SECURITIES AND EXCHANGE COMMISSION
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Item 8.01 Other Events
As disclosed in our report on Form 10-Q for the period ended September 30, 2021, the Market Supervisions Administration (“MSA”) of Baokang County, a county located within Hubei Province, China, was conducting an investigation into the business practices of Shanghai Da Er Wei Trading Company Limited ("SHDEW"), a company in which we own a 19.91% interest, and some of its affiliates. SHDEW is in the business of selling cosmetics and other consumer goods online.
We were advised in July 2022 by SHDEW that in September 2021, the MSA fined SHDEW 21 million RMB (approximately $3 million) for business practices that did not conform to government standards. The MSA required SHDEW to change its business model for the collection of commissions from downline distributors, which was found to resemble an unacceptable multi-level marketing program. Accordingly, SHDEW subsequently changed its business practices.
We are not related to this investigation, and we do not have any control or influence over the business practices of SHDEW. We are unable to evaluate the merits of any allegations or conclusions by the MSA.
We do not know how any change in SHDEW’s business practices will affect its revenue and ability to pay a dividend, which has been a significant source of our revenue in recent years. While SHDEW is not required to pay any dividends, any material decline in the dividend could have a material adverse effect on our business. At this stage, we are also unable to evaluate the impact on our future cash flow resulting from this investigation.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: September 13, 2022
| SUNRISE REAL ESTATE GROUP, INC. | |||
| By: | /s/ Zhang Jian | ||
| Name: Zhang Jian | |||
| Title: CEO | |||