UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K/A


(Amendment
No. 1)





(Mark
One)


x ANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE


ACT
OF 1934





For
the Fiscal Year Ended December 31, 2009





 ̈ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934





For
the transition period from _________ to __________





Commission
file number: 000-27159




SUNWAY
GLOBAL INC.


(Exact
name of registrant as specified in its charter)





Nevada
              
              65-0439467(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (IRS
      Employer Identification
                No.)





Daqing
Hi-Tech Industry Development Zone


Daqing,
Heilongjiang, Post Code 163316


People’s
Republic of China


(Address
of principal executive offices)





86-459-604-6043


(Registrant’s
telephone number, including area code)









(Former
name, former address and former fiscal year, if changed since last
report)





Copies
to:


Marc
Ross, Esq.


Sichenzia
Ross Friedman Ference LLP


61
Broadway


New York,
New York 10006


Phone:
(212) 930-9700


Fax:
(212) 930-9725





Securities
registered under Section 12(b) of the Exchange Act:None.




Securities
registered pursuant to Section 12(g) of the Act:Common Stock, par value
$.0000001





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yeso Nox





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act Yesx Noo




(COVER
CONTINUES ON FOLLOWING PAGE)








Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yesx  Noo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


o Yes      o No





Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of
Regulation S-K (§229.405) is not contained herein, and will not be contained, to
the best of the Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b2 of the Exchange Act.





Large
      accelerated filero
              Accelerated
      fileroNon-accelerated
      filero
      (Do not check if a smaller reporting company)
              Smaller
      reporting companyx




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yeso Nox




State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.





Note – If a determination
as to whether a particular person or entity is an affiliate cannot be made
without involving unreasonable effort and expense, the aggregate market value of
the common stock held by non-affiliates may be calculated on the basis of
assumptions reasonable under the circumstances, provided that the assumptions
are set forth in this Form.




The
aggregate market value of the voting and non-voting common stock of the issuer
held by non-affiliates as of


June 30,
2009 was approximately $13,920,080 based upon the closing price of the common
stock of $4.25 as quoted by Nasdaq OTC Bulletin Board on June 30,
2009.





APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:




Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.  Yeso Noo





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)




Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.





As of
November 15, 2010, there were 18,499,736 issued and outstanding shares of the
issuer’s common stock.





DOCUMENTS
INCORPORATED BY REFERENCE




List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g. Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.  The listed documents should be
clearly described for identification purposes (e.g. annual report to security
holders for fiscal years ended December 24, 1980).








EXPLANATORY
NOTE





The
Amendment No. 1 to Sunway Global Inc, (the “Company”, “Sunway”)’s Annual report
on Form 10K/A for the year ended December 31, 2009 (the “Amended 10-K”) is being
made as a result of the Company’s recent discovery of certain incorrect
classifications of paid-in capital and retained earnings.





This
Amended 10-K is being filed to amend the paid-in capital and retained earnings
accounts in the Balance Sheet as of December 31, 2008 and 2009, and the
Statements of Shareholders’ Equity for the year ended December 31, 2008 and
2009, related notes and disclosure to comply with paragraph of ASC 740-10-50-12.
This Amended 10-K also includes corrections to certain typographical errors,
provides additional explanation to clarify the statement of cash flow for the
year ended December 31, 2008. This Amended 10-K also provides supplementary
additional income tax reconciliation disclosure to note 13 and includes changes
to Item 9A - Evaluation of Disclosure Controls and Procedures. In addition, this
Amended 10-K includes an adjustment to the audit report of the Company’s
independent registered accountants to reflect certain changes to Note
19  of the financial statements.  No other information
included in the original Form 10-K is amended hereby.





For
convenience and ease of reference, the Company is filing the annual report in
its entirety with applicable changes. Unless otherwise stated, all information
contained in this Amended 10-K is as of April 14, 2010, the filing date of the
original Annual Report. Except as stated herein, this Amended 10-K does not
reflect events or transactions occurring after such filing date and does not
contain any modification or updates to the disclosure in the Annual Report that
may have been affected by events or transactions occurring subsequent to such
filing date. No information in the Annual Report other than as set forth above
is amended hereby.


3


FORWARD
LOOKING STATEMENTS





In this
annual report, references to “Sunway Global,” “Sunway,” “SUWG,” “the Company,”
“we,” “us,” and “our” refer to Sunway Global Inc.




This
Annual Report on Form 10-K/A (including the section regarding Management’s
Discussion and Analysis or Plan of Operation) contains forward-looking
statements regarding our business, financial condition, results of operations
and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “seeks,” “estimates” and similar expressions or variations of such
words are intended to identify forward-looking statements, but are not deemed to
represent an all-inclusive means of identifying forward-looking statements as
denoted in this Annual Report on Form 10-K/A. Additionally, statements
concerning future matters are forward-looking statements.





Although
forward-looking statements in this Annual Report on Form 10-K/A reflect the good
faith judgment of our Management, such statements can only be based on facts and
factors currently known by us. Consequently, forward-looking statements are
inherently subject to risks and uncertainties and actual results and outcomes
may differ materially from the results and outcomes discussed in or anticipated
by the forward-looking statements. Factors that could cause or contribute to
such differences in results and outcomes include, without limitation, those
specifically addressed under the heading “Risks Related to Our Business” below,
as well as those discussed elsewhere in this Annual Report on Form 10-K/A.
Readers are urged not to place undue reliance on these
forward-looking statements, which speak only as of the date of this Annual
Report on Form 10-K. We file reports with the Securities and Exchange Commission
(“SEC”). We make available on our website under “Investor Relations/SEC
Filings,” free of charge, our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those reports as soon
as reasonably practicable after we electronically file such materials with or
furnish them to the SEC. Our website address is www.sunwaytech.com.cn/.  
You can also read and copy any materials we file with the SEC at the SEC’s
Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain
additional information about the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet
site (www.sec.gov) that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC,
including us.





We
undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
Annual Report on Form 10-K/A, except as required by law. Readers are urged to
carefully review and consider the various disclosures made throughout the
entirety of this Annual Report, which are designed to advise interested parties
of the risks and factors that may affect our business, financial condition,
results of operations and prospects.




4





TABLE OF
CONTENTS




PagePART
      IItem
      1.
                      BUSINESS
                      
                      5Item
      1A
                      RISK
      FACTORS
                      
                      14Item
      1B
                      UNRESOLVED
      STAFF COMMENTS
                      
                      24Item
      2.
                      PROPERTIES
                      
                      24Item
      3.
                      LEGAL
      PROCEEDINGS
                      
                      26Item
      4.
                      (REMOVED
      AND RESERVED)
                      
                      26PART
      IIItem
      5.
                      MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
                      
                      26Item
      6
                      SELECTED
      FINANCIAL DATA
                      
                      27Item
      7.
                      MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                      
                      27Item
      7A
                      QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                      
                      32Item
      8.
                      FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
                      
                      33Item
      9.
                      CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSUREItem
      9A.
                      CONTROLS
      AND PROCEDURES
                      
                      34Item
      9B.
                      OTHER
      INFORMATION
                      
                      36PART
      IIIItem
      10.
                      DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
                      
                      36Item
      11.
                      EXECUTIVE
      COMPENSATION
                      
                      39Item
      12.
                      SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                      
                      40Item
      13.
                      CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
                      
                      41Item
      14.
                      PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
                      
                      41PART
      IVItem
      15.
                      EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
                      
                      42SIGNATURES
                      
                      44





PART
I




ITEM
1. BUSINESS.





Our
Business





As a
result of the consummation of a reverse merger, discussed below, we are engaged
in the business of designing, manufacturing and selling logistic transport
systems and medicine dispensing systems and equipment. Our principal product is
a pneumatic tube logistic transport system used in hospitals and other medical
facilities. We recently developed an automatic medicine dispensing and packing
system, which we introduced to the market in the first quarter
of 2008 for use in hospitals and medical facilities.





Our
customers are primarily hospitals and medical appliance companies in the
People’s Republic of China (the “PRC”). As the market for pneumatic transport
systems (“PTS”) and Sunway
Automatic Dispensing and Packing(“SADP”) are still an emerging market,
official data about the industry in general and competition in particular have
not been readily available. Based on information we have collected from bids,
the internet and other market intelligence, it is our estimate that among the
hospitals that have adopted pneumatic transport systems and medicine dispensing
system in China, we were the supplier to the largest number of hospitals in
2005, 2006, 2007, 2008 and 2009. In 2005, we sold 1,105 units PTS to 43
hospitals and medical facilities and recognized revenue of $5,047,365. In 2006,
we sold 1,930 units PTS to 65 hospitals and medical facilities and recognized
revenue of $8,914,139. In 2007, we sold 2,575 units PTS to 87 hospitals and
medical facilities and recognized revenue of $11,865,138. In 2008, we sold 3,669
units PTS and 5 units SADP to 96 hospitals. In 2009, we sold 2,279 units PTS and
11 units SADP to 52 hospitals. We sell our products both directly, through our
sales employees and direct sales office and indirectly, through twelve
independent sales agents and four direct sales office. Our sales network covers
Beijing, Shanghai, Guangzhou, Xi’an and 13 other provinces in the
PRC.




5




We
generate our revenues from sales in five product categories: Type A
workstations, Type B workstations, Type C workstations, SADP and spare part. The
PTS have the same function and price but with different product designs. Having
three types of workstations enables us to provide more options and flexibility
to our customers to accommodate their aesthetic taste, space restrictions and
other requirements.




About
Us





We are a
Nevada corporation which was formed on October 18, 1971. Prior to June 6, 2007,
we were a shell company. On June 6, 2007, we consummated (i) a reverse merger
transaction, in which we acquired control over an operating company in the PRC
and (ii) a private sale of our restricted stock, in which we received an
aggregate of $6.7 million of financing. Through these transactions, we ceased to
be a shell company and, through our subsidiaries, entered into the business of
manufacturing and selling logistic transport systems and medicine
dispensing and system in the PRC.





On June
6, 2007, the Company acquired World Through Limited, a British Virgin Islands
Corporation (“WTL”) through a share exchange transaction with WTL and Rise Elite
International Limited (“Rise Elite”), a company incorporated under the laws of
the British Virgin Islands and the owner of 100% of the outstanding voting stock
of WTL. WTL owns all of the stock of Sunway World Through Technology (Daqing)
Co., Ltd. (“SWT”), a wholly foreign-owned enterprise (“WFOE”) organized under
the laws of the PRC. SWT has a series of contracts with the Company’s operating
company, Daqing Sunway Technology Co., Ltd. (“Daqing Sunway”), a company
organized under the laws of the PRC, which gives it control over Daqing Sunway’s
business, personnel and finances as if it were a wholly owned subsidiary of SWT.
The transaction was structured in this way because PRC regulations require that
Daqing Sunway be acquired for cash and the natural person in control of WTL was
unable to raise sufficient funds to pay the full value for Daqing Sunway’s
shares of assets in cash prior to the acquisition.





As
contemplated by the reverse merger and approved by a majority of shareholders on
June 28, 2007, the Company effected a 86.3035-for-one reverse split of its
common stock that took effect on February 7, 2008.





Also on
February 7, 2008, the Company changed its name from National Realty and
Mortgage, Inc. to Sunway Global Inc.





On March
16, 2008, SWT acquired Beijing Sunway New-force Medical Treatment Tech Co., Ltd.
(“Beijing Sunway”) as its wholly-owned subsidiary.  Beijing Sunway was
incorporated in Beijing, PRC on May 24, 2007.  The current structure
of the Company and its subsidiaries is set forth below:










*deemed a
variable interest entity




6




The
Company, through its subsidiaries and Daqing Sunway, is now in the business of
designing, manufacturing and selling logistic transport systems and medicine
dispensing systems and equipment.





Description
of Our Products and Services





Medical
Transport Systems





The
Company’s principal product has been the SUNTRANS-160 pneumatic tube transport
system (“PTS”) used in hospitals and medical facilities. Pneumatic tube material
transport systems are used in over 140 countries throughout the world with many
of the systems used in hospitals and medical facilities. Our annual PTS sales in
2004, 2005, 2006, 2007, 2008 and 2009 were 785, 1,105, 1,930, 2,575, 3,669 and
2,279 units (each unit consists of one workstation in a PTS), respectively. The
average price of our PTS is approximately $153,700 (consisting of 30
workstations on average).





Our PTS
transports small materials weighing up to five kilograms in capsules at
high-speed through a network of tubing and transfer units that connect hundreds
of working departments of a hospital, including nurse stations, operation
departments, medicine dispensing centers, testing centers and disinfection
stations, each designated as a user workstation. The high speed transmission of
the materials in the tubing network is through pneumatic air flow powered by air
compressors and the path of a capsule can be switched and redirected through
transfer units. Typical applications for our PTS are the transport of items from
a user workstation to another user workstation at a users’ request.





Our PTS
provides two-way carrier travel between send/receive user workstations through a
single interconnecting tube. It can deliver anything that fits in a capsule to a
remote location - even on different floors or in other buildings - in a few
seconds at speeds up to 8 meters per second on a stream of compressed air in the
transmission tubes. Capsules can be transmitted up to 1,800 meters horizontally
and 120 meters vertically. Each pneumatic tube transport system can have up to
eight sub-systems with up to 64 send/receive workstations under control by each
sub-system.





The
control units for user workstations and transfer units contain self-diagnostic
and troubleshooting software. When an operating error occurs, the applicable
control unit will send error message to each user workstation and the system
control center. When a receiving user workstation malfunctions, the system will
automatically return the transmission carrier to its originating user
workstation.





A PTS
primarily consists of send/receive user workstations, transfer units, tubing
network, capsules, air compressors, system blower and system control
centers.




User
Workstations





User
Workstations are combined sending and receiving units that send and receive
capsules carrying the items transported. Each workstation has an easy-to-use
control panel equipped with a 5-inch LCD screen. It displays the real-time
operating status of all workstations, capsules, transfer units and air
compressors throughout a PTS and also monitors capsules in transit, indicates
the sequence of transport requests and displays destinations of a transport. It
has a heightened security system that can discern and prevent the entry of any
foreign items that are not requested to be transported by the system. Each
workstation has a voice function that announces the arrival of a capsule as well
as its originating workstation. When error occurs in one user workstation, such
user workstation can automatically shut down without interfering with the
operation of other user workstations.





Transfer
Units





Transfer
units are switching devices used at branching points in a tubing system to
direct and redirect the path of a capsule from one route into another route
until it gets to its final destination.




7




Tubing
network





The
tubing and bends in a PTS are made from strong, lightweight, non-corroding,
dent-resistant U-PVC that can withstand adverse exterior weather conditions as
well as a numerous harsh conditions between buildings, through existing
utilities and underground. Generally, the diameter of a straight tube is 160mm
and the radius of a bend is 850 mm and the tube wall is 3.2mm
thick.





System
Control Centers





A system
control center consists of one computer that controls the control units of all
other components of the PTS connected through communication cables, and it
configures the sub-systems, monitors system operations and troubleshoots system
errors. It has a graphical user interface, dynamic system monitoring and
administration, real-time tracking of capsules, event reporting and
self-diagnostic systems and a security system to prevent unauthorized use. The
system control centers can also store current and historical transport data and
instructions entered into the system, which can be retrieved for research and
other purposes. In the event of a system shut-down due to a blackout, the system
can resume operation without losing any data or instructions and complete
transport requests given prior to the shut-down when the power supply
resumes.





Capsules





Capsules
are the transporting “vehicle” for medical items within the hospital. A capsule
is a tube-like bottle made from transparent Plexiglas with leak-resistant caps
at both ends. Each capsule can carry a load weigh up to five
kilograms.





Air
Compressors and System Blower





Air
compressors and the system blower compress and pressurize air which creates
pneumatic force that moves capsules through the tubing system.





Execution
and Transmission Flow of a Transport Request





A
transport request is typically executed as follows: At an originating user
workstation, a user places the item to be transmitted in a capsule and puts the
capsule in the input basket of the originating user workstation. The user then
enters a transmission request on the control panel of the workstation for the
capsule to be delivered to another designated user workstation. The request will
then be transmitted to the system control center. Upon receipt of the
transmission request, the system control center will check whether there is any
item currently in transit in the applicable route. If not, the system control
center will instruct the originating user workstation to allow the capsule to
enter the tube. Upon the capsule’s entry into the tube, the air compressor and
system blower will be turned on. The system blower will provide vacuum to suck
the capsule into the transfer unit and the transfer unit will then switch to the
path leading to the destination workstation. The system blower will then provide
positive pressure in the tube that will carry the capsule to its destination.
Upon arrival of the capsule at the destination workstation, the destination
workstation will automatically release the capsule into its output basket. At
the same time, the destination workstation will make a voice announcement to
alert the arrival of the capsule and the system control center records and
stores all the information regarding the transport operation.





Installation





Send/receive
workstations with built-in air compressors can sit on desks or tables, or mount
easily in a minimum of space on walls, building columns, or any convenient flat
surface, without using prime locations. Tubing may be installed indoors or
outdoors and fire prevention measures can be added. Our outdoor installation
utilizes antifreeze and is waterproof. Tubes can be installed through floors and
walls with fireproof insulation casing.





Our PTS
has three types: Type A Workstations, Type B Workstations and Type C
Workstations. The three types of workstations are priced the same with similar
functions. The differences between the three types lie in the mechanism of
sending and receiving items as well as size and method of installation. Having
three types of workstations enables us to provide more options and flexibility
to our customers to accommodate their aesthetic taste, space restrictions and
other requirements.




8




Medicine
Dispensing Systems




We have
developed a new medicine dispensing system (“SADP”) primarily for hospital use,
which we launched commercially in the first quarter of 2008. Our SAPD
is a computerized system that can automatically fill medical prescriptions for
oral medications in single or multiple dosages with high efficiency. Based on
the prescriptions entered into the system by pharmacists, the system
automatically dispenses and packages the prescribed amount of medication with
printed labels that provides a patient’s name, location in the hospital,
hospital bed identification, name of medication, quantity of medication and
instructions for taking the medication. The prescription information can be
stored in medicine dispensing system for up to one year for future reference.
Each medicine dispensing system is connected with hospital computer network and
can retrieve information from the network when necessary. Our SADP is capable of
dispensing and packaging up to 60 prescriptions in one minute and can fill the
prescriptions and package medication for 500 patients based on three doses per
day in approximately 30 minutes. Our annual SADP sales in 2008 and 2009 were 5
and 11 units, respectively. The average price of our SADP is approximately
$100,000.




Each of
our SADPs has the capacity to house between 240 to 500 medicine storage bins,
which allows for the dispensing and packaging of between 240 and 500 different
types of medication at any given time. Each medicine storage bin has a CPU which
controls the precise dosage dispensed in accordance with the prescription. The
interior of the medicine storage bins are specifically designed to hold
different types of medications based on the specifications provided by
hospitals. Our SADP also comes with a back-up medicine bin which can house up to
40 different types of medications. When a medication that is not stored in any
of the storage bins is prescribed or if a non-standard dosage of a medication is
prescribed (for example, one-half of a tablet may be prescribed), a pharmacist
can mix and prepare the medication and place it in the back-up medicine bin for
dispensing by our SADP system together with the rest of the prescribed
medication.




The
central control system controls of an SADP monitors the operating status of each
storage bin. It also automatically recognizes and tracks the locations to which
each medication was transmitted and the quantities of medication in each bin.
Pharmacists can give operate the SADP with its touch screen.





Medical
treatment mistakes are often caused by human errors made by medical
professionals in prescribing and dispensing medicine because of lack of
historical information on patients and the medication that the patients have
been taking. We believe that the SADP, which retains information about patients
medications can help reduce the number of such errors. In Europe and the United
States, approximately 80% of hospitals already use some form of automatic drug
dispensation system. However, the use of such systems has just started in the
PRC.





Manufacture
and Quality Control





We
manufacture the main components of our products, such as tube diverters and
pneumatic direction diverters, in our own facility. We outsource the
manufacturing of certain other parts such as workstations. We assemble all the
components and parts into finished products. In choosing our suppliers, we focus
on the quality of raw material supplied. We conduct our manufacturing procedures
and quality testing based on ISO 9000 or CE Quality Standard and ISO
Environmental Standards. We have received ISO 9000 certification since
August 2004.





We
usually provide a standard 12-month product warranty to our customers. During
the warranty period, we replace defective products for our customers without
charge.





Our
Product/Marketing Strategy





Our
product/marketing strategy focuses on using our human resources and intellectual
capital to design new and better hardware and software products with a variety
of applications for many markets. Currently, we are focused on logistics
products for the hospital and medical markets, but believe that we can expand
into other markets.





Implementing
our product/marketing strategy involves the following:





Expand and
Strengthen Our Product Lines. Currently, we offer two main products:
medical transport systems and medicine dispensing systems. We hope to leverage
the existing technologies that we own and our technical expertise to expand our
product offerings in developing new logistics products and new medical and
hospital products.





Expand and
Strengthen Our Marketsfor our Current
Product Lines in the PRC and then outside of the PRC. Our medical
transport systems and medicine dispensing systems are designed principally for
hospital use. Currently, we are conducting research and development to expand
the use of our products in banks, industrial companies and office buildings. We
believe that our low cost structure that comes with operating in the PRC can
allow us to expand into other countries and successfully compete based on our
cost and price advantages.


9




Expand and
Strengthen Our Distribution Network in the PRC and then outside of the
PRC. We own the technologies used in our existing products, and
therefore, our cost of sales and the prices for our products are lower than
those of other companies which must pay licensing fees and royalties. As result,
we have been able to capture significant market share in the PRC (approximately
50% of hospitals and medical facilities that use pneumatic tube systems). In
order to leverage this strength, we will seek to build our own distribution
service centers in strategic locations in the PRC.




Sales
and Marketing





We sell
our products directly through our sales employees and direct sales offices or
indirectly through independent sales agents. As of the date of this report, we
have thirteen independent sales agents and four direct sales office covering
Beijing, Shanghai, Guangzhou, Chengdu, Xi’an and 13 other provinces, and 16
sales employees. Our sales agents purchase products from us and resell them at
higher prices.





