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
OVERVIEW
In
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
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SRRE and its subsidiaries, namely, CY-SRRE, LRY,
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
On
SHDEW was established in
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In
RECENTLY ADOPTED ACCOUNTING STANDARDS
In
In
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
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The following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our condensed consolidated financial statements.
Revenue Recognition
Most of the Company's revenue is derived from real estate sales in the PRC. The majority of the Company's contracts contain a single performance obligation involving significant real estate development activities that are performed together to deliver a real estate property to customers. Revenues arising from real estate sales are recognized when or as the control of the asset is transferred to the customer. The control of the asset may transfer over time or at a point in time. For the sales of individual condominium units in a real estate development project, the Company has an enforceable right to payment for performance completed to date, revenue is recognized over time by measuring the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognized at a point in time when the customer obtains control of the asset.
All revenues represent gross revenues less sales and business tax.
ASC 606 requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of the contract(s) which include (i) identifying the contract(s) with the customer, (ii) identifying the separate performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the separate performance obligations, and (v) recognizing revenue when each performance obligation is satisfied. ASC 606 also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, ASC 606 requires extensive disclosures.
The Company adopted ASC 606 on
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
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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
RESULTS OF OPERATIONS
We provide the following discussion and analyses of our changes in financial
condition and results of operations for the period ended
Revenue
The following table shows the net revenue detail by line of business:
Three months ended March 31 2022 % of total 2021 % of total % change Property management 323,669 3 322,582 13.66 0.34 House Sales 10,498,729 97 2,039,019 86.34 414.89 Net revenue 10,822,398 100 2,361,601 100 358.27
The net revenue in the first quarter of 2022 was
Property Management
Property management represented 3% of our revenue in the first quarter of 2022 and revenue from property management increased by 0.34% compared with the same period in 2021.
House sales
House sales represented 97% of our revenue in the first quarter of 2022. The company has recognition the house sales revenue of HATX project in the period.
Cost of Revenue
The following table shows the cost of revenue detail by line of business:
Three months ended March 31, 2022 % of total 2021 % of total % change Property management 399,732 3.89 390,130 17.62 2.46 House sales 9,863,649 96.11 1,823,953 82.38 440.78 Cost of Revenue 10,263,380 100 2,214,084 100 363.55 23 Table of Contents
The cost of revenue in the first quarter of 2022 was
Property management
The cost of revenue for property management in the first quarter of 2022 was
House sales
House sales represented 96.11% of our cost of revenue in the first quarter of 2022. The Company recognized its house sales of HATX project in the period.
Operating Expenses
The following table shows operating expenses detail by line of business:
Three months ended March 31, 2022 % of total 2021 % of total % change Property management 422,318 60.13 196,191 19 115.26 House sales 279,984 39.87 860,940 81 (67.48) Operating expenses 702,303 100 1,057,131 100 (33.57)
The operating expenses in the first quarter of 2022 were
Property management
The operating expenses for property management in the first quarter of 2022 were
House sales
The operating expenses for house sales in the first quarter of 2022 were
General and Administrative Expenses
The general and administrative expenses in the first quarter of 2022 were
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.
Amounts Due To Directors
The amounts due to directors as ofMarch 31, 2022 were$456,787 . The amounts due are as follows: 24 Table of Contents Amount Due toLin Chi-Jung
The amount due to
Amount Due to
The balance due to
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of 2022, 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
The Company's operating activities used cash in the amount of
The Company's investing activities used cash resources of
The Company's financing activities provided cash resources of
The potential cash needs for 2022 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 and the HATX 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.
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