
|
|
|
-
|
|
|
|
664,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(115,108
|
)
|
|
|
(98,674
|
)
|
|
|
-
|
|
|
|
(92
|
)
|
|
|
(213,874
|
)
|
General and administrative expenses
|
|
|
(502,436
|
)
|
|
|
(207,430
|
)
|
|
|
-
|
|
|
|
(69,506
|
)
|
|
|
(779,372
|
)
|
Operating loss
|
|
|
(528,564
|
)
|
|
|
269,526
|
|
|
|
-
|
|
|
|
(69,598
|
)
|
|
|
(328,636
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
30,222
|
|
|
|
3,261
|
|
|
|
-
|
|
|
|
498
|
|
|
|
33,981
|
|
Interest expense
|
|
|
-
|
|
|
|
3,473
|
|
|
|
52,553
|
|
|
|
|
|
|
|
56,026
|
|
Other income, Net
|
|
|
206,873
|
|
|
|
35,383
|
|
|
|
254,809
|
|
|
|
7
|
|
|
|
497,072
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
33,343,384
|
|
|
|
-
|
|
|
|
33,343,384
|
|
Total other (expenses) income
|
|
|
237,095
|
|
|
|
42,117
|
|
|
|
33,650,746
|
|
|
|
505
|
|
|
|
33,930,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(291,469
|
)
|
|
|
311,643
|
|
|
|
33,650,746
|
|
|
|
(69,093
|
)
|
|
|
33,601,827
|
|
Income tax
|
|
|
(992,913
|
)
|
|
|
12,350
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(980,563
|
)
|
Net Income (loss)
|
|
$
|
(1,284,382
|
)
|
|
$
|
323,993
|
|
|
$
|
33,650,746
|
|
|
$
|
(69,093
|
)
|
|
$
|
32,621,264
|
|
|
|
Nine Months Ended September 30, 2018
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
Net revenues
|
|
$
|
1,147,654
|
|
|
$
|
4,014,733
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
5,162,387
|
|
Cost of revenues
|
|
|
(659,007
|
)
|
|
|
(2,428,300
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,087,307
|
)
|
Gross profit
|
|
|
488,647
|
|
|
|
1,586,433
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,075,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
(805,529
|
)
|
|
|
(50,198
|
)
|
|
|
-
|
|
|
|
(274
|
)
|
|
|
(1,306,001
|
)
|
General and administrative expenses
|
|
|
(928,794
|
)
|
|
|
(586,819
|
)
|
|
|
-
|
|
|
|
(381,663
|
)
|
|
|
(1,897,276
|
)
|
Operating loss
|
|
|
(1,245,676
|
)
|
|
|
499,416
|
|
|
|
-
|
|
|
|
(381,937
|
)
|
|
|
(1,128,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
50,778
|
|
|
|
8,004
|
|
|
|
-
|
|
|
|
5,593
|
|
|
|
64,375
|
|
Interest expense
|
|
|
-
|
|
|
|
(139,237
|
)
|
|
|
(2,107,033
|
)
|
|
|
-
|
|
|
|
(2,246,270
|
)
|
Other income, Net
|
|
|
32,397
|
|
|
|
(109,589
|
)
|
|
|
860,918
|
|
|
|
(256
|
)
|
|
|
783,470
|
|
Equity in net income (loss) of unconsolidated affiliates
|
|
|
-
|
|
|
|
-
|
|
|
|
64,679,542
|
|
|
|
-
|
|
|
|
64,679,542
|
|
Total other (expenses) income
|
|
|
83,175
|
|
|
|
(240,822
|
)
|
|
|
63,433,427
|
|
|
|
5,337
|
|
|
|
63,281,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
(1,162,501
|
)
|
|
|
258,594
|
|
|
|
63,433,427
|
|
|
|
(376,60
|
)
|
|
|
62,152,920
|
|
Income tax
|
|
|
(1,045,296
|
)
|
|
|
83,670
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(961,626
|
)
|
Net Income (loss)
|
|
$
|
(2,207,797
|
)
|
|
$
|
342,264
|
|
|
$
|
63,433,427
|
|
|
$
|
(376,600
|
)
|
|
$
|
61,191,294
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokerage
|
|
|
Real Estate
|
|
|
Investment
|
|
|
|
|
|
|
|
|
|
Services
|
|
|
Development
|
|
|
Transaction
|
|
|
Others
|
|
|
Total
|
|
As of September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate property under development
|
|
$
|
-
|
|
|
$
|
78,919,736
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
78,919,736
|
|
Total assets
|
|
|
9,846,321
|
|
|
|
60,031,914
|
|
|
|
39,921,016
|
|
|
|
68,472,011
|
|
|
|
178,271,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate property under development
|
|
|
-
|
|
|
|
63,422,830
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,422,830
|
|
Total assets
|
|
$
|
2,730,819
|
|
|
$
|
78,716,319
|
|
|
$
|
131,825,646
|
|
|
$
|
8,558,079
|
|
|
$
|
221,830,863
|
|
NOTE 22 – RELATED PARTY TRANSACTIONS
On January 18, 2019, SHDEW passed a shareholder
resolution to issue a cash dividend to its shareholders. The Company, on March 13, 2019, through its subsidiaries SHSY and LYRL,
received RMB 170,839,500 and RMB 98,858,500, respectively.
On
January 28, 2019, Sunrise Real Estate Group, Inc. paid a cash dividend in the amount of $6,869,192 ($0.10 per share) to
shareholders of record as of December 28, 2018. The ex-dividend date was December 26, 2018.
In
January 2019, the Company rented a property unit from a related party for office use.
NOTE 23 – SUBSEQUENT EVENT
On December 2019, SHDEW had an employee
stock bonus where many of its employees received their vested shares. This resulted in the dilution of our ownership of SHDEW from
20.38% to 19.91%. As the Company does not have significant influence in SHDEW and the change of ownership to 19.91%, we changed
our accounting method for the SHDEW investment from the equity method to the alternative measurement going forward.
On May 27, 2020, LYRL received 10% of shares
of LYSY from Nanjing Longchang Real Estate Development Group. LYRL now owns 34% of LYSY.