Materials
and Suppliers





The
principal supplies purchased for our business are composite panels, aluminum
frames, micro processors and other IC chips, power supplies, LCD panels, fans,
U-PVC tubes and equipment chassis. Except for LCD panels, which we purchase from
Truly Semiconductors Limited, a Japanese manufacturer, we have at least two
suppliers for each of the supplies we purchase for our business. We generally
have long-term relationships with our suppliers but no written contracts with
them as the materials we need are generally available in the market.





Customers





Our
customers are primarily hospitals and medical appliance companies. The following
table presents, for the periods indicated, our largest customers by
revenue:





Percentage of SalesFiscal year ended December 31,Customers
                
                2009
                
                
                2008Customer
      H
                
                
                6.93
                %
                
                
                8.09
                %Customer
      I
                
                
                6.46
                %
                
                
                8.51
                %Customer
      A
                
                
                7.68
                %
                
                
                9.65
                %Customer
      B
                
                
                8.15
                %
                
                
                10.46
                %Customer
      D
                
                
                7.09
                %
                
                
                9.63
                %Customer
      E
                
                
                9.09
                %
                
                
                10.46
                %Customer
      F
                
                
                9.29
                %
                
                
                11.53
                %Total
                
                
                54.69
                %
                
                
                68.33
                %





The
payment terms of our standard sales agreement generally require a cash payment
of 30% of the total purchase price within 5 days of the signing of the
agreement, a cash payment of 30% of the total purchase price upon receipt of the
products if there is no exterior damage to the products, and a cash payment of
40% of the total purchase price upon installation, completion of testing, and
acceptance of the products. The purchase price generally does not contain
shipping expenses. If a shipment is delayed in breach of a sales agreement, we
are required to pay 1.0% of the total purchase price for each day delayed up to
10% of the total purchase price.





Technology
and Research and Development





We have
developed and own the intellectual property used in our products. Currently we
hold thirteen PRC patents for our medical transport systems. In September 1999,
Daqing Sunway was designated as a New-and-High-Technology Enterprise in
Heilongjiang Province by the Science and Technology Commission of Heilongjiang
Province.





We have
18 full-time employees engaged in research and development (“R&D”) efforts.
Our R&D personnel specialize in the fields of software development,
electronic engineering, machinery design and manufacture, electronic information
technology, communication technology and application, automatic control
technology and optoelectronic technology. Most of our R&D personnel have
more than 5 years’ experience in their fields of specialty. We also outsource
certain software development projects to third party software
developers.




10




Currently,
we are conducting R&D on products for use in banks, industrial companies and
commercial use office buildings.





For the
fiscal years ended December 31, 2009 and 2008, respectively, we expended
approximately $203,876 and $36,138 on R&D activities.





Competition
and Competitive Advantages





Pneumatic
Transport System





Our main
competitors in the supply of PTS are Beijing Chuansheng Weiye Science Trade Co.,
Ltd., Hainan Lingjing Medical Purification Project Co., Ltd., and Beijing Ruize
Network Co., Ltd. While we are both a manufacturer and distributor of our
medical transport systems, our competitors are distributors of imported
pneumatic transport systems. Among these companies, Hainan Lingjing Medical
Purification Project Co., Ltd. is a distributor of Swisslog’s pneumatic force
transportation products, and Beijing Ruize Network Co., Ltd. is a distributor
for Sumetzberger GMBH, an Austrian company.





As the
market for pneumatic transport systems is still an emerging market in the PRC,
official data about the industry in general, and competition in particular, have
not been readily available. Based on the information we collected from
competitive bids, the internet and other market intelligence, it is our estimate
that among suppliers of pneumatic transport systems in the PRC, we were the
supplier to the largest number of hospitals in the fiscal years ended December
31, 2009 and 2008 in Chinese Mainland.




The
following table sets forth our estimates, based on information we have
collected from bids, the internet and other market intelligence, of the relative
number of hospitals and medical facilities in the PRC supplied with pneumatic
transport systems by us and our major competitors in 2009 and 2008:





Time of PRC
                        
                        Percentage of
                          PRC Hospitals
                          Adopting PTSName
                        
                        Brand
                        
                        Market Entry
                        
                        2009
                        
                        
                        2008Sunway
      Global Inc.
                        
                        Suntrans
                        
                        2002
                        
                        
                        34
                        %
                        
                        
                        48
                        %Company
      A
                        
                        Brand
      A
                        
                        1999
                        
                        
                        4
                        %
                        
                        
                        4
                        %Company
      B
                        
                        Brand
      B
                        
                        1998
                        
                        
                        29
                        %
                        
                        
                        20
                        %Company
      C
                        
                        Brand
      C
                        
                        1996
                        
                        
                        20
                        %
                        
                        
                        15
                        %Company
      D
                        
                        Brand
      D
                        
                        2001
                        
                        
                        7
                        %
                        
                        
                        7
                        %Company
      E
                        
                        Brand
      E
                        
                        1999
                        
                        
                        6
                        %
                        
                        
                        6
                        %




Medicine
Dispensing Systems





We
introduced our medicine dispensing systems to the market in May 2007. Currently,
we face competition from Japanese manufacturers, Yuyama Manufacturing Co., Tosho
Co., Inc. and Sany Co., Ltd., and a South Korean company, JV Medi Co., Ltd.,
whose products are imported into the PRC and sold through distributors. Since
the introduction of our medical dispensing system to the market in January 2008,
we have received orders to purchase eight units. We have sold and delivered 5
units and 11 units SADP in 2008 and 2009 respectively.





The
following table sets forth our estimates, based on information we have
collected from bids, the internet and other market intelligence, of the relative
number of hospitals and medical facilities in the PRC supplied with medicine
dispensing systems by us and our major competitors in 2009.




Percentage of
                      PRC Hospitals
                      Adopting PTSName
                    
                    Brand
                    
                    2009Sunway
      Global Inc.
                    
                    Suntrans
                    
                    
                    38
                    %Company
      A
                    
                    Brand
      A
                    
                    
                    33
                    %Company
      B
                    
                    Brand
      B
                    
                    
                    8
                    %Company
      C
                    
                    Brand
      C
                    
                    
                    21
                    %




11




Competitive
Advantages




We
believe that we have the following competitive advantages over our
competitors:




Cost: We have cost advantages
because we source our supplies domestically and our products are manufactured
domestically using technologies developed by us. Our major competitors are
domestic distributors of imported products that cost more in both materials and
labor and, additionally, are subject to customs duties. As a result, our
PTS is generally priced lower than our competitors’ products - our PTS is
priced at approximately $150,810 per unit while our cost of sales is
approximately $41,422 per unit, representing a gross margin of approximately
72.53%. We estimate that similar products of our competitors are priced at
approximately $210,000 per unit. Our medicine dispensing system, which we
launched in 2008, is priced at $272,902 per unit while our cost of sales is
approximately $107,128, representing a gross margin of approximately 60.74%. We
estimate that our competitors’ prices range from $315,900 to
$402,170.





Large Existing Customer Base and
Customer Loyalty: As of the end of 2008, we estimate, based on
information we have collected through competitive bids, internet research and
other market sources, that we had an approximate 50% share in
hospitals and medical facilities using pneumatic tube systems in the PRC market
based on the number of hospitals and medical facilities that have adopted
pneumatic tube transport systems in China, as compared to an approximate
20% for our largest competitor, Swisslog. Our large existing customer base,
which includes approximately 268 hospitals as our end users, provides us an
advantage in the marketing and sales of additional products and services, both
because existing customers are an important source of new orders, and
because we are frequently referred to new customers by our existing
customers due to our cost advantage, localized technology and excellent
service.





Localized and Customized
Technology: We
are the only provider of PTS with localized interfaces in Chinese language
specifically designed based on the needs of PRC customers. Daqing Sunway’s PTS
is therefore more user friendly for Chinese speaking customers. Our competitors’
products are based on English language interfaces. As the general population in
the PRC is not proficient in English, purchasers of our competitors’ products
are required to employ highly educated and specially trained English speaking
personnel to operate their systems, which represent an additional expense adding
to their already higher prices. In addition, as the technologies used in our
systems are developed by us, we have the capacity and flexibility to easily and
quickly adapt our products to specific customer requirements and changing
market trends.




Extensive After-Sales Service
Coverage: We believe that we are more accessible to our
customers than our competitors because we are the only manufacturer in
the PRC, as opposed to distributor, of pneumatic tube systems. As a
manufacturer, we believe we are in a better position to provide pre-sale
consultation and post-sale services than our competitors, all of which are
distributors of imported systems. We are available to provide pre-sale
consultation to help potential customers determine their specific needs and
design their transportation networks using PTS, and post-sale services such as
on-site diagnostic tests to identify and prevent any potential problems, and
maintenance and repair services. Our competitors’ customers do not have
such easy access to the manufacturers because they must rely
on the distributors to provide that access indirectly. Often, parts needed
for maintenance are not available in the PRC and must be ordered from overseas
for replacement, with a lag time for delivery.




Intellectual
Property





Patents





Our
products use patented technologies developed by us. Currently, we hold thirteen
PRC patents used in our products. The following is a list of the patents we
hold:




No.
                
                Certificate No.
                
                Issuer
                
                Name of the Patent
                
                Registered No.
                
                Application
                  Date
                
                Valid
                  Term1
                
                523933
                
                State
      Intellectual Property Office (SIPO)
                
                Pneumatic
      tube material transport facility
                
                ZL
      01 2 71975 7
                
                12/02/2001
                
                102
                
                532336
                
                SIPO
                
                Tube
      air flow direction converter
                
                ZL
      02 2 09902 6
                
                1/22/2002
                
                103
                
                534389
                
                SIPO
                
                One
      type of tube direction converter
                
                ZL
      02 2 09901 8
                
                1/22/2002
                
                104
                
                556112
                
                SIPO
                
                Pneumatic
      tube material transport sending and receiving box
                
                ZL
      02 2 73509 7
                
                5/23/2002
                
                105
                
                275295
                
                SIPO
                
                Pneumatic
      tube material transport sending and receiving box (exterior
      design)
                
                ZL
      02 3 52960 1
                
                5/23/2002
                
                106
                
                567890
                
                SIPO
                
                Pneumatic
      tube material transport air sender
                
                ZL
      02 2 73510 0
                
                5/23/2002
                
                107
                
                655292
                
                SIPO
                
                Pneumatic
      tube material transport sending and receiving box of parallel changing
      mode
                
                ZL
      03 2 60602 8
                
                9/24/2003
                
                108
                
                719650
                
                SIPO
                
                Self
      motivating rail car for material transport system
                
                ZL
      2004 2 0070058 5
                
                7/28/2004
                
                109
                
                719482
                
                SIPO
                
                Car
      rail of material transport system
                
                ZL
      2004 2 0070057 0
                
                7/08/2004
                
                1010
                
                732675
                
                SIPO
                
                Pneumatic
      tube material transport sending and receiving box of parallel changing
      mode
                
                ZL
      2004 2 0063538 9
                
                10/11/2004
                
                1011
                
                743362
                
                SIPO
                
                Material
      flow tube router
                
                ZL
      2004 2 0063537 4
                
                10/11/2004
                
                1012
                
                738892
                
                SIPO
                
                One
      type of tube air flow direction converter
                
                ZL
      2004 2 0063535 5
                
                10/11/2004
                
                1013
                
                739042
                
                SIPO
                
                One
      type of tube direction converter
                
                ZL
      2004 2 0063536 X
                
                10/11/2004
                
                10




12




The PRC
Patent Law was adopted by the National People’s Congress, the parliament in the
PRC, in 1984 and was subsequently amended in 1992 and 2000. The Patent Law aims
to protect and encourage invention, foster application of inventions and promote
the development of science and technology. To be patentable, an invention must
meet three conditions: novelty, inventiveness and practical applicability.
Certain items are not patentable under the Patent Law, which include scientific
discoveries, rules and methods for intellectual activities; methods used to
diagnose or treat diseases, animal and plant breeds or substances obtained by
means of nuclear transformation. The Patent Office under the State Council is
responsible for receiving, examining and approving patent applications. A patent
is valid for a term of twenty years in the case of an invention and a term of
ten years in the case of utility models and designs. Our patents are all utility
models and subject to the ten years’ protection. Any use of patent without
consent or a proper license from the patent owner constitutes an infringement of
patent rights which is actionable in court in the PRC.





Registered
software





We own
the following software used in our products:





No.
              
              Certificate No
              
              Software
              
              Issued by
              
              Issuance date
              
              Term
                (year)1
              
              HEI DGY-2003
                0005
              
              Daqing Sunway material transport control
                software V 1.0 (Daqing Sunway material
                transport imbedded software)
              
              Heilongjiang
                Software Industry
                Association
              
              4/16/2008
              
              5




Trademarks





We have
two trademarks registered with the Trademark Office of the State Administration
for Industry and Commerce in PRC as follows:





No.
              
              Trademark number
              
              Issuer
              
              Classification
              
              Term1
              
              1102674
              
              State Trademark Bureau
              
              10
              
              Sep.14,2007 — Sep.13, 20172
              
              3205734
              
              State Trademark Bureau
              
              10
              
              Dec.14 , 2003 — Dec.13, 2013




Under the
PRC Trademark Law, which was adopted in 1982, and revised in 2001, registered
trademarks are granted a term of ten years protection, renewable for further
terms. Each renewal is limited to ten years term and the registrant must
continue to use the trademark and apply for a renewal within six months prior to
the expiration of the current term.





Other Intellectual Property Rights Protections in the
PRC





In
addition to patent, trademark and trade secret protection law in the PRC, we
also rely on contractual confidentiality provisions to protect our intellectual
property rights and our brand. Our R&D personnel and executive officers are
subject to confidentiality agreements to keep our proprietary information
confidential. In addition, they are subject to a one-year covenant not to
compete following the termination of employment with our company. Further, they
agree that any work product belongs to our company.





Insurance





We
currently do not carry any product liability or other similar insurance, nor do
we have property insurance covering our plant, manufacturing equipment and
office building. While product liability lawsuits in the PRC are rare and Daqing
Sunway has never experienced significant failures or accidents, there can be no
assurance that Daqing Sunway would not face liability in the event of any
failure or accident.




13




Daqing
Sunway maintains social insurance for their staff and employees in accordance
with relevant compulsory requirements under the PRC laws and has compulsory
insurance and fixed-sum insurance for cars and other vehicles.





Employees




Presently
we have 232 full-time employees and contractors, out of which 38 are management
and accounting personnel, 15 are R&D personnel, 32 are marketing and
sales personnel and 147 manufacturing personnel.





Government
Regulation





Under
certain regulations in the form of public notices issued by the PRC State
Administration of Foreign Exchange, or SAFE, our shareholders who are PRC
resident entities or individuals are subject to certain registration
requirements due to the status of WTL as “SPCs” (as defined under the public
notice issued by SAFE on October 21, 2005). These regulations would prohibit SWT
distributing dividends or profits to WTL and/or SWT as “SPC”s unless the
registration requirements are complied with. The registration procedures were
completed and SWT obtained a SAFE certificate from SAFE’s Heilongjiang
office on March 30, 2007. Our PRC counsel advised us that the SAFE certificate
will allow SWT to distribute dividends and profits out of the PRC.




Medical
Appliance manufacturing companies in the PRC are required to obtain Medical
Appliance Manufacturing permits. Daqing Sunway holds a Medical Appliance
registration certificate and Medical Appliance Manufacturing Permit issued by
Heilongjiang Province Food and Drug Supervision Administration
Bureau.





Pursuant
to the tax laws of PRC, general enterprises are subject to income tax at an
effective rate of 33%. Companies qualified as hi-technology companies are
subject to certain preferential tax treatment. Daqing Sunway was approved as a
domestic hi-technology company and enjoys a 15% corporate income tax rate
according to National New and High Tech Development Zone Taxes
Policy.





Other
than the foregoing, Daqing Sunway is not subject to any other significant
government regulation of its business or production, or any other government
permits or approval requirements, except for the laws and regulations of general
applicability for corporations formed under the laws of the PRC.




ITEM
1A. RISK FACTORS.





An
investment in our securities involves a high degree of risk. In determining
whether to purchase our securities, you should carefully consider all of the
material risks described below, together with the other information contained in
this prospectus before making a decision to purchase our securities. You should
only purchase our securities if you can afford to suffer the loss of your entire
investment.




Risks
Related to Our Business





We
operate in an emerging industry and an unsettled market.





The
automated material transport system and medication distribution industries in
which we operate in the PRC are in an early stage of development. While we
believe that the potential advantages of this situation, including a strong
potential for growth, are significant, there are also related risks. In a
rapidly-growing market, our competitors could develop new technologies or new
variations of existing technologies that could gain popularity quickly. While we
believe that we understand the needs and preferences of our potential customers,
especially hospitals, for the kinds of systems we produce, these needs and
preferences could change in ways that our competitors anticipate or adapt to
more rapidly than we do. While we believe that our relatively large customer
base is one of our strengths, in a rapidly growing market, our industry could
gain so many new customers that the number of our existing customers could
become insignificant. If any of these risks materialize, our competitive
position, results of operations and financial condition could be significantly
impaired.




14




Our limited operating history may not serve as an
adequate basis to judge our future prospects and results of operations.





We
commenced our current line of business operations in recent years. Our limited
operating history may not provide a meaningful basis on which to evaluate our
business. Although our revenues have grown rapidly since inception, we cannot
assure you that we will maintain our profitability or that we will not incur net
losses in the future. We expect that our operating expenses will increase as we
expand. Any significant failure to realize anticipated revenue growth could
result in significant operating losses. We will continue to encounter risks and
difficulties frequently experienced by companies at a similar stage of
development, including our potential failure to:





·
            raise adequate capital for
      expansion and operations;





·
            implement our business model and
      strategy and adapt and modify them as
  needed;





·
            increase awareness of our brands,
      protect our reputation and develop customer
  loyalty;





·
            manage our expanding operations
      and service offerings, including the integration of any future
      acquisitions;





·
            maintain adequate control of our
      expenses;





·
            anticipate and adapt to changing
      conditions in the transport and distribution systems markets in which we
      operate as well as the impact of any changes in government regulations,
      mergers and acquisitions involving our competitors, technological
      developments and other significant competitive and market
      dynamics.




If we are
not successful in addressing any or all of these risks, our business may be
materially and adversely affected.




Our
failure to compete effectively may adversely affect our ability to generate
revenue.




We
compete primarily on the basis of our price advantage; cost advantage, our
technology and product features that are specifically designed for the PRC
market, our extensive after-sales service coverage and such after-sales services
being easily accessible to our clients. These competitive advantages are in part
based on our being a local manufacturer while our competitors are generally
distributors of foreign products with much higher costs and less accessible
after-sales services. There can be no assurance that we will maintain these
advantages in the future. Our foreign competitors may establish manufacturing
capabilities in the PRC to lower their costs and improve accessibility of
after-sales services. Our local competitors may gain larger market share and
reduce their costs by taking advantage of economies of scale. Developments of
this kind could have a material adverse effect on our business, results of
operations and financial condition. Further, our business requires large amounts
of working capital to fund our operations. Our competitors may have better
resources and better strategies to raise capital which could also have a
material adverse effect on our business, results of operations or financial
condition.




We
rely on sales to a single kind of customer in a single industry. Our long-term
growth may be impaired if we are unable to expand our customer base beyond the
hospital industry.





Nearly
all of our sales are made to hospitals and medical facilities in the PRC. If the
medical industry in the PRC shrinks or loses steam, our customer base and
potential customers will have fewer resources for the purchase of our products,
and our business, results of operations and financial condition could be
adversely affected.





Although
we intend to expand our business to make products that will be used by customers
in other industries, there is no guarantee that we will succeed. If we are
unable to expand beyond the hospital industry, our long-term growth could fall
short of expectations.





If
we are unable to fund our capital requirements for research and development, our
growth and profitability may be adversely affected.





Pneumatic
tube transport systems and medicine dispensing systems are the only two products
from which we generate or expect to generate substantial revenues. Both of our
product lines are designed for use in hospitals and medical facilities. Our
long-term growth and profitability could depend on our ability to expand beyond
the medical industry. This expansion may require us to make substantial and
long-term investments in research and development to develop new products or new
features for our existing products. If we are unable to fund such research and
development efforts, our long-term market potential, income and financial
condition could be impaired.


15




We
do not have written contracts with our suppliers and could be hurt by a change
in the market for our supplies.





We have
at least two suppliers for most of the principal supplies used in the
manufacture of our products, including composite panels, aluminum frames, micro
processors and other IC chips, power supplies, fans, U-PVC tubes and equipment
chassis. The suppliers of these supplies are PRC companies. We purchase LCD
panels from one supplier only, Truly Semiconductors Limited, a Japanese
manufacturer. Although we believe that our supplies are generally available in
the market and that we are not at great risk of disruption to these supply
chains, there can be no guarantee that the markets for these supplies will not
be disrupted, for business or economic reasons relating to a particular
manufacturing sector, or for economic or political reasons affecting the PRC
more generally.




We
are responsible for the indemnification of our officers and
directors.





Our
bylaws provide for the indemnification of our directors, officers, employees,
and agents, under certain circumstances, against costs and expenses incurred by
them in any litigation to which they become a party arising from their
association with or activities on behalf of us. This indemnification policy
could result in substantial expenditures, which we may be unable to
recoup.





We
may not be able to effectively protect our proprietary technology and other
intellectual property, which could harm our business and competitive
position.




We have
13 PRC patents on proprietary technology used in the manufacture of our
products. We also have a registered software program and two registered
trademarks. Our success depends in part on our ability to protect our
proprietary technologies. Although we believe we are protected from intellectual
property infringement both by our patents and by the complexity of our designs,
which we believe makes them difficult to copy, we cannot assure you that we will
be able to effectively protect our technology, or that our current or potential
competitors do not have, or will not obtain or develop, similar
technology.




We also
rely on trade secrets, non-patented proprietary expertise and continuing
technological innovation that we seek to protect, in part, by entering into
confidentiality agreements with licensees, suppliers, employees and consultants.
These agreements may be breached and there may not be adequate remedies in the
event of a breach. Disputes may arise concerning the ownership of intellectual
property or the applicability of confidentiality agreements. Moreover, our trade
secrets and proprietary technology may otherwise become known or be
independently developed by our competitors. If patents are not issued with
respect to products arising from research, we may not be able to maintain the
confidentiality of information relating to these products.




Implementation
of PRC intellectual property-related laws has historically been problematic,
primarily because of ambiguities in the PRC laws and difficulties in
enforcement. Accordingly, intellectual property rights and confidentiality
protections in China may not be as effective as in the United States or other
countries. Policing unauthorized use of proprietary technology is difficult and
expensive, and we might need to resort to litigation to enforce or defend
patents issued to us or to determine the enforceability, scope and validity of
our proprietary rights or those of others. Such litigation may require
significant expenditure of cash and management efforts and could harm our
business, financial condition and results of operations. An adverse
determination in any such litigation will impair our intellectual property
rights and may harm our business, competitive position, business prospects and
reputation.





We
may be exposed to intellectual property infringement and other claims by third
parties, which, if successful, could cause us to pay significant damage awards
and incur other costs.




We use
our own patented proprietary technology in manufacturing our products. However,
as litigation becomes more common in China in resolving commercial disputes, we
face a higher risk of being the subject of intellectual property infringement
claims brought by others. The outcome of claims relating to our logistic
transport systems could involve complex technical, legal and factual
questions and analysis and, therefore, may be highly uncertain. The defense and
prosecution of intellectual property suits, patent opposition proceedings and
related legal and administrative proceedings can be both costly and time
consuming and may significantly divert the efforts and resources of our
technical and management personnel. An adverse determination in any such
litigation or proceedings to which we may become a party could subject us to
significant liability, including damage awards, to third parties, require us to
seek licenses from third parties, to pay ongoing royalties, or to redesign our
products or subject us to injunctions preventing the manufacture and sale of our
products. Protracted litigation could also result in our customers or potential
customers deferring or limiting their purchase or use of our products until
resolution of such litigation.




16




Potential
environmental liability could have a material adverse effect on our operations
and financial condition.





To the
knowledge of our management team, the manufacture of our products does not
require us to comply with PRC environmental laws other than PRC environmental
laws of general applicability. It has not been alleged that we have violated any
current environmental regulations by PRC government officials; however, there
can be no assurance that the Chinese government will not amend its current
environmental protection laws and regulations. Our business and operating
results could be materially and adversely affected if we were to increase
expenditures in order to comply with environmental regulations affecting our
operations.





We
may not be able to hire and retain qualified personnel to support our growth and
if we are unable to retain or hire such personnel in the future, our ability to
improve our products and implement our business objectives could be adversely
affected.





Our
future success depends heavily upon the continuing services of the members of
our senior management team, in particular our President and Chief Executive
Officer, Mr. Liu Bo; our Chief Financial Officer, Mr. Samuel Sheng; and our
Chief Operating Officer and Secretary, Mr. Sun Weishan. If one or more of our
senior executives or other key personnel are unable or unwilling to continue in
their present positions, we may not be able to replace them easily or at all,
and our business may be disrupted and our financial condition and results of
operations may be materially and adversely affected. Competition for senior
management and senior technology personnel is intense, the pool of qualified
candidates is very limited, and we may not be able to retain the services of our
senior executives or senior technology personnel, or attract and retain
high-quality senior executives or senior technology personnel in the future.
Such failure could materially and adversely affect our future growth and
financial condition.




We
do not presently maintain product liability insurance, and our property
equipment insurance does not cover their full value, which leaves us with
exposure in the event of loss or damage to our properties or claims filed
against us.





We
currently do not carry any product liability or other similar insurance. While
product liability lawsuits in the PRC are rare and we have never experienced
significant failures of our products, we cannot assure you that we would not
face liability in the event of the failure of any of our products. We do not
carry any property insurance to cover our real property or manufacturing
equipment, nor do we have other insurance such as business liability or
disruption insurance coverage for our operations in the PRC.





Risks
Related to Doing Business in the PRC





Adverse
changes in political and economic policies of the Chinese government could have
a material adverse effect on the overall economic growth of China, which could
reduce the demand for our products and materially and adversely affect our
competitive position.




Our
business, financial condition, results of operations and prospects are affected
significantly by economic, political and legal developments in China. The
Chinese economy differs from the economies of most developed countries in many
respects, including:




Ÿ
            the amount of government
      involvement;





Ÿ
            the level of
      development;





Ÿ
            the growth
      rate;





Ÿ
            the control of foreign
      exchange; and





Ÿ
            the allocation of
      resources.




While the
Chinese economy has grown significantly in the past 20 years, the growth
has been uneven, both geographically and among various sectors of the economy.
The Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures
benefit the overall Chinese economy, but may also have a negative effect on us.
For example, our financial condition and results of operations may be adversely
affected by government control over capital investments or changes in tax
regulations that are applicable to us, as well as its ability to control prices,
including the price of coal, which is a principal raw material for our
business.




17




The
Chinese economy has been transitioning from a planned economy to a more
market-oriented economy. Although in recent years the Chinese government has
implemented measures emphasizing the utilization of market forces for economic
reform, the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises, a
substantial portion of the productive assets in China is still owned by the
Chinese government. Further, there is no private ownership of land in China.
Rather, land is owned by the government and the government issues land use
rights. Although the land use rights are transferable, it is necessary to obtain
government approval for a transfer. The continued control of these assets and
other aspects of the national economy by the Chinese government could materially
and adversely affect our business. The Chinese government also exercises
significant control over Chinese economic growth through the allocation of
resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy and providing preferential treatment to particular
industries or companies.




Any
adverse change in the economic conditions or government policies, policy
interpretations, imposition of confiscatory taxation, restrictions on currency
conversion, exports, devaluations of currency, the nationalization or other
expropriation of private enterprises in China could have a material adverse
effect on the overall economic growth and the level of investments and
expenditures in China, which in turn could lead to a reduction in demand for our
products in both the Chinese and international markets.





The
PRC laws and regulations governing our current business operations are sometimes
vague and uncertain. Any changes in such PRC laws and regulations may have a
material and adverse effect on our business.




There are
substantial uncertainties regarding the interpretation and application of PRC
laws and regulations, including but not limited to the laws and regulations
governing our business, or the enforcement and performance of our arrangements
with customers in the event of the imposition of statutory liens, death,
bankruptcy and criminal proceedings. We and any future subsidiaries are
considered foreign persons or foreign funded enterprises under PRC laws, and as
a result, we are required to comply with PRC laws and regulations. These laws
and regulations are sometimes vague and may be subject to future changes, and
their official interpretation and enforcement may involve substantial
uncertainty. The effectiveness of newly enacted laws, regulations or amendments
may be delayed, resulting in detrimental reliance by foreign investors. New laws
and regulations that affect existing and proposed future businesses may also be
applied retroactively. We cannot predict what effect the interpretation of
existing or new PRC laws or regulations may have on our businesses.
Additionally, if the relevant authorities find us in violation of PRC
laws or regulations, they would have broad discretion in dealing with such
a violation, including, without limitation:





·
            levying
    fines;





·
            revoking our business and other
      licenses;





·
            requiring that we restructure our
      ownership or operations; and





·
            to the extent that we use the
      Internet for marketing and providing information on our products and
      services, requiring that we discontinue any portion or all of our Internet
      related business.




A
slowdown or other adverse developments in the PRC economy may materially and
adversely affect our customers, demand for our services and our
business.




All of
our operations are conducted in the PRC and all of our revenues are generated
from sales in the PRC. Although the PRC economy has grown significantly in
recent years, we cannot assure you that such growth will continue. A slowdown in
overall economic growth, an economic downturn or recession or other adverse
economic developments in the PRC may materially reduce the demand for our
products and materially and adversely affect our business.





Inflation
in the PRC could negatively affect our profitability and growth.




While the
PRC economy has experienced rapid growth, such growth has been uneven among
various sectors of the economy and in different geographical areas of the
country. Rapid economic growth can lead to growth in the money supply and rising
inflation. If prices for our products rise at a rate that is insufficient to
compensate for the rise in the costs of supplies, it may have an adverse effect
on profitability. In order to control inflation in the past, the PRC government
has imposed controls on bank credits, limits on loans for fixed assets and
restrictions on state bank lending. Such an austerity policy can lead to a
slowing of economic growth. In October 2004, the People’s Bank of China, the
PRC’s central bank, raised interest rates for the first time in nearly a decade
and indicated in a statement that the measure was prompted by inflationary
concerns in the Chinese economy. Repeated rises in interest rates by the central
bank would likely slow economic activity in China which could, in turn,
materially increase our costs and also reduce demand for our
products.




18




SWT
is subject to restrictions on paying dividends and making other payments to
us.




We are a
holding company incorporated in the State of Nevada and do not have any assets
or conduct any business operations other than our investments in our
subsidiaries. As a result of our holding company structure, we rely primarily on
dividends payments from our subsidiary in China. However, PRC regulations
currently permit payment of dividends only out of accumulated profits, as
determined in accordance with PRC accounting standards and regulations. Our
subsidiary and affiliated entity in China are also required to set aside a
portion of their after-tax profits according to PRC accounting standards and
regulations to fund certain reserve funds. The PRC government also imposes
controls on the conversion of RMB into foreign currencies and the remittance of
currencies out of China. We may experience difficulties in completing the
administrative procedures necessary to obtain and remit foreign currency. See
“Governmental control of
currency conversion may affect the value of your investment .”
Furthermore, if our subsidiary or affiliated entity in China incurs debt on
their own in the future, the instruments governing the debt may restrict their
ability to pay dividends or make other payments. If we are unable to receive all
of the revenues from our operations through contractual or dividend
arrangements, we may be unable to pay dividends on our common stock even if we
wish to pay dividends.





If
certain tax exemptions within the PRC regarding withholding taxes are removed,
we may be required to deduct corporate withholding taxes from any dividends we
may pay in the future.




Under the
PRC’s current tax laws, regulations and rulings, companies are exempt from
paying withholding taxes with respect dividends paid to stockholders outside of
the PRC. However, if the foregoing exemption is removed, we may be required to
deduct certain amounts from any dividends we pay to our
stockholders.




Governmental
control of currency conversion may affect the value of your
investment.




The PRC
government imposes controls on the convertibility of Renminbi into foreign
currencies and, in certain cases, the remittance of currency out of the PRC. We
receive substantially all of our revenues in Renminbi, which is currently not a
freely convertible currency. Shortages in the availability of foreign
currency may restrict our ability to remit sufficient foreign currency to pay
dividends or otherwise satisfy foreign currency dominated obligations. Under
existing PRC foreign exchange regulations, payments of current account items,
including profit distributions, interest payments and expenditures from the
transaction, can be made in foreign currencies without prior approval from the
PRC State Administration of Foreign Exchange by complying with certain
procedural requirements. However, approval from appropriate governmental
authorities is required where Renminbi is to be converted into foreign currency
and remitted out of China to pay capital expenses such as the repayment of bank
loans denominated in foreign currencies.




The PRC
government may also at its discretion restrict access in the future to foreign
currencies for current account transactions. If the foreign exchange control
system prevents us from obtaining sufficient foreign currency to satisfy our
currency demands, we may not be able to pay certain of our expenses as they come
due.




The
fluctuation of the Renminbi may materially and adversely affect your
investment.




The value
of the Renminbi against the U.S. dollar and other currencies may fluctuate and
is affected by, among other things, changes in the PRC’s political and economic
conditions. As we rely entirely on revenues earned in the PRC, any significant
revaluation of the Renminbi may materially and adversely affect our cash flows,
revenues and financial condition. For example, to the extent that we need to
convert U.S. dollars we receive from an offering of our securities into Renminbi
for our operations, appreciation of the Renminbi against the U.S. dollar could
have a material adverse effect on our business, financial condition and results
of operations. Conversely, if we decide to convert our Renminbi into U.S.
dollars for the purpose of making payments for dividends on our common shares or
for other business purposes and the U.S. dollar appreciates against the
Renminbi, the U.S. dollar equivalent of the Renminbi we convert would be
reduced. In addition, the depreciation of significant U.S. dollar denominated
assets could result in a charge to our income statement and a reduction in the
value of these assets.




On July
21, 2005, the PRC government changed its decade-old policy pegging the value of
the RMB to the U.S. dollar. Under the new policy, the RMB is permitted to
fluctuate within a narrow and managed band against a basket of certain foreign
currencies. This change in policy has resulted in an approximately 21.12%
appreciation of the Renminbi against the U.S. dollar as of February 24, 2010,
based on the exchange rate of the base period at $1 = 8.27 Yuan on July 21,
2005. While the international reaction to the RMB revaluation has generally been
positive, there remains significant international pressure on the PRC government
to adopt an even more flexible currency policy, which could result in a further
and more significant appreciation of the RMB against the U.S.
dollar.




19




Price
controls may affect both our revenues and net income.




The laws
of the PRC provide for the government to fix and adjust prices. To the extent
that we are subject to price control, our revenue, gross profit, gross margin
and net income will be affected since the revenue we derive from our sales will
be limited and, unless there is also price control on the products that we
purchase from our suppliers, we may face no limitation on our costs. Further, if
price controls affect both our revenue and our costs, our ability to be
profitable and the extent of our profitability will be effectively subject to
determination by the applicable regulatory authorities in the PRC.




Our
operations may not develop in the same way or at the same rate as might be
expected if the PRC economy were similar to the market-oriented economies of
OECD member countries.




The
economy of the PRC has historically been a nationalistic, “planned economy,”
meaning it functions and produces according to governmental plans and pre-set
targets or quotas. In certain aspects, the PRC’s economy has been making a
transition to a more market-oriented economy, although the government imposes
price controls on certain products and in certain industries. However, we cannot
predict the future direction of these economic reforms or the effects these
measures may have. The economy of the PRC also differs from the economies of
most countries belonging to the Organization for Economic Cooperation and
Development (the “OECD”), an international group of member countries sharing a
commitment to democratic government and market economy. For
instance:




·
            the level of state-owned
      enterprises in the PRC, as well as the level of governmental control over
      the allocation of resources is greater than in most of the countries
      belonging to the OECD;





·
            the level of capital reinvestment
      is lower in the PRC than in other countries that are members of the
      OECD;





·
            the government of the PRC has a
      greater involvement in general in the economy and the economic structure
      of industries within the PRC than other countries belonging to the
      OECD;





·
            the government of the PRC imposes
      price controls on certain products and our products may become subject to
      additional price controls;
and





·
            the PRC has various impediments
      in place that make it difficult for foreign firms to obtain local
      currency, as opposed to other countries belonging to the OECD where
      exchange of currencies is generally free from
      restriction.




As a
result of these differences, our business may not develop in the same way or at
the same rate as might be expected if the economy of the PRC were similar to
those of the OECD member countries.




If
we are not able to protect our intellectual property rights, our business may be
impaired.




Our
intellectual property relates to our know-how in developing our products. The
protection of intellectual property rights in the PRC is weak, and we cannot
give any assurance that we will be able to protect our intellectual property
rights. To the extent that our business is dependent upon intellectual property,
our ability to generate revenue from these products, would be severely impaired
if we are not able to protect our rights in these products.





Any
recurrence of avian flu, severe acute respiratory syndrome, or SARS, or another
widespread public health problem, could adversely affect our
operations.





A renewed
outbreak of avian flu, SARS, or another widespread public health problem in the
PRC, where all of our revenue is derived, could have an adverse effect on our
operations. Our operations may be adversely impacted by a number of
health-related factors, including the following:




·
            the level of state-owned
      enterprises in the PRC, as well as the level of governmental control over
      the allocation of resources is greater than in most of the countries
      belonging to the OECD;





·
            the level of capital reinvestment
      is lower in the PRC than in other countries that are members of the
      OECD;





·
            the government of the PRC has a
      greater involvement in general in the economy and the economic structure
      of industries within the PRC than other countries belonging to the
      OECD;





·
            the government of the PRC imposes
      price controls on certain products and our products may become subject to
      additional price controls;
and





·
            the PRC has various impediments
      in place that make it difficult for foreign firms to obtain local
      currency, as opposed to other countries belonging to the OECD where
      exchange of currencies is generally free from
      restriction.





20




Because
our principal assets are located outside of the United States and nearly all of
our directors and all our officers reside outside of the United States, it may
be difficult for you to enforce your rights based on U.S. Federal Securities
Laws against us and our officers and some directors in the U.S. or to enforce
U.S. Court Judgment against us or them in the PRC.





All of
our directors and officers reside outside of the United States. In addition,
Daqing Sunway, which functions as our operating subsidiary, is located in the
PRC and substantially all of its assets are located outside of the United
States. It may therefore be difficult for investors in the United States to
enforce their legal rights based on the civil liability provisions of the U.S.
Federal securities laws against us in the courts of either the U.S. or the PRC
and, even if civil judgments are obtained in U.S. courts, to enforce such
judgments in PRC courts. Further, it is unclear if extradition treaties now in
effect between the United States and the PRC would permit effective enforcement
against us or our officers and directors of criminal penalties, under the U.S.
Federal securities laws or otherwise.





We
may have limited legal recourse under PRC law if disputes arise under contracts
with third parties.




Almost
all of our agreements with our employees and third parties, including our
supplier and customers, are governed by the laws of the PRC. The legal system in
the PRC is a civil law system based on written statutes. Unlike common law
systems, such as we have in the United States, it is a system in which decided
legal cases have little precedential value. The government of the PRC has
enacted some laws and regulations dealing with matters such as corporate
organization and governance, foreign investment, commerce, taxation and trade.
However, their experience in implementing, interpreting and enforcing these laws
and regulations is limited, and our ability to enforce commercial claims or to
resolve commercial disputes is unpredictable. The resolution of these matters
may be subject to the exercise of considerable discretion by agencies of the
PRC, and forces unrelated to the legal merits of a particular matter or dispute
may influence their determination. Any rights we may have to specific
performance or to seek an injunction under Chinese law are severely limited, and
without a means of recourse by virtue of the Chinese legal system, we may be
unable to prevent these situations from occurring. The occurrence of any such
events could have a material adverse effect on our business, financial condition
and results of operations.





Because
we may not be able to obtain business insurance in the PRC, we may not be
protected from risks that are customarily covered by insurance in the United
States.




Business
insurance is not readily available in the PRC. To the extent that we suffer a
loss of a type which would normally be covered by insurance in the United
States, such as product liability and general liability insurance, we would
incur significant expenses in both defending any action and in paying any claims
that result from a settlement or judgment. Since our products are used for the
transportation and storage of CNG and chemicals, any damage caused by the
failure or alleged failure of our products could result in substantial damages,
and if the nature or amount of any uninsured loss is significant, we may be
unable to continue in business





Because
our funds are held in banks which do not provide insurance, the failure of any
bank in which we deposit our funds could affect our ability to continue in
business.




Banks and
other financial institutions in the PRC do not provide insurance for funds held
on deposit. As a result, in the event of a bank failure, we may not have access
to funds on deposit. Depending upon the amount of money we maintain in a bank
that fails, our inability to have access to our cash could impair our
operations, and, if we are not able to access funds to pay our suppliers,
employees and other creditors, we may be unable to continue in
business.




Failure
to comply with the United States Foreign Corrupt Practices Act could subject us
to penalties and other adverse consequences.




We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with us, are not
subject to these prohibitions. Corruption, extortion, bribery, pay-offs,
theft and other fraudulent practices occur from time-to-time in the PRC. We can
make no assurance, however, that our employees or other agents will not engage
in such conduct for which we might be held responsible. If our employees or
other agents are found to have engaged in such practices, we could suffer severe
penalties and other consequences that may have a material adverse effect on our
business, financial condition and results of operations.




Any
deterioration of political relations between the United States and the PRC could
impair our operations.




The
relationship between the United States and the PRC is subject to sudden
fluctuation and periodic tension. Changes in political conditions in the PRC and
changes in the state of PRC-U.S. relations are difficult to predict and could
adversely affect our operations. Such a change could lead to a decline in our
profitability. Any weakening of relations between the United States and the PRC
could have a material adverse effect on our operations, particularly in our
efforts to raise capital to expand our business activities.




21




Our
operations and assets in the PRC are subject to significant political and
economic uncertainties.




Government
policies are subject to rapid change and the government of the PRC may adopt
policies which have the effect of hindering private economic activity and
greater economic decentralization. There is no assurance that the government of
the PRC will not significantly alter its policies from time to time without
notice in a manner with reduces or eliminates any benefits from its present
policies of economic reform. In addition, a substantial portion of productive
assets in the PRC remains government-owned. For instance, all lands are state
owned and leased to business entities or individuals through governmental
granting of state-owned land use rights. The granting process is typically based
on government policies at the time of granting, which could be lengthy and
complex. This process may adversely affect our operations. The government of the
PRC also exercises significant control over China’s economic growth through the
allocation of resources, controlling payment of foreign currency and providing
preferential treatment to particular industries or companies. Uncertainties may
arise with changing of governmental policies and measures. In addition, changes
in laws and regulations, or their interpretation, or the imposition of
confiscatory taxation, restrictions on currency conversion, imports and sources
of supply, devaluations of currency, the nationalization or other expropriation
of private enterprises, as well as adverse changes in the political, economic or
social conditions in the PRC, could have a material adverse effect on our
business, results of operations and financial condition.





We
may have difficulty establishing adequate management, legal and financial
controls in the PRC.





The PRC
historically has not adopted a Western style of management and financial
reporting concepts and practices, as well as in modern banking, computer and
other control systems. We may have difficulty in hiring and retaining a
sufficient number of qualified employees to work in the PRC. As a result of
these factors, we may experience difficulty in establishing management,
legal and financial controls, collecting financial data and preparing financial
statements, books of account and corporate records and instituting business
practices that meet Western standards.





Risks
Related to Our Common Stock





Our
officers, directors and affiliates control us through their positions and stock
ownership and their interests may differ from other stockholders.





Our
officers, directors and affiliates beneficially own approximately 53% of our
common stock. Liu Bo, our Chairman and Chief Executive Officer, beneficially
owns approximately 48% of our common stock, and Liang Deli, a Director of the
Company, beneficially owns approximately 5% of our common stock. As a result,
Mr. Liu and Mr. Liang are able to influence the outcome of stockholder votes on
various matters, including the election of directors and extraordinary
corporation transactions including business combinations. Yet Mr. Liu and Mr.
Liang’s interests may differ from other stockholders.





We
are not likely to pay cash dividends in the foreseeable future.




We
currently intend to retain any future earnings for use in the operation and
expansion of our business. We do not expect to pay any cash dividends in the
foreseeable future but will review this policy as circumstances dictate. Should
we decide in the future to do so, as a holding company, our ability to pay
dividends and meet other obligations depends upon the receipt of dividends or
other payments from our operating subsidiary. In addition, our operating
subsidiary, from time to time, may be subject to restrictions on its ability to
make distributions to us, including as a result of restrictions on the
conversion of local currency into U.S. dollars or other hard currency and other
regulatory restrictions.




There
is currently a limited trading market for our common stock.





Our
common stock is quoted on the over-the-counter Bulletin Board. However, our bid
and asked quotations have not regularly appeared on the OTC Bulletin Board for
any consistent period of time. There is no established trading market for our
common stock and our common stock may never be included for trading on any stock
exchange or through any other quotation system (including, without limitation,
the NASDAQ Stock Market). In the absence of an active trading market, you may
have difficulty buying and selling or obtaining market quotations; the market
visibility for our stock may be limited, and the lack of visibility for our
common stock may have a depressive effect on the market price for our common
stock.




22




The
price of our common stock may fluctuate dramatically.




There is
a limited market for our common stock and we cannot give any assurance that
there will ever be an active market for our common stock. If a market for our
common stock develops, there is a significant risk that our stock price may
fluctuate dramatically in the future in response to any of the following
factors, some of which are beyond our control:


·
            the level of state-owned
      enterprises in the PRC, as well as the level of governmental control over
      the allocation of resources is greater than in most of the countries
      belonging to the OECD;





·
            the level of capital reinvestment
      is lower in the PRC than in other countries that are members of the
      OECD;





·
            the government of the PRC has a
      greater involvement in general in the economy and the economic structure
      of industries within the PRC than other countries belonging to the
      OECD;





·
            the government of the PRC imposes
      price controls on certain products and our products may become subject to
      additional price controls;
and





·
            the PRC has various impediments
      in place that make it difficult for foreign firms to obtain local
      currency, as opposed to other countries belonging to the OECD where
      exchange of currencies is generally free from
      restriction.




Failure
to achieve and maintain effective internal controls in accordance with Section
404 of the Sarbanes-Oxley Act could have a material adverse effect on our
business and operating results and stockholders could lose confidence in our
financial reporting.




Effective
internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our operating results could be harmed. We will be required to
document and test our internal control procedures in order to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act, which requires increased
control over financial reporting requirements, including annual management
assessments of the effectiveness of such internal controls and a report by our
independent certified public accounting firm addressing these assessments.
Failure to achieve and maintain an effective internal control environment,
regardless of whether we are required to maintain such controls, could also
cause investors to lose confidence in our reported financial information, which
could have a material adverse effect on our stock price.




Our
Common Stock is subject to “Penny Stock” Rules of the Securities and Exchange
Commission, which makes transactions in our stock more difficult.





The
Securities and Exchange Commission has adopted Rule 3a51-1 which establishes the
definition of a “penny stock,” for purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, Rule 15g-9
requires:




•
            that a broker or dealer approve a
      person's account for transactions in penny stocks;
    and





•
            the broker or dealer receive from
      the investor a written agreement to the transaction, setting forth the
      identity and quantity of the penny stock to be
      purchased




23




In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must:





•
            obtain financial information and
      investment experience objectives of the person;
  and





•
            make a reasonable determination
      that the transactions in penny stocks are suitable for that person and the
      person has sufficient knowledge and experience in financial matters to be
      capable of evaluating the risks of transactions in penny
      stocks.





The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:




•
            sets forth the basis on which the
      broker or dealer made the suitability determination;
      and





•
            that the broker or dealer
      received a signed, written agreement from the investor prior to the
      transaction.




Generally,
brokers may be less willing to execute transactions in securities subject to the
“penny stock” rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our
stock.




Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks.




The
application of these rules may affect the ability of broker-dealers to sell our
common stock and may affect your ability to sell any common stock you may
own





As
an issuer of “penny stock” the protection provided by the federal securities
laws relating to forward looking statements does not apply to us.




Although
the federal securities law provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, we
will not have the benefit of this safe harbor protection in the event of any
based upon an claim that the material provided by us contained a material
misstatement of fact or was misleading in any material respect because of our
failure to include any statements necessary to make the statements not
misleading.




Our
common stock is illiquid and subject to price volatility unrelated to our
operations.





The
market price of our common stock could fluctuate substantially due to a variety
of factors, including market perception of our ability to achieve our planned
growth, quarterly operating results of other companies in the same industry,
trading volume in our common stock, changes in general conditions in the economy
and the financial markets or other developments affecting our competitors or us.
In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market price
of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock.





ITEM
1B. UNRESOLVED STAFF COMMENTS.





Not
Applicable.





Available
Information





Our
electronic filings with the United States Securities and Exchange Commission
(including our Annual Reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K, and any amendments to these reports) are available
free of charge on the Securities and Exchange Commission’s website at
http://www.sec.gov.





ITEM
2. PROPERTIES.





The
Company’s manufacturing facilities are housed in a two-story building occupying
26,522 square meters of land located in Daqing Municipal Hi-Tech Development
Zone, Zone Three, Daqing, Helongjiang Province, PRC. Our office building is
located in Saertu Daqing Software Development Zone, Daqing, Helongjiang
Province, PRC.




24




Under the
PRC law, most land is owned by the government, which grants a “land use right”
to an individual or entity after a purchase price for such “land use right” is
paid to the government. The “land use right” allows the holder the right to use
the land for a specified long-term period of time and enjoys all the ownership
rights incident to the land. Daqing Sunway holds the land use right for one
parcel of land that was used in its business and which will be used in SWT’s
business pursuant to the leases entered into in connection with the
Restructuring Agreements.





Land
Use Right





Set forth
below is the detailed information regarding the land use right registered under
the name of Daqing Sunway:




Registered owner
                ofland use right
              
              Location & certificate of land use right
              
              Usage
              
              (Approximate)
                square meters
              
              Date of Issuance
                or Grant
              
              Expiration
                DateDaqing Sunway
              
              Daqing Municipal Hi-Tech Development Zone, Zone
                Three, Daqing, Helongjiang Provice, PRC
                Daqing Municipality Guo Yong (2005) No. 021843
              
              Industrial use
              
              26,522
              
              September 16, 2005
              
              June 13, 2052Qingdao
      Liheng
              
              Qingdao
      Hi-Tech Industry Development Zone, Qingdao, Shandong in the People’s
      Republic of China
                Huangdao
      Municipality Gou Yong (2006) N. 197
              
              Industrial
      use
              
              9,082
              
              November
      3, 2006
              
              July
      24, 2053





Lease





Pursuant
to a lease agreement, the Company is leasing from Daqing Chuangye Square Co.,
Ltd. a building with a total of 2,342.87 square meters for use in its operation
for a term of three years starting from May 18, 2008 with an annual rent of
approximately $29,383.





Pursuant
to a lease agreement, Beijing Sunway is leasing from Beijing Jiahai Property
Management Co., Ltd. a building with a total of 409.96 square meters for use in
its operation for a term of two years starting from August 29, 2010 with an
annual rent of approximately $75,585.





Pursuant
to a lease agreement, Beijing Sunway is leasing from Chen Tonghang a building
with a total of 102 square meters for use in its operation for a term of one
year starting from November 18, 2009 with an annual rent of approximately
$5,973.





Pursuant
to a lease agreement, Beijing Sunway is leasing from Luo Haibing a building with
a total of 83 square meters for use in its operation for a term of one year
starting from September 12, 2009 with an annual rent of approximately
$2,300.





Building
Properties





The
Company also owns two building properties as follows:





Owner
              
              Location
              
              Usage
              
              Approximate
                square meters
              
              Certificate of Ownership or
                Right to UseDaqing
      Sunway
              
              North
      Section of Longfeng District, West Wing of Building No. 15, 1st Floor,
      Daqing, Helongjiang Province, PRC
              
              Real
      property for use by joint stock company limited enterprise
              
              3,050
              
              Qing
      Real Property Right Certificate No. No. 00014093 (Original Certificate No.
      0230404)Daqing
      Sunway
              
              Building
      No. 3, Saertu Software Development Zone, Daqing, Helongjiang Province,
      PRC
              
              Real
      property for use by joint stock company limited enterprise
              
              5,066.96
              
              Qing
      Real Property Right Certificate Longfeng District
    No.NA216750





25




Effective
on November 30, 2005, Daqing Sunway granted a lien on the land use right and
property located at the West Wing of Building No. 15 to Daqing Industrial
and Commercial Mortgage Company for a debt of Daqing Sunway in the amount of
3,000,000 RMB owed to it. The lien expired on November 30, 2009. The property
located in the North Section of Longfeng District, West Wing of Building No. 15,
1st  Floor, is
not currently used in Daqing Sunway’s business.





ITEM
3. LEGAL PROCEEDINGS.





To our
knowledge, there is no material litigation pending or threatened against
us.




ITEM
4. (REMOVED AND RESERVED).




PART
II




ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.




Market
Information





The
Company’s common stock is quoted on the OTC Bulletin Board under the symbol
“SUWG.OB.”  The following table sets forth, for the calendar periods
indicated the range of the high and low last reported bid and ask prices of the
Company’s common stock from January 1, 2008 through December 31, 2009, as
reported by the OTC Bulletin Board.  The quotations represent inter-dealer
prices without retail mark-ups, mark-downs or commissions, and may not
necessarily represent actual transactions.  The quotations may be
rounded for presentation.




Period
                
                High*
                
                
                Low*First
      Quarter 2008
                
                $
                8.00
                
                
                $
                1.51Second
      Quarter 2008
                
                $
                5.00
                
                
                $
                1.55Third
      Quarter 2008
                
                $
                4.00
                
                
                $
                2.25Fourth
      Quarter 2008
                
                $
                5.00
                
                
                $
                2.00First
      Quarter 2009
                
                $
                6.50
                
                
                $
                2.00Second
      Quarter 2009
                
                $
                6.49
                
                
                $
                2.00Third
      Quarter 2009
                
                $
                5.00
                
                
                $
                3.00Fourth
      Quarter 2009
                
                $
                4.50
                
                
                $
                2.00





On
December 31, 2009, the last price of the Company’s common stock as reported on
the OTC Bulletin Board was $3.00* per share.





As of
March 24, 2010, the Company had approximately 652 shareholders of record.
Certain of the shares of common stock are held in “street” name and may be held
by numerous beneficial owners.




*The
above-quoted stock prices have been adjusted to reflect the 86.3035-for-one
reverse split that was approved by a majority of shareholders on June 28, 2007
and took effect on February 7, 2008.





Dividends




The
Company’s board of directors has not declared a dividend on our common stock
during the last two fiscal years and we do not anticipate the payments of
dividends in the near future as we intend to reinvest our profits to grow
operations. We rely on dividends from Daqing Sunway for our funds and PRC
regulations may limit the amount of funds distributed to us from Daqing
Sunway, which will affect our ability to declare any dividends.




Equity
Compensation Plan Information





As of the
date of this report, the Company neither has any securities authorized for
issuance under any equity compensation plans nor does it have any equity
compensation plans.





Purchases
of Equity Securities by the Small Business Issuer and Affiliated
Purchasers





None.




26





ITEM
6. SELECT FINANCIAL DATA.





Not
Applicable.





ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.





Overview





The
following discussion and analysis of the consolidated financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and related notes of Sunway Global Inc., appearing
elsewhere in this report. This discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. Actual results may
differ materially from those anticipated in these forward-looking
statements.





Sunway
Global Inc. primarily functions as a holding company for entities that, through
contractual relationships, control the business of Daqing Sunway, a company
organized under the laws of the PRC that designs, manufactures and sells
logistic transport systems and medicine dispensing systems and equipment that
are principally used by hospitals and other medical facilities in the PRC.
Because Daqing Sunway’s operations are the only significant operations of the
Company and its affiliates, this discussion and analysis focuses on the business
results of Daqing Sunway, comparing its results in the fiscal years ended
December 31, 2009 and 2008.




Results
of Operations





In the
fiscal year ended December 31, 2009, the company’s net sales, gross profit,
operating income and net income decreased quickly  as compared with
the same period in the fiscal year ended December 31, 2008, but operating
expenses increased quickly during these periods. These decreases are due in
large part to (i) affected by the financial crisis, (ii) affected by equivocal
reform of the medical institutions in the PRC, bring about hopital’s investment
declines, and (iii) one of sales manager quit to set up its own
company.





The
following table summarizes the results of our operations during the fiscal years
ended December 31, 2009 and 2008, respectively, and provides information
regarding the dollar and percentage increase or (decrease) from the fiscal years
ended December 31, 2009 and 2008.




FiscalYearEndedDecember
                  31,2009
                
                
                2008
                
                
                Change
                
                
                ChangerateNet
      Revenue
                
                $
                13,063,122
                
                
                $
                19,845,882
                
                
                $
                (6,782,760
                )
                
                
                (34.18
                )%Cost
      of sales
                
                $
                4,620,251
                
                
                $
                5,634,143
                
                
                $
                (1,013,892
                )
                
                
                (18.00
                )%Gross
      Profit
                
                $
                8,442,871
                
                
                $
                14,211,739
                
                
                $
                (5,768,868
                )
                
                
                (40.59
                )%Gross
      Margin
                
                $
                64.63
                %
                
                
                71.61
                %
                
                
                
                
                
                
                (6.98
                )%Operating
      Income
                
                $
                4,430,158
                
                
                $
                10,718,662
                
                
                $
                (6,288,504
                )
                
                
                (58.67
                )%Operating
      Margin
                
                
                33.91
                %
                
                
                54.01
                %
                
                
                
                
                
                
                (20.10
                )%Changes
      in fair value of warrants
                
                
                29,093,546
                
                
                
                -
                
                
                
                29,093,546
                
                
                
                -
                %Impairment
      on investment
                
                
                4,831,386
                
                
                
                -
                
                
                
                4,831,386
                
                
                
                -
                %Net
      Income
                
                $
                27,978,900
                
                
                $
                9,058,769
                
                
                $
                18,920,131
                
                
                
                208.86
                %Net
      profit margin
                
                
                214.18
                %
                
                
                45.65
                %
                
                
                
                
                
                
                168.53
                %





Net
revenue





Net
revenue for the fiscal year ended December 31, 2009, which resulted primarily
from sales of PTS, SADP and spare parts, was $13,063,122, a decrease of 34.18%
as compared with the net revenue of $19,845,882 in the same period ended
December 31, 2008. In the fiscal year ended December 31, 2009, we sold 2,279
workstations and 11 units SADP, representing a decrease in workstation sales of
37.88% as compared with 3,669 workstations sold in the same period ended on
December 31, 2008. The decrease in workstation sales was primarily due to (i) a
decline in hospital-related investment due to governmental reforms requiring
pharmacies to be operated outside of and separate from hospitals in the PRC; and
(ii) the departure of one of our sales managers, who left to set up his own
company. During the same time, we sold 11 units SADP, an increase of 120% as
compared with 5 units SADP for the fiscal year ended December 31, 2008. The
increase in SADP sales was due primarily to our distinct advantage of price and
service as compared with foreign competitors.




27




The
following table presents information about our revenue for the periods
indicated:




2009
                            
                            
                            2008sales
                            
                            
                            % of total sales
                            
                            
                            sales
                            
                            
                            % of total salesPTS
                            
                            $
                            11,798,311
                            
                            
                            
                            90.32
                            %
                            
                            $
                            18,444,600
                            
                            
                            
                            92.94
                            %SADP
                            
                            $
                            1,080,597
                            
                            
                            
                            8.27
                            %
                            
                            $
                            1,364,511
                            
                            
                            
                            6.88
                            %Other
                            
                            $
                            184,214
                            
                            
                            
                            1.41
                            %
                            
                            $
                            36,771
                            
                            
                            
                            0.19
                            %Total
      sales
                            
                            $
                            13,063,122
                            
                            
                            
                            100.00
                            %
                            
                            $
                            19,845,882
                            
                            
                            
                            100.00
                            %





Gross
Profit





Gross
profit decreased 40.59% to $8,442,871 for the fiscal year ended December 31,
2009, as compared to $14,211,739 for the fiscal year ended December 31, 2008.
Our gross profit margin dropped 6.98% from 71.61% as of the fiscal year ended
December 31, 2008 to 64.63% as of the same period of 2009, mainly due to a
decrease in product volume, which caused the rising of average fixed cost per
unit, and a decrease in the sales price of SADP units.





The table
below presents information about our gross profit for the periods indicated:





FiscalYearEndedDecember31,2009
                    
                    
                    2008US$
                    
                    
                    Gross profit
                      margin
                    
                    
                    US$
                    
                    
                    Gross profit
                      marginGross Profit
                    
                    $
                    8,442,871
                    
                    
                    
                    64.63
                    %
                    
                    $
                    14,211,739
                    
                    
                    
                    71.61
                    %




Income
from Operations





Operating
income decreased 58.67% to $4,430,158 for the fiscal year ended December 31,
2009, as compared with $10,718,662 for the fiscal year ended December 31, 2008.
Our operating margin dropped 20.10%, from 54.01% as of the fiscal year ended
December 31, 2008, to 33.91% as of the same period of 2009. The decrease was
primarily due to a dropp in sales and increase in operation
expenses.





FiscalYearEndedDecember31,2009
                    
                    
                    2008US$
                    
                    
                    Operating
                      margin
                    
                    
                    US$
                    
                    
                    Operating
                      marginIncome
      from operations
                    
                    $
                    4,430,158
                    
                    
                    
                    33.91
                    %
                    
                    $
                    10,718,662
                    
                    
                    
                    54.01
                    %





Cost
of Net Revenue





Cost of
net revenue decreased to $4,620,251 for the fiscal year ended December 31, 2009,
representing a decrease of 18% as compared with $5,634,143 for the same period
of 2008. This decrease is primarily due to a decrease in sales and product
volume, which caused the rise of average fixed cost per unit.





The
following table presents information about our cost of sales for the periods
indicated:





Fiscal Year Ended December 31,2009
                            
                            
                            2008
                            
                            
                            ChangeCost
      of net revenue
                            
                            $
                            4,620,251
                            
                            
                            $
                            5,634,143
                            
                            
                            
                            (18.00
                            )%




28




Operating
Expenses





Operating
expenses were $4,012,713 for the fiscal year ended December 31, 2009, an
increase of 14.88% as compared to $3,493,077 for the same period of 2008. This
increase was due primarily to two reasons:(i) selling expenses increased
$648,783 or 152.64% to $1,073,833 for the fiscal year ended December 31, 2009
from $425,050 for the same period of 2008; and (ii) general and administrative
expenses decreased $129,147 or 4.21% to $2,938,880 for the fiscal years ended
December 31, 2009 from $3,068,027 for the same period of 2008. During the
period, we have already added sales force caused increase quickly in selling
expenses and salary and benefits for salesman.




The
following table presents information about our operating expenses for the
periods indicated:





Fiscal Year Ended December 31,2009
                        
                        
                        2008
                        
                        
                        changeSelling
      expenses
                        
                        $
                        1,073,833
                        
                        
                        $
                        425,050
                        
                        
                        $
                        152.64
                        %General
      & Administrative Expenses
                        
                        $
                        2,938,880
                        
                        
                        $
                        3,068,027
                        
                        
                        $
                        (4.21
                        )%Total
      operating expenses
                        
                        $
                        4,012,713
                        
                        
                        $
                        3,493,077
                        
                        
                        $
                        14.88
                        %





Changes
in fair value of warrants





Changes
in fair value of warrants were $29,093,546 for the fiscal year ended December
31, 2009,this is a non-cash income, which resulted from the change in fair value
of warrants issued to investors in conjunction with the Company’s issuance of
warrants in June of 2007 pursuant to provisions of FAB ASC Topic 815,
“Derivative and Hedging” (ASC 815). The accounting treatment of the warrants
resulted from a provision providing anti-dilution protection to the warrant
holders. On March 18, 2010, the Company entered into a Security Exchange
Agreement intending to exchange all warrants into common stock. As a result of
the agreements, the closing date, the Company will issue 2,000,000 shares of
common stock in exchange for the retirement of all of the outstanding warrants
owned by Vision Opportunity Master Fund Ltd. and its affiliates.  The
closing is conditioned upon a closing of a financing with minimum proceeds of
$10 million to the company.





Impairment
on investment





Impairment
on investment was $4,831,386 for the fiscal year ended December 31, 2009.
Originally, it was showed on goodwill in the first quarter of 2009, it
represents the excess of the cost of an acquisition over the fair value of the
net acquired identifiable assets at the date of acquisition. In the first
quarter of 2010, after performing extended analysis into the definition of a
business as set forth in the paragraph 805-10-20 of the FASB Accounting
Standards Codification, we recognized the acquisitions based on the fair value
of net assets obtained. For the amount over the fair value of the net
assets obtained, we wrote them off as expenses at the time of
acquisition.





Net
Income





Net
income was $27,978,900 for the fiscal year ended December 31, 2009, increases of
208.86% from $9,058,769 for the same period of 2008. in 2009 our net income were
impacted by a non-cash income of $24,262,160 unrelated to the Company’s
operations,  mainly consisting of  changes in fair value of
warrants and impairment on investment were 29,093,546 and (4,831,386)
respectively. Excluding this $24,262,160 non-cash income, the Company’s net
income from operations for the fiscal year ended December 31, 2009 would have
been $3,716,740, representing a year over year net income fall of
58.97%.





Earnings
Per Share





Basic and
diluted earnings per share for the fiscal year ended December 31, 2009 was $1.51
and $0.92 compared to $0.60 and $0.31 for the same period of 2008. The weighted
average number of shares outstanding to calculate basic EPS was 18,499,736 and
15,127,645 for the fiscal years ended December 31, 2009 2008, respectively. The
weighted average number of shares outstanding to calculate diluted EPS was
30,445,696 and 28,870,595 for the fiscal years ended December 31, 2009 and 2008,
respectively.




29




Cash
and Cash Equivalents





Cash and
cash equivalents decreased to $4,717,240 as of December 31, 2009, as compared to
$15,189,941 as of December 31, 2008. This increase was mainly due to an increase
in investing activities and overall decrease in sales.





Trade
Receivables, net





Trade
receivables, net increased 19.75% to $3,537,395 as of December 31, 2009,
compared with $2,953,919 as of December 31, 2008. This increase in trade
receivables was primarily attributable to a change in our sales policy. In the
fiscal year ended December 31, 2009, we changed our trade receivables policy to
require that the remaining 5 percent of the amount due under the purchase
contract is received within one year after the acceptance test completed.
Previously, we requiredreceipt of the remaining 5 percent immediately after the
acceptance test completed.





Inventory





Inventory
consists of raw materials, works in process and finished goods. As of December
31, 2009, the recorded value of our inventory has a decreased 0.15% to $589,871
from $590,738 as of December 31, 2008. This decrease is mainly due to increase
in finished goods from $218,448 as of December 31, 2008 to $241,831 as of
December 31, 2009, an increase of 10.70%. In raw materials increased from
$183,435 as of December 31, 2008 to $321,888 as of December 31, 2009, an
increase of 75.48%. In work in progress decrease from $188,855 as of December
31, 2008 to $26,152 as of December 31, 2009, a decrease of 86.15%. The increase
in raw material was primarily attributable to attributable to an expected
increase in sales volume based upon market research and several confirmed
purchase agreements for our products.





The
following table presents information about our inventory for the periods
indicated:





December 31,
                  2009
                
                
                December 31,
                  2008
                
                
                changeRaw
      material
                
                $
                321,888
                
                
                $
                183,435
                
                
                
                75.48
                %Work
      in process
                
                $
                26,152
                
                
                $
                188,855
                
                
                
                (86.15
                )%Finished
      goods
                
                $
                241,831
                
                
                $
                218,448
                
                
                
                10.70
                %Total
      inventory
                
                $
                589,871
                
                
                $
                590,738
                
                
                
                (0.15
                )%





Accounts
payable





Accounts
payable amounted to $271,139 as of December 31, 2009, an increase of 352.56%
from $59,912 as of December 31, 2008. The increase is mainly due to an increase
in the purchase volume of raw materials.




Liquidity
and Capital Resources





We have
historically financed our operations and capital expenditures principally
through private placements of debt and equity offerings, and cash provided by
operations.





The
following table presents information about our cash flow for the periods
indicated:




Fiscal Year Ended December 31,2009
                
                
                2008
                
                
                ChangeNet
      cash provided by (used in) operating activities
                
                $
                6,094,443
                
                
                $
                11,022,248
                
                
                $
                (4,927,805
                )Net
      cash provided by (used in) investing activities
                
                $
                (16,719,847
                )
                
                $
                (9,428,330
                )
                
                $
                (7,291,517
                )Net
      cash provided by (used in) financing activities
                
                $
                -
                
                
                $
                6,580,000
                
                
                $
                (6,580,000
                )Effect
      of foreign currency translation on cash and cash
    equivalents
                
                $
                152,703
                
                
                $
                1,195,923
                
                
                $
                (1,043,220
                )Cash
      and cash equivalents at beginning of year
                
                $
                15,189,941
                
                
                $
                5,820,100
                
                
                $
                9,369,841Cash
      and cash equivalents–end of year
                
                $
                4,717,240
                
                
                $
                15,189,941
                
                
                $
                (10,472,701
                )




30





Operating
Activities





For the
fiscal year ended December 31, 2009, net cash provided by operating activities
was $6,094,443. This is  primarily attributable to our net income of
$27,978,900, adjusted by an add-back of non-cash expenses/(loss) mainly
consisting of depreciation, amortization, loss on disposal of fixed assets,
provision for doubtful debts, impairment on the  purchase of our
Qingdao factory and Gain on fair value of warrants of $1,114,264, $1,103,231,
$10,038, $9,549, $4,831,386 and $(29,093,546), respectively, offset by a
$140,621 increase in working capital. Specifically, the working capital increase
was primarily due to i) a $585,369 net trade receivables increase driven by our
change in sales policy; ii) a $2,334 decrease in inventories, principally
increased in work in process, in the fourth quarter of 2009; iii) a $213,599
increase in advance to suppliers, due to the increase in raw material purchases;
iv) a $690,141 decrease in prepayments , travel advances to shareholders, other
receivables, tender deposits and advances to employees, consisting primarily of
prepayments for raw materials supplies in advance of shipment, working capital
of salesmen and payments of deposits for client; partially offset by a $247,114
increase in accounts payable, tax payable, amount due from a director, customers
deposits, accrued liabilities and other payables.





Investing
Activities





For the
fiscal year ended December 31, 2009, net cash used in investing activities was
$16,719,847. This was primarily attributable to i) a $3,905,935 capital
expenditure for purchase of new plant and equipment; ii) a $8,592,797 capital
expenditure for purchase of new intangibles assets; iii) a $4,316,306 capital
expenditure for purchase technology-based designs, and iv) a $95,191 in
restricted cash.





As of
December 31, 2009, we had cash and cash equivalents of $4,717,240, down
$10,472,701 from $15,189,941 at December 31, 2008.





In future
periods, we believe that our existing cash, cash equivalents and cash flows from
operations, combined with availability under our revolving credit facility, will
be sufficient to meet our presently anticipated future cash needs for at least
the next 12 months. We may, however, require additional cash resources due to
changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue.





Obligations
under Material Contracts





We do not
have any material contractual obligations as of December 31, 2009.





Critical
Accounting Policies





Management’s
discussion and analysis of its financial condition and results of operations is
based upon Sunway’s consolidated financial statements, which have been prepared
in accordance with United States generally accepted accounting principles.
Sunway’s financial statements reflect the selection and application of
accounting policies which require management to make significant estimates and
judgments. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. Sunway believes that the following reflect the more
critical accounting policies that currently affect Sunway’s financial condition
and results of operations.




Impairment of long-lived
assets. We account for impairment of property, plant and equipment and
amortizable intangible assets in accordance with FASB ASC 360. The carrying
value of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately identifiable and is less
than its carrying value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair market value of the long-lived
asset. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Losses on
long-lived assets to be disposed of are determined in a similar manner, except
that fair market values are reduced for the cost to dispose. During the
reporting years, there was no impairment loss incurred. Competitive pricing
pressure and changes in interest rates, could materially and adversely affect
our estimates of future net cash flows to be generated by our long-lived
assets.





Inventories. Inventories
consist of finished goods and raw materials, and stated at the lower of cost or
market value. Substantially all inventory costs are determined using the
weighted average basis. Finished goods are comprised of direct materials, direct
labor and an appropriate proportion of overhead. The management regularly
evaluates the composition of its inventory to identify slow-moving and obsolete
inventories to determine if additional write-downs are required. Changes in
sales volumes due to unexpected economic or competitive conditions are among the
factors that could materially affect the adequacy of such write
down.





Trade receivables. Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An allowance for doubtful accounts is
maintained for all customers based on a variety of factors, including the length
of time the receivables are past due, significant one-time events and historical
experience. Bad debts are written off as incurred.  During the
reporting years, there were no bad debts.


31





Outstanding
accounts balances are reviewed individually for collectability. The Company does
not charge any interest income on trade receivables.  Accounts
balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. To
date, the Company has not charged off any balances as it has yet to exhaust all
means of collection.





Revenue recognition. Revenue
represents the invoiced value of goods sold recognized upon the delivery of
goods to customers. Revenue is recognized when all of the following criteria are
met:





-
Persuasive evidence of an arrangement exists;




-
Delivery has occurred or services have been rendered;




- The
seller’s price to the buyer is fixed or determinable, and




-
Collection is reasonably assured.





Contract
revenues are recognized when the manufacturing and installation of the medical
equipments is completed.  Generally, the company receives total
contract sum from clients in 3 installments. Deposit of 30% is received from
client when the contract is signed.  Second payment of 30% is received
when the project commenced. The final sum of the remaining portion is received
after the construction is completed within 4 months.





Expected warranty
liabilities. The Company warrants its products against defects in design,
materials, and workmanship generally for one year. A provision for estimated
future costs relating to warranty expense are recorded when products are
shipped, and the provision is based upon our own historical claim
experience.





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements as of December 31, 2009.




ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Not
Applicable.




32




ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.




SUNWAY
GLOBAL INC.





INDEX
TO FINANCIAL STATEMENTS





PageReports
      of Independent Registered Public Accounting Firms
                  
                  F-1Consolidated
      Balance Sheets as of December 31, 2009 and December 31,
    2008
                  
                  F-2 –
      F-3Consolidated
      Statements of Income for the Years Ended December 31, 2009 and
      December 31, 2008
                  
                  F-4Consolidated
      Statements of Shareholders’ Equity for the Years Ended December 31, 2009
      and December 31, 2008
                  
                  F-5Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2009 and
      December 31, 2008
                  
                  F-6 –
      F-7Notes
      to Consolidated Financial Statements
                  
                  F-8 – F-31




33




ALBERT
WONG & CO.


CERTIFIED
PUBLIC ACCOUNTANTS


7th
Floor, Nan Dao Commercial Building


359-361
Queen’s Road Central


Hong
Kong


Tel :
2851 7954


Fax: 2545
4086





ALBERT
WONG


B.Soc.,
Sc., ACA., LL.B.,


CPA(Practising)




To:
            The
      Board of Directors and Stockholders
of


Sunway
Global Inc. (“the Company”)





Report
of Independent Registered Public Accounting Firm





We have
audited the accompanying consolidated balance sheets of Sunway Global Inc. and
subsidiaries as of December 31, 2009 and 2008 and the related consolidated
statements of income and comprehensive income, stockholders’ equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.





We
conducted our audit in accordance with 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. 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.





We were
not engaged to examine management’s assertion about the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2009
included in the Company’s Item 9A “Controls and Procedures” in the Annual
Report on Form 10-K and, accordingly, we do not express an opinion
thereon.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sunway Global
Inc. as of December 31, 2009 and 2008 and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.




Hong
      Kong, China
              April
      14,
      2010
            Albert
      Wong & Co.
              Certified
      Public Accountants


Except
for note 19 dated January 31, 2011




F-1




SUNWAY
GLOBAL INC.


CONSOLIDATED
BALANCE SHEETS


AS
AT DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)




Notes
                                                    
                                                    2009
                                                    
                                                    
                                                    2008(Restated)
                                                    
                                                    
                                                    (Restated)ASSETSCurrent assetsCash
      and cash equivalents
                                                    
                                                    2(k)
                                                    
                                                    $
                                                    4,717,240
                                                    
                                                    
                                                    $
                                                    15,189,941Trade
      receivables, net
                                                    
                                                    5
                                                    
                                                    
                                                    3,537,395
                                                    
                                                    
                                                    
                                                    2,953,919Inventories
                                                    
                                                    8
                                                    
                                                    
                                                    589,871
                                                    
                                                    
                                                    
                                                    590,738Advances
      to suppliers
                                                    
                                                    
                                                    
                                                    
                                                    940,872
                                                    
                                                    
                                                    
                                                    547,952Prepayments
                                                    
                                                    
                                                    
                                                    
                                                    127,388
                                                    
                                                    
                                                    
                                                    -Tender
      deposits
                                                    
                                                    
                                                    
                                                    
                                                    122,050
                                                    
                                                    
                                                    
                                                    112,735Travel
      advances to shareholders
                                                    
                                                    6
                                                    
                                                    
                                                    71,372
                                                    
                                                    
                                                    
                                                    38,733Advances
      to employees
                                                    
                                                    7
                                                    
                                                    
                                                    217,865
                                                    
                                                    
                                                    
                                                    429,804Total
      current assets
                                                    
                                                    
                                                    
                                                    $
                                                    10,324,053
                                                    
                                                    
                                                    $
                                                    19,863,822Restricted
      cash
                                                    
                                                    
                                                    
                                                    
                                                    283,175
                                                    
                                                    
                                                    
                                                    378,366Amount
      due from a related company
                                                    
                                                    4
                                                    
                                                    
                                                    830
                                                    
                                                    
                                                    
                                                    830Property,
      plant and equipment, net
                                                    
                                                    9
                                                    
                                                    
                                                    10,508,415
                                                    
                                                    
                                                    
                                                    5,069,871Intangibles,
      net
                                                    
                                                    10
                                                    
                                                    
                                                    15,109,988
                                                    
                                                    
                                                    
                                                    6,576,769Deposit
      for technology-based designed
                                                    
                                                    
                                                    
                                                    
                                                    4,318,643
                                                    
                                                    
                                                    
                                                    1,750,751Deposit
      for acquisition of subsidiary
                                                    
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    7,725,445TOTAL
      ASSETS
                                                    
                                                    
                                                    
                                                    $
                                                    40,545,104
                                                    
                                                    
                                                    $
                                                    41,365,854LIABILITIES
      ANDSTOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                                    
                                                    
                                                    
                                                    $
                                                    271,139
                                                    
                                                    
                                                    $
                                                    59,912Income
      tax payable
                                                    
                                                    
                                                    
                                                    
                                                    269,082
                                                    
                                                    
                                                    
                                                    632,893Turnover
      and other taxes
                                                    
                                                    
                                                    
                                                    
                                                    154,871
                                                    
                                                    
                                                    
                                                    406,839Expected
      warranty liabilities
                                                    
                                                    11
                                                    
                                                    
                                                    32,618
                                                    
                                                    
                                                    
                                                    50,396Customer
      deposits
                                                    
                                                    
                                                    
                                                    
                                                    304,093
                                                    
                                                    
                                                    
                                                    -Accrued
      liabilities
                                                    
                                                    
                                                    
                                                    
                                                    657,215
                                                    
                                                    
                                                    
                                                    316,629Total
      current liabilities
                                                    
                                                    
                                                    
                                                    $
                                                    1,689,018
                                                    
                                                    
                                                    $
                                                    1,466,669Warrants
      liabilities
                                                    
                                                    12
                                                    
                                                    
                                                    40,808,327
                                                    
                                                    
                                                    
                                                    -TOTAL
      LIABILITIES
                                                    
                                                    
                                                    
                                                    $
                                                    42,497,345
                                                    
                                                    
                                                    $
                                                    1,466,669





See
accompanying notes to consolidated financial statements




F-2




SUNWAY
GLOBAL INC.





CONSOLIDATED
BALANCE SHEETS (Continued)


AS
AT DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





Notes
                                          
                                          2009
                                          
                                          
                                          2008(Restated)
                                          
                                          
                                          (Restated)STOCKHOLDERS’
      EQUITYSeries
      B Convertible PreferredStock
      $0.0000001 par value; 400,000shares
      authorized; 160,494 shares issuedand
      outstanding at December 31, 2009and
      2008
                                          
                                          12
                                          
                                          $
                                          1
                                          
                                          
                                          $
                                          1Common
      stock at $0.0000001 parvalue;
      100,000,000 shares authorized;18,499,736
      shares issued andoutstanding
      at December 31, 2009and
      2008
                                          
                                          
                                          
                                          
                                          2
                                          
                                          
                                          
                                          2Additional
      paid-in capital
                                          
                                          
                                          
                                          
                                          13,833,383
                                          
                                          
                                          
                                          17,824,325Statutory
      reserves
                                          
                                          
                                          
                                          
                                          3,033,855
                                          
                                          
                                          
                                          2,127,978(Accumulated
      deficit)/retained earnings
                                          
                                          
                                          
                                          
                                          (21,735,219)
                                          
                                          
                                          
                                          17,102,689Accumulated
      other comprehensive income
                                          
                                          
                                          
                                          
                                          2,915,737
                                          
                                          
                                          
                                          2,844,190$
                                          (1,952,241
                                          )
                                          
                                          $
                                          39,899,185TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                                          
                                          
                                          
                                          $
                                          40,545,104
                                          
                                          
                                          $
                                          41,365,854





See
accompanying notes to consolidated financial statements




F-3




SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





Notes
                  
                  2009
                  
                  
                  2008Net
      revenues
                  
                  16
                  
                  $
                  13,063,122
                  
                  
                  $
                  19,845,882Cost
      of net revenues
                  
                  16
                  
                  
                  (4,620,251
                  )
                  
                  
                  (5,634,143
                  )Gross
      profit
                  
                  
                  
                  $
                  8,442,871
                  
                  
                  $
                  14,211,739Selling
      expenses
                  
                  
                  
                  
                  (1,073,833
                  )
                  
                  
                  (425,050
                  )General
      and administrative expenses
                  
                  
                  
                  
                  (2,938,880
                  )
                  
                  
                  (3,068,027
                  )Income
      from operations
                  
                  
                  
                  $
                  4,430,158
                  
                  
                  $
                  10,718,662Interest
      income
                  
                  
                  
                  
                  56,627
                  
                  
                  
                  66,935Interest
      expenses
                  
                  
                  
                  
                  (1,727
                  )
                  
                  
                  -Impairment
      on investment
                  
                  
                  
                  
                  (4,831,386
                  )
                  
                  
                  -Changes
      in fair value of warrants
                  
                  
                  
                  
                  29,093,546
                  
                  
                  
                  -Income
      before income tax
                  
                  
                  
                  $
                  28,747,218
                  
                  
                  $
                  10,785,597Income
      tax expense
                  
                  13
                  
                  
                  (768,318
                  )
                  
                  
                  (1,726,828
                  )Net
      income
                  
                  
                  
                  $
                  27,978,900
                  
                  
                  $
                  9,058,769Foreign
      currency translation
                  
                  
                  
                  
                  71,547
                  
                  
                  
                  1,663,902Comprehensive
      income
                  
                  
                  
                  $
                  28,050,447
                  
                  
                  $
                  10,722,671Net
      income per share:-Basic
                  
                  14
                  
                  $
                  1.51
                  
                  
                  $
                  0.60-Diluted
                  
                  14
                  
                  $
                  0.92
                  
                  
                  $
                  0.31Weighted
      average number of common stock-Basic
                  
                  14
                  
                  
                  18,499,736
                  
                  
                  
                  15,127,645-Diluted
                  
                  14
                  
                  
                  30,445,696
                  
                  
                  
                  28,870,595





See
accompanying notes to consolidated financial statements


F-4




SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





Additional
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            Retained
                                                            
                                                            
                                                            AccumulatedPreferred
                                                            
                                                            
                                                            Preferred
                                                            
                                                            
                                                            No. of
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            paid
                                                            
                                                            
                                                            
                                                            
                                                            
                                                            earnings/
                                                            
                                                            
                                                            otherSeries
                                                            
                                                            
                                                            Series
                                                            
                                                            
                                                            shares
                                                            
                                                            
                                                            Common
                                                            
                                                            
                                                            in
                                                            
                                                            
                                                            Statutory
                                                            
                                                            
                                                            (Accumulated
                                                            
                                                            
                                                            comprehensiveA
                                                            
                                                            
                                                            B
                                                            
                                                            
                                                            outstanding
                                                            
                                                            
                                                            stock
                                                            
                                                            
                                                            capital
                                                            
                                                            
                                                            reserves
                                                            
                                                            
                                                            deficit)
                                                            
                                                            
                                                            income
                                                            
                                                            
                                                            TotalBalance,
      January 1, 2008
                                                            
                                                            $
                                                            1
                                                            
                                                            
                                                            $
                                                            1
                                                            
                                                            
                                                            
                                                            223,658
                                                            
                                                            
                                                            $
                                                            1
                                                            
                                                            
                                                            $
                                                            11,244,325
                                                            
                                                            
                                                            $
                                                            2,127,978
                                                            
                                                            
                                                            $
                                                            8,043,920
                                                            
                                                            
                                                            $
                                                            1,180,288
                                                            
                                                            
                                                            $
                                                            22,596,514Conversion
      of Preferred Series A into commonstock
                                                            
                                                            
                                                            (1
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            13,711,831
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            1
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Conversion
      of Preferred Series B into commonstock
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            148,140
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Conversion
      of Warrant Series J into Common Stock
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            4,416,107
                                                            
                                                            
                                                            
                                                            1
                                                            
                                                            
                                                            
                                                            6,579,999
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            6,580,000Net
      income
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            9,058,769
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            9,058,769Foreign
      currency translationadjustment
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            1,663,902
                                                            
                                                            
                                                            
                                                            1,663,902Balance,
      December 31, 2008
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            1
                                                            
                                                            
                                                            
                                                            18,499,736
                                                            
                                                            
                                                            $
                                                            2
                                                            
                                                            
                                                            $
                                                            17,824,325
                                                            
                                                            
                                                            $
                                                            2,127,978
                                                            
                                                            
                                                            $
                                                            17,102,689
                                                            
                                                            
                                                            $
                                                            2,844,190
                                                            
                                                            
                                                            $
                                                            39,899,185Balance,
      January 1, 2009
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            1
                                                            
                                                            
                                                            
                                                            18,499,736
                                                            
                                                            
                                                            $
                                                            2
                                                            
                                                            
                                                            $
                                                            17,824,325
                                                            
                                                            
                                                            $
                                                            2,127,978
                                                            
                                                            
                                                            $
                                                            17,102,689
                                                            
                                                            
                                                            $
                                                            2,844,190
                                                            
                                                            
                                                            $
                                                            39,899,185Reclassification
      of warrants from equity to derivative liabilities
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (3,990,942
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (65,910,931
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (69,901,873
                                                            )Net
      income
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            27,978,900
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            27,978,900Appropriations
      to statutoryReserves
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            905,877
                                                            
                                                            
                                                            
                                                            (905,877
                                                            )
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -Foreign
      currency translationadjustment
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            71,547
                                                            
                                                            
                                                            
                                                            71,547Balance,
      December 31, 2009
                                                            
                                                            $
                                                            -
                                                            
                                                            
                                                            $
                                                            1
                                                            
                                                            
                                                            
                                                            18,499,736
                                                            
                                                            
                                                            $
                                                            2
                                                            
                                                            
                                                            $
                                                            13,833,383
                                                            
                                                            
                                                            $
                                                            3,033,855
                                                            
                                                            
                                                            $
                                                            (21,735,219
                                                            )
                                                            
                                                            $
                                                            2,915,737
                                                            
                                                            
                                                            $
                                                            (1,952,241
                                                            )




See
accompanying notes to consolidated financial statements




F-5




SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2009
                    
                    
                    2008(Restated)
                    
                    
                    (Restated)Cash
      flows from operating activitiesNet
      income
                    
                    $
                    27,978,900
                    
                    
                    $
                    9,058,769Depreciation
                    
                    
                    1,114,264
                    
                    
                    
                    855,729Amortization
                    
                    
                    1,103,231
                    
                    
                    
                    809,192Loss
      on disposal of property, plant and equipment
                    
                    
                    10,038
                    
                    
                    
                    -Provision
      for doubtful debts
                    
                    
                    9,549
                    
                    
                    
                    -Impairment
      on investment
                    
                    
                    4,831,386
                    
                    
                    
                    -Changes
      in fair value of warrants
                    
                    
                    (29,093,546
                    )
                    
                    
                    -Adjustments
      to reconcile net incometo
      net cash provided by operating activities:Trade
      receivables, net
                    
                    
                    (585,369
                    )
                    
                    
                    (1,305,806
                    )Inventories
                    
                    
                    2,334
                    
                    
                    
                    224,124Advances
      to suppliers
                    
                    
                    (213,599
                    )
                    
                    
                    858,369Prepayments
                    
                    
                    (127,319
                    )
                    
                    
                    131,668Tender
      deposits
                    
                    
                    (9,030
                    )
                    
                    
                    26,649Travel
      advances to shareholders
                    
                    
                    (32,525
                    )
                    
                    
                    (5,750
                    )Advances
      to employees
                    
                    
                    212,893
                    
                    
                    
                    152,944Other
      receivables
                    
                    
                    646,122
                    
                    
                    
                    -Accounts
      payable
                    
                    
                    210,964
                    
                    
                    
                    (197,352
                    )Income
      tax payable
                    
                    
                    (365,188
                    )
                    
                    
                    457,219Turnover
      and other taxes
                    
                    
                    (224,376
                    )
                    
                    
                    249,400Expected
      warranty liabilities
                    
                    
                    (17,894
                    )
                    
                    
                    (8,533
                    )Customer
      deposits
                    
                    
                    303,929
                    
                    
                    
                    (218,802
                    )Accrued
      liabilities
                    
                    
                    339,679
                    
                    
                    
                    (42,702
                    )Other
      payables
                    
                    
                    -
                    
                    
                    
                    (22,870
                    )Net
      cash provided by operating activities
                    
                    $
                    6,094,443
                    
                    
                    $
                    11,022,248Cash
      flows from investing activitiesDecrease
      in restricted cash
                    
                    $
                    95,191
                    
                    
                    $
                    112,683Repayment
      from a director
                    
                    
                    -
                    
                    
                    
                    1,080,457Purchase
      of plant and equipment
                    
                    
                    (3,905,935
                    )
                    
                    
                    (1,172,432
                    )Purchase
      of intangibles
                    
                    
                    (8,592,797
                    )
                    
                    
                    -Deposit
      for technology-based designed
                    
                    
                    (4,316,306
                    )
                    
                    
                    (1,723,593
                    )Deposit
      for the acquisition of subsidiary
                    
                    
                    -
                    
                    
                    
                    (7,725,445Net
      cash used in investing activities
                    
                    $
                    (16,719,847
                    )
                    
                    $
                    (9,428,330
                    )Cash
      flows from financing activitiesProceeds
      from exercise of Series J ConvertiblePreferred
      Stock
                    
                    $
                    -
                    
                    
                    $
                    6,580,000Net
      cash provided by financing activities
                    
                    $
                    -
                    
                    
                    $
                    6,580,000




F-6




SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2009
                  
                  
                  2008Net
      in cash and cash equivalents (used)/sourced
                  
                  $
                  (10,625,404
                  )
                  
                  $
                  8,173,918Effect
      of foreign currency translation oncash
      and cash equivalents
                  
                  
                  152,703
                  
                  
                  
                  1,195,923Cash
      and cash equivalents–beginning of year
                  
                  
                  15,189,941
                  
                  
                  
                  5,820,100Cash
      and cash equivalents–end of year
                  
                  $
                  4,717,240
                  
                  
                  $
                  15,189,941




2009
                  
                  
                  2008Supplementary
      cash flow information:Tax
      paid
                  
                  $
                  1,134,119
                  
                  
                  $
                  1,269,609Interest
      received
                  
                  
                  55,627
                  
                  
                  
                  66,935Interest
      paid
                  
                  
                  1,727
                  
                  
                  
                  -




SUPPLEMENTAL
NON-CASH DISCLOSURES:





1.
            During
      the years ended December 31, 2009 and 2008, an amount of $1,723,593 and
      nil were transferred from “deposit for the acquisition of technology-based
      design” to “intangible assets”,
respectively.





2.
            During
      the years ended December 31, 2009 and 2008, an amount of $7,725,445 and
      nil were transferred from “deposit for the acquisition of subsidiary” to
      “acquisition of subsidiary, net of cash
  acquisition”.




Regarding
the non-cash disclosures of Liheng acquisition, the balance was transferred to
the following assets, liabilities and statement of incomes:





Cash
      and cash equivalents
                  
                  $
                  73,193Property,
      plant and equipment
                  
                  
                  955,208Land
      use rights
                  
                  
                  1,133,323Other
      receivables
                  
                  
                  1,127,949Turnover
      and other taxes
                  
                  
                  28,477Other
      payables
                  
                  
                  (424,091
                  )Impairment
      on investment
                  
                  
                  4,831,386$
                  7,725,445





See
accompanying notes to consolidated financial statements




F-7





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





Sunway
Global Inc. (the “Company”) was incorporated in the state of Nevada on October
18, 1971. Prior to June 6, 2007 the company has only nominal operations and
assets.





On June
6, 2007, the Company executed a reverse-merger with Rise Elite International
Limited (“Rise Elite (BVI)”) by an exchange of shares whereby the Company issued
210,886 shares of the Company’s Series A Convertible Preferred Stock, par value
$0.0000001 per share in exchange for all shares in World Through Limited, a
British Virgin Islands corporation (“World Through (BVI)”).





World
Through (BVI) holds Sunway World Through Technology (Daqing) Co Ltd (“SWT” or
“WFOE”), which entered into a series of agreements with Daqing Sunway Technology
Co., Ltd (“Sunway”) including but not limited to management, loan, purchase
option, consignment, trademark licensing, non-competition, etc. As a result of
entering the abovementioned agreements, WFOE  deems to control Sunway
as a Variable Interest Entity as required by FASB Interpretation No. 46 (revised
December 2003) Consolidated of Variable Interest Entities, an
Interpretation of ARB No. 51 since SWT was the primary beneficiary. On
March 16, 2008, SWT acquired Beijing Sunway New-force Medical Treatment Tech
Co., Ltd (“Beijing Sunway”) as its wholly-owned subsidiary.  Beijing
Sunway was incorporated in Beijing, PRC on May 24, 2007.





On
January 16, 2009, World Through (BVI) acquired Qingdao Liheng Textiles Co Ltd
(“Liheng”) as its wholly-owned subsidiary. Liheng was incorporated in PRC on
June 6, 2003.





The
Company, through its subsidiaries and Sunway, (hereinafter, collectively
referred to as “the Group”), is now in the business of designing, manufacturing
and selling logistic transport systems and medicine dispensing systems and
equipment.





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Method
      of accounting





The
Company maintains its general ledger and journals with the accrual method
accounting for financial reporting purposes.  The financial statements
and notes are representations of management.  Accounting policies
adopted by the Company conform to generally accepted accounting principles in
the United States of America and have been consistently applied in the
presentation of financial statements.


F-8





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)




(b)
            Principles
      of consolidation





The
consolidated financial statements, which include the Company and its
subsidiaries, are complied in accordance with generally accepted accounting
principles in the United States of America. All significant inter-company
accounts and transactions have been eliminated. The consolidated financial
statements include 100% of assets, liabilities, and net income or loss of those
wholly-owned subsidiaries.





The
Company owned five subsidiaries since its reverse-merger on June 6, 2007. The
detailed identities of the consolidating subsidiaries would have been as
follows:




Nameofsubsidiaries
                        
                        Placeofincorporation
                        
                        AttributableinterestWorld
      Through Ltd
                        
                        British
      Virgin Islands
                        
                        
                        100
                        %Sunway
      World Through Technology (Daqing) Co Ltd
                        
                        PRC
                        
                        
                        100
                        %*Daqing
      Sunway Technology Co Ltd
                        
                        PRC
                        
                        
                        100
                        %Beijing
      Sunway New-force Medical Treatment Tech Co., Ltd
                        
                        PRC
                        
                        
                        100
                        %Qingdao
      Liheng Textiles Co Ltd
                        
                        PRC
                        
                        
                        100
                        %*
      Note: Deemed variable interest entity





(c)
            Use
      of estimates





The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America 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 periods.  Management makes these estimates using
the best information available at the time the estimates are made; however
actual results could differ materially from those estimates.





(d)
            Economic
      and political risks





The
Group’s operations are conducted in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.





The
Group’s operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Group’s results may be adversely affected by changes in the political and social
conditions in the PRC, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion,
remittances abroad, and rates and methods of taxation, among other
things.


F-9





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(e)
            Intangibles





Intangibles
are stated at cost less accumulated amortisation.  Amortisation is
provided over the respective useful lives, using the straight-line
method.  Estimated useful lives of the intangibles are as
follows:




Land
      use rights
              Over
      the lease termsTechnology-based
      design
              10
      years





(f)
            Property,
      plant and equipment





Property,
plant and equipment are carried at cost less accumulated
depreciation.  Depreciation is provided over their estimated useful
lives, using the straight-line method. Estimated useful lives of the property,
plant and equipment are as follows:





Buildings
              20
      yearsMachinery
      and equipment
              6
      yearsMoldings
              10
      yearsComputer
      software
              3 -
      10 yearsOffice
      equipment and motor vehicles
              6 -
      10 years





The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income.





(g)
            Maintenance
      and repairs





The cost
of maintenance and repairs is charged to income as incurred, whereas significant
renewals and betterments are capitalized.





(h)
            Accounting
      for the impairment of long-lived
assets





The Group
periodically evaluates the carrying value of long-lived assets to be held and
used, including intangible assets subject to amortization, when events and
circumstances warrant such a review, pursuant to the guidelines established in
FASB ASC 360. The carrying value of a long-lived asset is considered impaired
when the anticipated undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that event, a loss is
recognised based on the amount by which the carrying value exceeds the fair
market value of the long-lived asset. Fair market value is determined primarily
using the anticipated cash flows discounted at a rate commensurate with the risk
involved. Losses on long-lived assets to be disposed of are determined in a
similar manner, except that fair market values are reduced for the cost to
dispose.





For the
years ended December 31, 2009 and 2008, impairment loss was $4,831,386 and nil
respectively.


F-10




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(i)
            Inventories





Inventories
consist of finished goods and raw materials, and stated at the lower of cost or
market value. Substantially all inventory costs are determined using the
weighted average basis. Finished goods are comprised of direct materials, direct
labor and an appropriate proportion of overhead. The management regularly
evaluates the composition of its inventory to identify slow-moving and obsolete
inventories to determine if additional write-downs are required.




(j)
            Trade
      receivables





Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An allowance for doubtful accounts is
maintained for all customers based on a variety of factors, including the length
of time the receivables are past due, significant one-time events and historical
experience.  Bad debts are written off as incurred.  During
the reporting years, there were no bad debts.





Outstanding
accounts balances are reviewed individually for collectability. The Company do
not charge any interest income on trade receivables.  Accounts
balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. To
date, the Company has not charged off any balances as it has yet to exhaust all
means of collection.





(k)
            Cash
      and cash equivalents





The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The Company maintains
bank accounts in the PRC and Hong Kong. The Company does not maintain any bank
accounts in the United States of America.




2009
                          
                          
                          2008Bank
      of Communications, Branch of DaqingCity
      Economic Zone
                          
                          $
                          4,402,294
                          
                          
                          $
                          9,606,188Daqing
      City Commercial Bank
                          
                          
                          -
                          
                          
                          
                          4,536,667China
      Construction Bank, Beijing Branch
                          
                          
                          147,273
                          
                          
                          
                          -Qingdao
      bank
                          
                          
                          16,111
                          
                          
                          
                          -Agricultural
      Bank of China
                          
                          
                          100,025
                          
                          
                          
                          930,332HSBC
                          
                          
                          35,106
                          
                          
                          
                          109,151Cash
      on hand
                          
                          
                          16,431
                          
                          
                          
                          7,603$
                          4,717,240
                          
                          
                          $
                          15,189,941




(l)
            Restricted
      cash





Restricted
cash are pledged deposits in an escrow account for investor relations
purpose.





(m)
            Revenue
      recognition


Revenue
represents the invoiced value of goods sold recognized upon the delivery of
goods to customers. Revenue is recognized when all of the following criteria are
met:


-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


- The
seller’s price to the buyer is fixed or determinable; and


-
Collection is reasonably assured.


F-11




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)




(m)
            Revenue
      recognition (Continued)





Contract
revenues are recognized when the manufacturing and installation of the medical
equipments is completed. Generally, the company receives total contract sum from
clients in 4 installments. Deposit of 30% is received from client when the
contract is signed. Second payment of 30% is received when the project
commenced. Third payment of 35% is received after the construction is completed
within 4 months. The final sum of the remaining portion is received after the
construction is completed until one year.





(n)
            Expected
      warranty liabilities





The
Company warrants its products against defects in design, materials, and
workmanship generally for one year. A provision for estimated future costs
relating to warranty expense are recorded when products are shipped, and the
provision is based upon our own historical claim experience.





(o)
            Cost
      of sales





Cost of
sales consists primarily of material costs, employee compensation, depreciation
and related expenses, which are directly attributable to the production of
products.  All inbound freight charges, purchasing and receiving
costs, inspection costs, warehousing costs, internal transfer costs, and the
other costs of distribution network are also included.  Write-down of
inventory to lower of cost or market is also recorded in cost of
revenues.





(p)
            Leases





The Group
did not have lease which met the criteria of capital lease. Leases which do not
qualify as capital lease are classified as operating lease. Operating lease
rental payment included in general and administrative expenses were $88,693 and
$86,507 and cost of sales were $34,526 and $28,825 for the years ended December
31, 2009 and 2008 respectively.




(q)
            Advertising





The Group
expensed all advertising costs as incurred.  Advertising expenses
included in selling expenses were $585 and $47,453 for the years ended December
31, 2009 and 2008 respectively.




(r)
            Shipping
      and handling





All
shipping and handling are expensed as incurred. Shipping and handling expenses
included in selling expenses were $43,782 and $29,217 for the years ended
December 31, 2009 and 2008 respectively.





(s)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $203,876
and $36,138 for the years ended December 31, 2009 and 2008
respectively.


F-12




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(t)
            Retirement
      benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit expenses included in general and administrative
expenses were $140,663 and $18,485 for the years ended December 31, 2009 and
2008 respectively.




(u)
            Income
      taxes





The Group
accounts for income tax using an asset and liability approach and allows for
recognition of deferred tax benefits in future years.  Under the asset
and liability approach, deferred taxes are provided for the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.  A valuation allowance is provided for deferred tax assets
if it is more likely than not these items will either expire before the Group is
able to realize their benefits, or that future realization is
uncertain.





(v)
            Foreign
      currency translation





The
accompanying financial statements are presented in United States dollars. The
reporting currency of the Group is the U.S. dollar ($). SWT, Sunway, Beijing
Sunway and Liheng use its local currency, Renminbi (RMB), as its functional
currency. Results of operations and cash flow are translated at average exchange
rates during the period, and assets and liabilities are translated at the end of
period exchange rates. Translation adjustments resulting from this process are
included in accumulated other comprehensive income in stockholders’ equity.
Transaction gains and losses that arise from exchange rate fluctuations from
transactions denominated in a currency other than the functional currency are
included in the results of operations as incurred.





The PRC
government imposes significant exchange restrictions on fund transfers out of
the PRC that are not related to business operations. These restrictions have not
had a material impact on the Group because it has not engaged in any significant
transactions that are subject to the restrictions.





The
exchange rates used to translate amounts in RMB into USD for the purposes of
preparing the consolidated financial statements were as follows:





2009
                  
                  
                  2008Year
      end RMB : USD exchange rate
                  
                  
                  6.8372
                  
                  
                  
                  6.8542Average
      yearly RMB : USD exchange rate
                  
                  
                  6.8409
                  
                  
                  
                  6.9622





The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have
been, or could be, converted into USD at the rates used in
translation.


F-13




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(w)
            Statutory
      reserves





As
stipulated by the PRC’s Company Law and as provided in the SWT, Sunway, Beijing
Sunway and Liheng’s Articles of Association, SWT, Sunway, Beijing Sunway and
Liheng’s net income after taxation can only be distributed as dividends after
appropriation has been made for the following:





(i)
            Making
      up cumulative prior years’ losses, if
any;


(ii)
            Allocations
      to the “Statutory surplus reserve” of at least 10% of income after tax, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company’s registered capital, which is restricted
      for set off against losses, expansion of production and operation or
      increase in registered capital;





(iii)
            Allocations
      of 5-10% of income after tax, as determined under PRC accounting rules and
      regulations, to the Company’s “Statutory common welfare fund”, which is
      restricted for capital expenditure for the collective benefits of the
      Company’s employees; and





(iv)
            Allocations
      to the discretionary surplus reserve, if approved in the shareholders’
      general meeting.





(x)
            Comprehensive
      income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other
disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same prominence as
other financial statements. The Group’s current component of other comprehensive
income is the foreign currency translation adjustment.





(y)
            Reclassification





Certain
amounts in the prior year have been reclassified to conform to the current
year’s presentation.


F-14




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(z)
            Recent
      accounting pronouncements
(Continued)





ASC 105,
Generally Accepted Accounting Principles (“ASC 105”) (formerly Statement of
Financial Accounting Standards No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162) reorganized by topic existing accounting
and reporting guidance issued by the Financial Accounting Standards Board
(“FASB”) into a single source of authoritative generally accepted accounting
principles (“GAAP”) to be applied by nongovernmental entities. All guidance
contained in the Accounting Standards Codification (“ASC”) carries an equal
level of authority. Rules and interpretive releases of the Securities and
Exchange Commission (“SEC”) under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. Accordingly, all other
accounting literature will be deemed “non-authoritative”. ASC 105 is effective
on a prospective basis for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company has implemented the
guidance included in ASC 105 as of July 1, 2009. The implementation of this
guidance changed the Company’s references to GAAP authoritative guidance but did
not impact the Company’s financial position or results of
operations.





ASC 805,
Business Combinations (“ASC 805”) (formerly included under Statement of
Financial Accounting Standards No. 141 (revised 2007), Business Combinations)
contains guidance that was issued by the FASB in December 2007. It requires the
acquiring entity in a business combination to recognize all assets acquired
and liabilities assumed in a transaction at the acquisition-date fair value,
with certain exceptions. Additionally, the guidance requires changes to the
accounting treatment of acquisition related items, including, among other items,
transaction costs, contingent consideration, restructuring costs,
indemnification assets and tax benefits. ASC 805 also provides for a substantial
number of new disclosure requirements. ASC 805 also contains guidance that was
formerly issued as FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies
which was intended to provide additional guidance clarifying application issues
regarding initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising from contingencies
in a business combination. ASC 805 was effective for business combinations
initiated on or after the first annual reporting period beginning after December
15, 2008. The Company implemented this guidance effective January 1, 2009.
Implementing this guidance did not have an effect on the Company’s financial
position or results of operations; however it will likely have an impact on the
Company’s accounting for future business combinations, but the effect is
dependent upon acquisitions, if any, that are made in the future.





In June
2009, FASB issued Statement of Financial Accounting Standards No. 167,
Amendments to FASB Interpretation No. 46(R) (“Statement No. 167”). Statement No.
167 amends FASB Interpretation No. 46R, Consolidation of Variable Interest
Entities an interpretation of ARB No. 51 (“FIN 46R”) to require an analysis to
determine whether a company has a controlling financial interest in a variable
interest entity. This analysis identifies the primary beneficiary of a variable
interest entity as the enterprise that has a) the power to direct the activities
of a variable interest entity that most significantly impact the entity’s
economic performance and b) the obligation to absorb losses of the entity that
could potentially be significant to the variable interest entity or the right to
receive benefits from the entity that could potentially be significant to the
variable interest entity. The statement requires an ongoing assessment of
whether a company is the primary beneficiary of a variable interest entity when
the holders of the entity, as a group, lose power, through voting or similar
rights, to direct the actions that most significantly affect the entity’s
economic performance. This statement also enhances disclosures about a company’s
involvement in variable interest entities. Statement No. 167 is effective as of
the beginning of the first annual reporting period that begins after November
15, 2009. Although Statement No. 167 has not been incorporated into the
Codification, in accordance with ASC 105, the standard shall remain
authoritative until it is integrated. The Company does not expect the adoption
of Statement No. 167 to have a material impact on its financial position or
results of operations.


F-15




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)




2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(z)
            Recent
      accounting pronouncements
(Continued)





ASC 855,
Subsequent Events (“ASC 855”) (formerly Statement of Financial Accounting
Standards No. 165, Subsequent Events) includes guidance that was issued by the
FASB in May 2009, and is consistent with current auditing standards in defining
a subsequent event. Additionally, the guidance provides for disclosure regarding
the existence and timing of a company’s evaluation of its subsequent events. ASC
855 defines two types of subsequent events, “recognized” and
“non-recognized”. Recognized subsequent events provide additional evidence about
conditions that existed at the date of the balance sheet and are required to be
reflected in the financial statements. Non-recognized subsequent events provide
evidence about conditions that did not exist at the date of the balance sheet
but arose after that date and, therefore; are not required to be reflected in
the financial statements. However, certain non-recognized subsequent events may
require disclosure to prevent the financial statements from being misleading.
This guidance was effective prospectively for interim or annual financial
periods ending after June 15, 2009. The Company implemented the guidance
included in ASC 855 as of July 1, 2009. The effect of implementing this guidance
was not material to the Company’s financial position or results of
operations.





In August
2009, the FASB issued ASC Update No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820): Measuring Liabilities at Fair Value (“ASC Update No.
2009-05”). This update amends ASC 820, Fair Value Measurements and Disclosures
and provides further guidance on measuring the fair value of a liability. The
guidance establishes the types of valuation techniques to be used to value a
liability when a quoted market price in an active market for the identical
liability is not available, such as the use of an identical or similar liability
when traded as an asset. The guidance also further clarifies that a quoted price
in an active market for the identical liability at the measurement date and the
quoted price for the identical liability when traded as an asset in an active
market when no adjustments to the quoted price of the asset are required are
both Level 1 fair value measurements. If adjustments are required to be applied
to the quoted price, it results in a level 2 or 3 fair value measurement. The
guidance provided in the update is effective for the first reporting period
(including interim periods) beginning after issuance. The effect of implementing
of ASC Update No. 2009-05 was not material to the Company’s financial position
or results of operations.





In
September 2009, the FASB issued ASC Update No. 2009-12, Fair Value Measurements
and Disclosures (Topic 820): Investments in Certain Entities that Calculate Net
Asset Value per Share (or Its Equivalent) (“ASC Update No. 2009-12”). This
update sets forth guidance on using the net asset value per share provided by an
investee to estimate the fair value of an alternative investment. Specifically,
the update permits a reporting entity to measure the fair value of this type of
investment on the basis of the net asset value per share of the investment (or
its equivalent) if all or substantially all of the underlying investments used
in the calculation of the net asset value is consistent with ASC 820. The update
also requires additional disclosures by each major category of investment,
including, but not limited to, fair value of underlying investments in the major
category, significant investment strategies, redemption restrictions, and
unfunded commitments related to investments in the major category. The
amendments in this update are effective for interim and annual periods ending
after December 15, 2009 with early application permitted. The effect of
implementing of ASC Update No. 2009-12 was not material to the Company’s
financial position or results of operations.


F-16




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)




2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(z)
            Recent
      accounting pronouncements
(Continued)





In June
2009, the FASB issued Statement of Financial Accounting Standards No. 166,
Accounting for Transfers of Financial Assets an amendment of FASB Statement No.
140 (“Statement No. 166”). Statement No. 166 revises FASB Statement of Financial
Accounting Standards No. 140, Accounting for Transfers and Extinguishment of
Liabilities a replacement of FASB Statement 125 (“Statement No. 140”) and
requires additional disclosures about transfers of financial assets, including
securitization transactions, and any continuing exposure to the risks related to
transferred financial assets. It also eliminates the concept of a “qualifying
special-purpose entity”, changes the requirements for derecognizing financial
assets, and enhances disclosure requirements. Statement No. 166 is effective
prospectively, for annual periods beginning after November 15, 2009, and interim
and annual periods thereafter. Although Statement No. 166 has not been
incorporated into the Codification, in accordance with ASC 105, the standard
shall remain authoritative until it is integrated. The Company does not expect
the adoption of Statement No. 166 will have a material impact on its financial
position or results of operations.





In June
2008, Emerging Issues Task Force Issue No. 07-5 (EITF 07-5) (ASC 820) was
issued.  The adoption of EITF 07-5 will affect issuers accounting for
warrants and many convertible instruments with provisions that protect holders
from declines in stock prices (“down-round provisions).  Warrants with
such provisions will no longer be recorded in equity. The Company adopted the
provision of EITF 07-5 as of January 1, 2009 (see Note 12).





In
January 2010, the Financial Accounting Standards Board (“FASB”) issued an
accounting standard update, Fair Value Measurements and Disclosures (Topic 820),
Improving Disclosures about Fair Value Measurements. The Update would affect all
entities that are required to make disclosures about recurring and nonrecurring
fair value measurements. The Board concluded that users will benefit from
improved disclosures in this Update and that the benefits of the increased
transparency in financial reporting will outweigh the costs of complying with
the new requirements. The new disclosures and clarifications of existing
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the disclosures about purchases, sales,
issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after
December 30, 2010, and for interim periods within those fiscal years. We are
currently evaluating the impact this update will have on our financial
statements.





In
January 2010,  the Financial Accounting Standards Board (“FASB”)
issued an accounting standard update to address implementation issues related to
the changes in ownership provisions in the Consolidation—Overall Subtopic
(Subtopic 810-10) of the FASB Accounting Standards CodificationTM, originally
issued as FASB Statement No. 160, Noncontrolling Interests in Consolidated
Financial Statements. Subtopic 810-10 establishes the accounting and reporting
guidance for noncontrolling interests and changes in ownership interests of a
subsidiary. An entity is required to deconsolidate a subsidiary when the entity
ceases to have a controlling financial interest in the subsidiary. Upon
deconsolidation of a subsidiary, an entity recognizes a gain or loss on the
transaction and measures any retained investment in the subsidiary at fair
value. The gain or loss includes any gain or loss associated with the difference
between the fair value of the retained investment in the subsidiary and its
carrying amount at the date the subsidiary is deconsolidated. In contrast, an
entity is required to account for a decrease in its ownership interest of a
subsidiary that does not result in a change of control of the subsidiary as
an equity transaction. We are currently evaluating the impact this update
will have on our financial statements.


F-17




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





3.
            CONCENTRATIONS
      OF CREDIT RISK AND MAJOR CUSTOMERS





Financial
instruments which potentially expose the Group to concentrations of credit risk,
consists of cash and trade receivables as of December 31, 2009 and 2008. The
Group performs ongoing evaluations of its cash position and credit evaluations
to ensure collections and minimize losses.





As of
December 31, 2009 and 2008, the Group’s bank deposits were all placed with banks
in the PRC and Hong Kong where there is currently no rule or regulation in place
for obligatory insurance of bank accounts.





For the
years ended December 31, 2009 and 2008, the group’s sales were generated from
the PRC and Western Europe. Trade receivables as of December 31, 2009 and
2008 arose in the PRC and overseas.





The
maximum amount of loss due to credit risk that the group would incur if the
counter parties to the financial instruments failed to perform is represented
the carrying amount of each financial asset in the balance sheet.





Normally
the Group does not obtain collateral from customers or debtors.





Details
of the customers accounting for 10% or more of the Group’s revenue are as
follows:





2009
                
                
                2008Customer
      A
                
                $
                1,002,673
                
                
                
                1,915,343Customer
      B
                
                
                1,064,612
                
                
                
                2,076,212Customer
      D
                
                
                926,048
                
                
                
                1,910,316Customer
      E
                
                
                1,187,997
                
                
                
                2,076,212Customer
      F
                
                
                1,213,578
                
                
                
                2,287,352





Details
of customers accounting for 10% or more of the Group’s trade receivables are as
follows:





2009
                
                
                2008Customer
      A
                
                $
                347,195
                
                
                $
                162,505Customer
      B
                
                
                373,223
                
                
                
                325,129Customer
      C
                
                
                310,245
                
                
                
                387,263Customer
      D
                
                
                421,177
                
                
                
                396,822Customer
      E
                
                
                214,417
                
                
                
                499,583Customer
      F
                
                
                287,106
                
                
                
                371,218




F-18




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





4.
            AMOUNT
      DUE FROM A RELATED COMPANY





Amount
due from Rise Elite International Ltd (Rise Elite), a related company where Mr.
Liu Bo, the director of the Group is a shareholder. The amount is unsecured,
interest free and repayable on demand.  The amount is held by Rise
Elite for the initial setup expenses.





5.
            TRADE
      RECEIVABLES, NET





Trade
receivables comprise the followings:





2009
                          
                          
                          2008Trade
      receivables, gross
                          
                          $
                          3,555,378
                          
                          
                          $
                          2,962,333Provision
      for doubtful debts
                          
                          
                          (17,983
                          )
                          
                          
                          (8,414
                          )Trade
      receivables, net
                          
                          $
                          3,537,395
                          
                          
                          $
                          2,953,919





All of
the above trade receivables are due within one year of aging.





An
analysis of the allowance for doubtful accounts for the years ended December 31,
2009 and 2008 is as follows:




2009
                              
                              
                              2008Balance
      at beginning of year
                              
                              $
                              8,414
                              
                              
                              $
                              7,884Addition
      of the provision
                              
                              
                              9,549
                              
                              
                              
                              -Foreign
      exchange adjustment
                              
                              
                              20
                              
                              
                              
                              530Balance
      at end of year
                              
                              $
                              17,983
                              
                              
                              $
                              8,414





Allowance
was made when collection of the full amount is no longer
probable.  Management reviews and adjusts this allowance periodically
based on historical experience, current economic climate as well as its
evaluation of the collectability of outstanding accounts. The Group evaluates
the credit risks of its customers utilizing historical data and estimates of
future performance.


F-19




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





6.
            TRAVEL
      ADVANCES TO SHAREHOLDERS





Travel
advances were made to shareholders. These shareholders are also the management
of the company and these advances are used to enable their execution of
operational duties such as marketing and sales promotion. The following table
provides the details of the outstanding accounts. They are unsecured, interest
free and repayable on demand.





2009
                            
                            
                            2008Bo
      Liu
                            
                            $
                            28,015
                            
                            
                            $
                            23,495Deli
      Liang
                            
                            
                            43,357
                            
                            
                            
                            15,238$
                            71,372
                            
                            
                            $
                            38,733




7.
            ADVANCES
      TO EMPLOYEES





Advances
to employees are advances for purchases and travelling. They are unsecured,
interest free and repayable on demand. The following table provides the
rollforward of the activity in the advances to employees:





2009
                    
                    
                    2008Beginning
      balance, January 1
                    
                    $
                    429,804
                    
                    
                    $
                    548,364Add:
      Advanced during the year
                    
                    
                    610,677
                    
                    
                    
                    659,177Less:
      Transferred to income statement
                    
                    
                    (418,288
                    )
                    
                    
                    (406,262
                    )Recollected
      from employees
                    
                    
                    (404,328
                    )
                    
                    
                    (371,475
                    )Ending
      balance, December 31
                    
                    $
                    217,865
                    
                    
                    $
                    429,804




8.
            INVENTORIES





Inventories
comprise the followings:





2009
                            
                            
                            2008Finished
      goods
                            
                            $
                            241,831
                            
                            
                            $
                            218,448Work
      in process
                            
                            
                            26,152
                            
                            
                            
                            188,855Raw
      materials
                            
                            
                            321,888
                            
                            
                            
                            183,435$
                            589,871
                            
                            
                            $
                            590,738




F-20




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





9.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net comprise the followings:




2009
                                
                                
                                2008At
      costBuildings
                                
                                $
                                1,848,075
                                
                                
                                $
                                1,447,402Machinery
      and equipment
                                
                                
                                1,087,332
                                
                                
                                
                                1,116,941Moldings
                                
                                
                                8,966,572
                                
                                
                                
                                4,155,598Computer
      software
                                
                                
                                2,101,507
                                
                                
                                
                                2,073,181Office
      equipment and motor vehicles
                                
                                
                                97,728
                                
                                
                                
                                288,736$
                                14,101,214
                                
                                
                                $
                                9,081,858Less:
      accumulated depreciation
                                
                                
                                (4,678,587
                                )
                                
                                
                                (4,011,987
                                )$
                                9,422,627
                                
                                
                                $
                                5,069,871Construction
      in progress
                                
                                
                                1,085,788
                                
                                
                                
                                -$
                                10,508,415
                                
                                
                                $
                                5,069,871





Construction
in progress represents direct costs of construction incurred for factory
infrastructure. Capitalization of these costs ceases and the construction in
progress is transferred to property, plant and equipment when substantially all
the activities necessary to prepare the assets for their intended use are
completed. No depreciation is provided until it is completed and ready for
intended use. Capital commitments in respect of these projects are $2,109,599 as
at December 31, 2009.





Depreciation
expenses are included in the statement of income as follows:





2009
                    
                    
                    2008Cost
      of net revenues
                    
                    $
                    963,728
                    
                    
                    $
                    786,844General
      and administrative expenses
                    
                    
                    107,373
                    
                    
                    
                    68,885Selling
      expenses
                    
                    
                    43,163
                    
                    
                    
                    -Total
      depreciation expenses
                    
                    $
                    1,114,264
                    
                    
                    $
                    855,729




F-21




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





10.
            INTANGIBLES,
      NET





Details
of intangibles are as follows:




2009
                        
                        
                        2008Land
      use rights, at cost
                        
                        $
                        2,502,082
                        
                        
                        $
                        1,354,308Technology-based
      design, at cost
                        
                        
                        14,811,984
                        
                        
                        
                        6,320,577$
                        17,314,066
                        
                        
                        $
                        7,674,885Less:
      accumulated amortization
                        
                        
                        (2,204,078
                        )
                        
                        
                        (1,098,116
                        )Total
      intangibles, net
                        
                        $
                        15,109,988
                        
                        
                        $
                        6,576,769





During
the year of 2009, the Group acquired the rights to use a parcel of land totaling
9,082 square meters, for a consideration of $89,552 (RMB613,035), located at
Qingdao Hi-Tech Industry Development Zone, Qingdao, Shandong in the People’s
Republic of China for a term of 48 years from November 3, 2006 to July 24,
2053.  The Group acquired secondly the rights to use a parcel of land
totaling 10,841 square meters, for a consideration of $106,709 (RMB730,485),
located at Qingdao Hi-Tech Industry Development Zone, Qingdao, Shandong in the
People’s Republic of China. Both lands have been used to build the Liheng’s
facility. The certificate of land use rights was under processing, no lease
terms can be determined yet.





During
the year of 2009, the Group acquired the design and internal device control of
medicine dispensing and packing machine, for a consideration of $6,988,882
(RMB47,300,000).





Amortization
expense included in the general and administrative expenses for the years ended
2009 and 2008 were $1,103,231 and $809,192 respectively.


F-22




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





11.
            EXPECTED
      WARRANTY LIABILITIES





An
analysis of the expected warranty liabilities for the years ended December 31,
2009 and 2008 is as follows:





2009
                          
                          
                          2008Balance
      at beginning of year
                          
                          $
                          50,396
                          
                          
                          $
                          55,351Warranty
      expense for the year
                          
                          
                          (17,903
                          )
                          
                          
                          (8,533
                          )Foreign
      currency difference
                          
                          
                          125
                          
                          
                          
                          3,578Balance
      at end of year
                          
                          $
                          32,618
                          
                          
                          $
                          50,396




12.
            SERIES
      B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED
  WARRANTS





On June
5, 2007, the Company entered into a purchase agreement, whereby the company
agreed to sell 165,432 shares of the Company’s Series B Preferred shares and
various stock purchase warrants to purchase up to 18,686,054 shares of the
Company’s common shares. The exercise price, expiration date and number of share
eligible to be purchased with the warrants is summary in the following
table:




Investment
                      Amount
                    
                    Preferred
                      B
                    
                    AWarrant
                    
                    BWarrant
                    
                    JWarrant
                    
                    CWarrant
                    
                    DWarrantVision
      Opportunity
                      Master
      Fund, Ltd.
                    
                    
                    6,500,000
                    
                    160,494
                    
                    
                    4,814,815
                    
                    2,407,407
                    
                    
                    4,362,416
                    
                    4,362,416
                    
                    
                    2,181,208Columbia
      China
                      Capital
      Group, Inc.
                    
                    
                    200,000
                    
                    4,938
                    
                    
                    148,148
                    
                    74,074
                    
                    
                    134,228
                    
                    134,228
                    
                    
                    67,114




SeriesofWarrant
                
                Numberofshares
                
                
                ExercisePrice
                
                ExpiryDateSeries
      A
                
                
                4,962,963
                
                
                $
                1.76
                
                6
      /5 /2012Series
      B
                
                
                2,481,481
                
                
                
                2.30
                
                6
      /5 /2012Series
      J
                
                
                4,496,644
                
                
                
                1.49
                
                6
      /5 /2008Series
      C
                
                
                4,496,644
                
                
                
                1.94
                
                6
      /5 /2012Series
      D
                
                
                2,248,322
                
                
                
                2.53
                
                6
      /5 /2012





On June
6, 2007, we issued to Kuhns Brothers, Inc. and its designees an aggregate of
17,646 shares of Series A Preferred and a Series J warrant to purchase an
aggregate of 496,296 shares of common stock of the Company at $1.62 per share in
connection with the reverse merger transaction pursuant to the placement agent
agreement with the Kuhns Brothers, Inc.





The
Series B preferred stock has liquidation rights senior to common stock and
Series A preferred stock.  In the event of a liquidation of the
Company, holders of Series B preferred stock are entitled to receive a
distribution equal to $40.50 per share of Series B preferred stock prior to any
distribution to the holders of common stock and Series A preferred
stock.  The Series B preferred stock is entitled to non-cumulative
dividends only upon declaration of dividends by the Company.  To date,
no dividends have been declared or accrued.  The Series B preferred
stock will participate based on their respective as-if conversion rates if the
Company declares any dividends.  After the Amendment were filed effect
the Reverse Split, each share of Series B preferred stock would be convertible
into 30 shares of Common Stock for $1.35 each, which both may be adjusted from
time to time pursuant to the conversion rate.


F-23




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





12.
            SERIES
      B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED WARRANTS
              (Continued)





The
holders of Series B preferred stock shall be entitled to voting rights by
applicable law and the right to vote together with the holders of Common and
Series A Preferred Stock.





The gross
proceeds of the transaction were $6.7 million. The proceeds from the transaction
were allocated to the Series B preferred stock, warrants and beneficial
conversion feature based on the relative fair value of the
securities.  The value of the Preferred Series B was determined by
reference to the market price of the common shares into which it converts, and
the gross value of the warrants was calculated using the Black –Scholes model
with the following assumptions:  expected life of 1 year, volatility
of 117% and an interest rate of 4.99%.





The
Company recognized a beneficial conversion feature discount on the Series B
preferred stock at its intrinsic value, which was the fair value of the common
stock at the commitment date for the Series B preferred stock investment, less
the effective conversion price but limited to the $6.7 million of proceeds
received from the sale. The Company recognized the $6.7 million beneficial
conversion feature as an increase in paid in capital in the accompanying
consolidated balance sheets on the date of issuance of the Series B preferred
shares since the Series B preferred shares were convertible at the issuance
date.





The
agreement, also provided that if a Registration Statement is not effective
within a certain period of time or the common shares are not listed on the
NASDAQ or American exchange by December 31, 2008, the Company will pay the
holders of the shares a penalty that can range from $67,000 to $670,000 and
certain principal shareholders would issue up to 1,000,000 additional shares to
the purchasers of the Preferred Series B shares.  The company is
accounting for these penalties in accordance with FAS 5 - Accounting for
Contingencies, whereby the penalty will not be recorded as a liability until and
if it is probable the penalty will be incurred. No penalty has been recorded in
the accompanying financial statements for this contingency.





Under the
agreement, Warrant J was expired on June 5, 2008. On that day, Vision
Opportunity Master Fund Ltd. converted all the Warrant J, totally 4,362,416
shares into 4,362,416 of common stock.





On
February 7, 2008, 12 shareholders of Preferred Series A converted 228,530 shares
into 13,711,831 shares of common stock, in which Rise Elite International
Limited, Vision Opportunity Master Fund, Ltd and Kuhns Brothers, Inc converted
210,886, 7,990 and 2,647 shares of Preferred Series A into 12,653,160, 479,400
and 158,820 shares of common stock respectively.





On June
18, 2008, Columbia China Capital Group, Inc. converted 4,938 shares of Preferred
Series B into 148,140 shares of common stock.





On
November 10, 2008, Columbia China Capital Group, Inc. converted the Warrant J,
totally 53,691 shares into 53,691 of common stock.


F-24




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





12.
            SERIES
      B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED WARRANTS
              (Continued)





Effective
January 1, 2009, the company adopted the provisions of Emerging Issues Task
Force Issue No. 07-5 “Determining Whether and Instrument (or Embedded Feature)
is Indexed to an Entity’s Own Stock” (EITF 07-5) (ASC 820).  In
accordance with  EITF 07-5, warrants issued by the company in prior
periods with “down-round protection” for the holder will no longer be classified
in shareholders’ equity but will be classified as a liability and recorded at
current fair value, computed using the Black-Scholes valuation
method.  Changes in the liability from period to period will be
recorded in other income (expense) under the caption “Change in fair value of
warrant liability.” If the warrants are ultimately settled in shares, any gains
or losses on those contracts will continue to be included in earnings. Upon
adoption of EITF 07-5, the company reclassified $65,910,931 from retained
earnings and $3,990,942 from paid in capital – warrants to the “Warrant
Liability.”





For the
fiscal year ended December 31, 2009, the Company recorded a total charge to
earnings of $40,808,327 related to the warrant liability. This amount includes a
charge of $65,910,931 to retaining earnings, an additional paid-in capital of
$3,990,942 and a total benefit of $29,093,546 resulting from changes in the fair
value of the warrant liability during the year.




13.
            INCOME
      TAXES





The
Company, being registered in the State of Nevada and which conducts all of its
business through its subsidiaries incorporated in PRC, is not subject to any
income tax. The subsidiaries are SWT, Sunway, Beijing Sunway, Liheng (see note
1).





SWT,
Sunway, Beijing Sunway and Liheng, being registered in the PRC, are subject to
PRC’s Corporate Income Tax (“CIT”). Under applicable income tax laws and
regulations, an enterprise located in PRC, including the district where our
operations are located, is subject to a rate of 25% for the years ended December
31, 2009 and 2008.





However,
Sunway is a high technology company, and in accordance with the relevant
regulations regarding the favourable tax treatment for high technology
companies, Sunway is entitled to a reduced tax rate of 15% as long as Sunway
located and registered in the high and advance technology development
zone.


F-25




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





13.
            INCOME
      TAXES (Continued)





The Group
uses the asset and liability method, where deferred tax assets and liabilities
are determined based in the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. There are no material temporary differences
and therefore no deferred tax asset or liabilities as at December 31, 2009 and
2008.





A
reconciliation between the income tax computed at the U.S. statutory rate and
the Group’s provision for income tax is as follows:





2009
                
                
                2008U.S.
      statutory rate
                
                
                34
                %
                
                
                34
                %Foreign
      income not recognized in the U.S.
                
                
                (34
                )%
                
                
                (34
                )%PRC
      CIT
                
                
                25
                %
                
                
                25
                %Tax
      holiday
                
                
                (10
                )%
                
                
                (10
                )%Provision
      for income taxes
                
                
                15
                %
                
                
                15
                %





The
provision for income taxes consists of the following:





2009
                
                
                2008Current
      tax - PRC CIT
                
                $
                768,318
                
                
                $
                1,726,828Deferred
      tax provision
                
                
                -
                
                
                
                -Income
      tax expenses
                
                $
                768,318
                
                
                $
                1,726,828





The
Reconciliation of non-taxable and non-tax deductible items is as
follows:





2009
                
                
                2008Income
      before taxation (as per reported)
                
                $
                28,997,256
                
                
                $
                10,785,597Add:
      Impairment on investment
                
                
                4,831,386
                
                
                
                -Other
      non-tax deductible items
                
                
                387,024
                
                
                
                726,589Less:
      Change in fair value of warrants
                
                
                (29,093,546
                )
                
                
                -Adjusted PRC
      EIT taxable income
                
                $
                5,122,120
                
                
                $
                11,512,186




F-26




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





14.
            EARNINGS
      PER SHARE





The
calculation of the basic and diluted earnings per share attributable to the
common stock holders is based on the following data:





2009
                            
                            
                            2008Income:Income
      for the purpose of basic earnings per share
                            
                            $
                            27,978,900
                            
                            
                            $
                            9,058,769Effect
      of dilutive potential common stock
                            
                            
                            -
                            
                            
                            
                            -Income
      for the purpose of dilutive earnings per share
                            
                            $
                            27,978,900
                            
                            
                            $
                            9,058,769Number
      of shares:Weighted
      average number of common stock for the purpose of basic earnings
      per share
                            
                            
                            18,499,736
                            
                            
                            
                            15,127,645Effect
      of dilutive potential common stock-conversion
      of Series Aconvertible
      preferred stock
                            
                            
                            -
                            
                            
                            
                            1,386,169-conversion
      of Series Bconvertible
      preferred stock
                            
                            
                            4,814,820
                            
                            
                            
                            4,883,223-conversion
      of Warrant Series A
                            
                            
                            2,843,862
                            
                            
                            
                            2,349,426-conversion
      of Warrant Series B
                            
                            
                            1,096,842
                            
                            
                            
                            773,773-conversion
      of Warrant Series J
                            
                            
                            -
                            
                            
                            
                            1,917,519-conversion
      of Warrant Series C
                            
                            
                            2,337,659
                            
                            
                            
                            1,886,496-conversion
      of Warrant Series D
                            
                            
                            852,777
                            
                            
                            
                            546,344Weighted
      average number of common stock for the purpose of
      dilutiveearnings per
      share
                            
                            
                            30,445,696
                            
                            
                            
                            28,870,595




F-27




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





15.
            COMMITMENTS
      AND CONTINGENCIES





The Group
has entered into a tenancy agreement for factory expiring through 2010. Total
rental expenses for the year ended December 31, 2009 and 2008 amounted to
$122,700 and $120,426 respectively.





As at
December 31, 2009, the Group’s commitments for minimum lease payments under
these leases for the next one year are as follows:





December
      31,2010
                  
                  $
                  122,7002011
      and thereafter
                  
                  
                  -$
                  122,700





16.
            SEGMENT
      INFORMATION





The Group
currently is engaged in the manufacturing and selling of logistic transport
systems and operating in one segment. The Group has contracted with customers
with four types of product altogether, workstation type A, workstation type B,
workstation type C and Sunway Automatic Dispensing and Packing (“SADP”) and
others .  Workstation types A, B and C are of the same function
but with different product design.





Net
revenues and cost of revenues by product:





2009
                    
                    Workstation
                    
                    
                    Workstation
                    
                    
                    WorkstationTypeA
                    
                    
                    TypeB
                    
                    
                    TypeC
                    
                    
                    SADP
                    
                    
                    Others
                    
                    
                    ConsolidatedNet
      revenues
                    
                    $
                    4,675,932
                    
                    
                    
                    1,643,643
                    
                    
                    
                    5,478,736
                    
                    
                    
                    1,080,597
                    
                    
                    
                    184,214
                    
                    
                    
                    13,063,122Cost
      of net revenues
                    
                    
                    (1,543,299
                    )
                    
                    
                    (517,179
                    )
                    
                    
                    (1,922,638
                    )
                    
                    
                    (566,542
                    )
                    
                    
                    (70,593
                    )
                    
                    
                    (4,620,251
                    )$
                    3,132,633
                    
                    
                    
                    1,126,464
                    
                    
                    
                    3,556,098
                    
                    
                    
                    514,055
                    
                    
                    
                    113,621
                    
                    
                    
                    8,442,871




2008
                  
                  Workstation
                  
                  
                  Workstation
                  
                  
                  WorkstationTypeA
                  
                  
                  TypeB
                  
                  
                  TypeC
                  
                  
                  SADP
                  
                  
                  Others
                  
                  
                  ConsolidatedNet
      revenues
                  
                  $
                  3,634,627
                  
                  
                  $
                  7,596,018
                  
                  
                  $
                  7,213,955
                  
                  
                  $
                  1,364,511
                  
                  
                  $
                  36,771
                  
                  
                  $
                  19,845,882Cost
      of net revenues
                  
                  
                  (849,366
                  )
                  
                  
                  (1,800,162
                  )
                  
                  
                  (2,416,392
                  )
                  
                  
                  (535,640
                  )
                  
                  
                  (32,583
                  )
                  
                  
                  (5,634,143
                  )$
                  2,785,261
                  
                  
                  $
                  5,795,856
                  
                  
                  $
                  4,797,563
                  
                  
                  $
                  828,871
                  
                  
                  $
                  4,188
                  
                  
                  $
                  14,211,739





The
Group’s operations are located in the PRC.  All revenues are derived
from customers in the PRC.  All of the Group’s assets are located in
the PRC.  Sales of workstations are carried out in the
PRC.  Accordingly, no analysis of the Group’s sales and assets by
geographical market is presented.


F-28




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





17.
            FAIR
      VALUE MEASUREMENTS





The
Company has adopted FASB Statement No. 157,Fair Value Measurements (ASC
820), establishes a framework for measuring fair value.  That
framework provides a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value.  The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to
unobservable inputs (level 3 measurements).  The three levels of the
fair value hierarchy under FASB Statement No. 157 are described as
follows:





Level
      1
              
              Inputs
      to the valuation methodology are unadjusted quoted prices for identical
      assets or liabilities in active markets.Level
      2
              
              Inputs
      to the valuation methodology include
                quoted
      prices for similar assets or liabilities in active markets
                quoted
      prices for identical or similar assets or liabilities in inactive
      markets
                inputs
      other than quoted prices that are observable for the asset or
      liability
                inputs
      that are derived principally from or corroborated by observable market
      data by correlation or other means
                If
      the asset or liability has a specified (contractual) term, the level 2
      input must be observable for substantially the full term of the asset or
      liability.Level
      3
              
              Inputs
      to the valuation methodology are unobservable and significant to the fair
      value measurement.





The
asset’s or liability’s fair value measurement level within the fair value
hierarchy is based on the lowest level of any input that is significant to the
fair value measurement.  Valuation techniques used need to maximize
the use of observable inputs and minimize the use of unobservable
inputs.





Following
is a description of the valuation methodologies used for assets and liabilities
measured at fair value.





Warrant
Liability: Valued at fair value using the Black-Scholes valuation method using
the quoted price of the company’s common stock in an active market, volatility
based on the actual market activity of the company’s stock, the remaining life
of the warrant and the risk free interest rate at the date of the financial
statements.


F-29




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





18.
            SUBSEQUENT
      EVENTS





In
preparing these financial statements, the Company evaluated the events and
transactions that occurred from January 1, 2010 through April 14, 2010, the date
these financial statements were issued. The Company has made the required
additional disclosures in reporting periods in which subsequent events
occur.





On March
18, 2010, the Company entered into an agreement with Vision Opportunity Master
Fund, Ltd (“Vision”) to exchange the Series A, B, C and D warrants into two
million (2,000,000) Common Stock of the company (the “Warrant
Exchange”).  The closing of the Warrant Exchange is conditional upon a
closing of a financing with minimum proceeds of $10 million to the
company.





On April
5, 2010, the Company entered into a Security Escrow Agreement as an inducement
to the holders of warrants to enter into the Security Exchange Agreement, the
principal shareholders of the Company have agreed to place an amount of common
stock equal to one million shares into escrow for the benefit of the holders in
the event the Company fails to achieve certain milestones by December 31,
2010.


F-30


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008


(Stated
in US Dollars)





19.
            RESTATEMENTS





During
the course of internal evaluation, our accounting staff discovered some
misstatements in our previously reported financial statements for the year ended
December 31, 2007 that required correction relating to the improper
classification of additional paid in capital items. To correct this error, the
overstated additional paid-in capital was adjusted down by $4,855,640, and
understated retained earnings were adjusted up by $4,855,640.  The
financial statements for the year ended December 31, 2008 and 2009 will have the
same amount of adjustment on additional paid-in capital and retained
earnings.





The 2008
and 2009 changes are shown in the following:





BALANCE
      SHEETSITEMS
                    
                    2008
                    
                    
                    2008Original
                    
                    
                    RestatedSTOCKHOLDERS’
      EQUITYAdditional
      paid-in capital
                    
                    
                    22,679,965
                    
                    
                    
                    17,824,325Statutory
      reserves
                    
                    
                    2,127,978
                    
                    
                    
                    2,127,978Retained
      earnings
                    
                    
                    12,247,049
                    
                    
                    
                    17,102,689Accumulated
      other comprehensive income
                    
                    
                    2,844,190
                    
                    
                    
                    2,844,190$
                    39,899,185
                    
                    
                    $
                    39,899,185TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
                    $
                    41,365,854
                    
                    
                    $
                    41,365,854





As a
result of the restatement of the consolidated balance sheet as of December 31,
2007 that has carryover effect to December 31, 2008, additional paid-in capital
decreased from $22,679,965 to $17,824,325. The retained earnings increased from
$12,247,049 to $17,102,689. The assets, liabilities and total stockholders’
equity have no changes.





BALANCE
      SHEETSITEMS
                    
                    2009
                    
                    
                    2009Original
                    
                    
                    RestatedSTOCKHOLDERS’
      EQUITYAdditional
      paid-in capital
                    
                    
                    18,689,023
                    
                    
                    
                    13,833,383Statutory
      reserves
                    
                    
                    3,033,855
                    
                    
                    
                    3,033,855Retained
      earnings
                    
                    
                    (26,590,859
                    )
                    
                    
                    (21,735,219
                    )Accumulated
      other comprehensive income
                    
                    
                    2,915,737
                    
                    
                    
                    2,915,737$
                    (1,952,241
                    )
                    
                    $
                    (1,952,241
                    )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                    
                    $
                    40,545,104
                    
                    
                    $
                    40,545,104





As a
result of the restatement of the consolidated balance sheet as of December 31,
2007 that has carryover effect to December 31, 2008 and 2009, the 2009
additional paid-in capital decreased from $18,689,023 to $13,833,383. The
retained earnings increased from $(26,590,859) to $(21,735,219). The assets,
liabilities and total stockholders’ equity have no changes.


F-31




ITEM
9A. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





The
Company maintains a set of disclosure controls and procedures designed to ensure
that information required to be disclosed by the Company in the reports filed
under the Securities Exchange Act, is recorded, processed, summarized and
reported within the time periods specified by the SEC’s rules and forms.
Disclosure controls are also designed with the objective of ensuring that this
information is accumulated and communicated to the Company’s management,
including the Company’s chief executive officer and chief financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.





During
the course of internal evaluation, our accounting staff found the following
misstatements in our previously reported financial statements for the fiscal
year ended December 31, 2008 and fiscal quarters ended December 31, 2009 that
required correction, relating to changes in fair value of warrants and
impairment on investment.:





1.
            Changes
      in fair value of warrants is a non-cash income, which resulted from the
      change in fair values of warrants issued to investors in conjunction with
      the Company’s issuance of warrants in June of 2007 pursuant to provisions
      of FAB ASC Topic 815, “Derivative and Hedging”(ASC 815). The accounting
      treatment of the warrants resulted from a provision providing
      anti-dilution protection to the warrant holders. On March 18, 2010, the
      Company entered into an agreement with Vision Opportunity Master Fund,
      Ltd. to exchange the Series A, B, C and D warrants into 2,000,000
      shares of common stock of the company (the “Warrant
      Exchange”).  The closing of the Warrant Exchange is conditional
      upon a closing of a financing with minimum proceeds of $10 million to the
      Company. On April 5, 2010, the Company entered into a Security Escrow
      Agreement as an inducement to the holders of warrants to enter into the
      Security Exchange Agreement, the principal shareholders of the Company
      have agreed to place an amount of common stock equal to one million shares
      into escrow for the benefit of the holders in the event the Company fails
      to achieve certain milestones by December 31,
  2010.





2.
            Originally,
      Impairment on investment was listed on goodwill in the first quarter of
      2009 and represented the excess of the cost of an acquisition over the
      fair value of the net acquired identifiable assets at the date of
      acquisition. In the first quarter of 2010, after extensive analysis into
      the definition of a business as set forth in the paragraph 805-10-20 of
      the FASB Accounting Standards Codification, we recognized the acquisitions
      based on the fair value of net assets obtained. For the amount over the
      fair value of the net assets obtained, we have written them off as
      expenses at the time of
acquisition.





In
addition, management identified an improper classification of additional paid in
capital items for the year ended December 31, 2007; overstated additional
paid-in capital was adjusted down by $4,855,640, and understated retained
earnings were adjusted up by $4,855,640. Financial statements for the year ended
December 31, 2008 and 2009 will have the same amount of adjustment.





Based
upon their evaluation as of the end of the period covered by this annual report,
the Company’s chief executive officer and chief financial officer concluded
that, in spite of the significant deficiencies in internal control over
financial reporting described below, the Company’s disclosure controls and
procedures are not effective as of December 31, 2009.





Management’s
Report on Internal Control over Financial Reporting





The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting. The Company’s internal control system
was designed to provide reasonable assurance to our management and Board of
Directors regarding the preparation and fair presentation of published financial
statements.





We
engaged PricewaterhouseCoopers (“PwC”) to assist the Company in improving the
internal control system based on COSO internal control
framework.  Management assessed the effectiveness of our internal
control over financial reporting as of December 31, 2009.  In
making this assessment, we used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control – Integrated Framework.  During our assessment of the
effectiveness of internal control over financial reporting as of
December 31, 2009, Management identified significant deficiencies related
to the following:





1. Accounting and Finance
Personnel Weaknesses - US GAAP expertise - The current staff in
the accounting department is relatively new and inexperienced, and needs
substantial training so as to meet with the higher demands of being a U.S.
public company. The accounting skills and understanding necessary to fulfill the
requirements of U.S. GAAP-based reporting, including the skills of subsidiary
financial statements consolidation, are inadequate and were inadequately
supervised. The lack of sufficient and adequately trained accounting and finance
personnel resulted in an ineffective segregation of duties relative to key
financial reporting functions.


34




2. Lack of internal audit
function - The Company lacks qualified resources to perform the internal
audit functions properly.  In addition, the scope and effectiveness of
the internal audit function are yet to be developed.





The
matters described above were the direct result of a lack of resources and
accounting personnel. We have taken measures and plan to continue to take
measures to remediate these deficiencies as soon as practicable. We have
implemented the following measures to remediate the deficiencies:





1. Hiring
additional accounting and operations personnel, as needed, and reorganizing the
accounting and finance department to ensure that accounting personnel with
adequate experience, skills and knowledge relating to complex, non-routine
transactions are directly involved in the review and accounting evaluation of
our complex, non-routine transactions.





2.
Requiring senior accounting personnel and the principal accounting officer to
review complex, non-routine transactions to evaluate and approve the accounting
treatment for such transactions.





3.  Interviewing
prospective new Directors for our Board, including a member who is appropriately
credentialed as a financial expert with a goal to establish both an Audit and
Compensation committee as well as sufficient independent Directors.





We
believe that the foregoing steps will remediate the significant deficiencies
identified above, and we will continue to monitor the effectiveness of these
steps and make any changes that our management deems appropriate.





Management
believes that these deficiencies do not amount to a material weakness, and it
has concluded that our internal controls over financial reporting were effective
as of December 31, 2009.





A
material weakness (within the meaning of PCAOB Auditing Standard No. 5) is a
deficiency, or a combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material
misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control over financial reporting that
is less severe than a material weakness, yet important enough to merit attention
by those responsible for oversight of the company’s financial
reporting.





Our
management is not aware of any material weaknesses in our internal control over
financial reporting, and nothing has come to the attention of management that
causes them to believe that any material inaccuracies or errors exist in our
financial statements as of December 31, 2009 except that some carryover
adjustments from the fiscal year December 31, 2007 will have carryover
corresponding changes in the year of 2008 and 2009.  Besides the carryover
adjustments from 2007, the reportable conditions and other areas of our internal
control over financial reporting identified by us as needing improvement have
not resulted in a material restatement of our financial statements. Nor are we
aware of any instance where such reportable conditions or other identified areas
of weakness have resulted in a material misstatement of omission in any report
we have filed with or submitted to the Commission. Accordingly, we believe that
our financial controls were effective.





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 and procedures may deteriorate.





This
Annual Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
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.





Changes
in Internal Control over Financial Reporting





Other
than as disclosed above, no changes in the Company’s internal control over
financial reporting have come to management’s attention during the Company’s
last fiscal quarter that have materially affected, or are likely to materially
affect, the Company’s internal control over financial reporting. After hiring
PwC to enhance the internal control system, the internal control over financial
reporting is also included in this process. No final report has been received
yet. Should PWC make anyone proposals to enhance the Company’s internal control
over financial reporting such proposals will carefully be considered by the
Company, and we will disclose the changes that we may execute to improve our
internal control system.


35




Limitations
on Controls





Management
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all error and fraud. Any
control system, no matter how well designed and operated, is based upon certain
assumptions and can provide only reasonable, not absolute, assurance that its
objectives will be met. Further, no evaluation of controls can provide
absolute assurance that misstatements due to error or fraud will not occur or
that all control issues and instances of fraud, if any, within the Company have
been detected.





ITEM
9B. OTHER INFORMATION.





PART
III





ITEM
10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.





Set forth
below is certain information regarding our directors and executive
officers.  Our Board of Directors is comprised of two directors. 
There are no family relationships between any of our directors or executive
officers. Each of our directors is elected to serve until the next annual
meeting of our shareholders and until his successor is elected and qualified or
until such director’s earlier death, removal or termination.





The
following table sets forth certain information with respect to our directors and
executive officers.




DirectorsandExecutiveOfficers
            
            Position/Title
            
            AgeLiu
      Bo
            
            President,
      Chief Executive Officer and Director
            
            44Samuel
      Sheng
            
            Chief
      Financial Officer
            
            39Sun
      Weishan
            
            Chief
      Operating Officer and Secretary
            
            48Liang
      Deli
            
            Director
            
            47





There are
no family relationships among our directors or executive officers.





Our
directors hold office until the next annual meeting of our shareholders, and
until their successors have been qualified after being elected or appointed. Our
officers serve at the discretion of our Board of Directors.





Set forth
below is biographical information about our current directors and executive
officers:





Liu Bo, our President and
Chief Executive Officer and a director, has been Chairman of the Board, CEO and
a director of Daqing Sunway since March 1993. Sunway is an affiliate of Rise
Elite and WTL. Mr. Liu has a Bachelors degree in the field of Automatic Systems
Engineering from Qiqihaer University in Heilongjiang Province, China in
1986.





Liang Deli became a director
upon the resignation of Richard Astrom in June 2007. He has been Vice President
of Sunway since August 1997, and is under contract to serve in that position
until 2017. Mr. Liang’s area of focus is Sunway’s technology and market
operations. Mr. Liang received a Bachelor degree in the field of Automatic
Systems Design and Control from Shenyang Industry University in Liaoning
Province, China in 1983.





Samuel Sheng has been Chief
Financial Officer since November 2007. Mr. Sheng has held numerous management
positions requiring expertise in financial and accounting matters. From 2004
until his appointment with the Company, he served as the Chief Financial Officer
of American Lorain Corp, and from 2002 through 2004 he served as President and
Chief Financial Officer of Linyi Jiangxing Steel Ltd.





Sun Weishan has been
Secretary and Chief Operating Officer since December 2007. Prior to joining the
Company, from April 2001 to December 2006 Mr. Sun served as Executive Director,
Vice President, Assistant General Manager, and Secretary of the Board of
Directors for Daqing Sunway. Mr. Sun graduated from Yenshan University and
Daqing Petroleum Institute with degrees in mechanical engineering and chemical
engineering, respectively.


36




To our
knowledge, during the last ten years, none of our directors and executive
officers (including those of our subsidiaries) has:




·
            Had a bankruptcy petition filed
      by or against any business of which such person was a general partner or
      executive officer either at the time of the bankruptcy or within two years
      prior to that time.





·
            Been convicted in a criminal
      proceeding or beensubject to a pending criminal
      proceeding, excluding traffic violations and other minor
      offenses.





·
            Been subject to any order,
      judgment or decree, not subsequently reversed, suspended or vacated, of
      any court of competent jurisdiction, permanently or temporarily enjoining,
      barring, suspending or otherwise limiting his involvement in any type of
      business, securities or banking
  activities.





·
            Been found by a court of
      competent jurisdiction (in a civil action), the SEC, the Commodities
      Futures Trading Commission, or any self-regulatory
      organization or equivalent exchange, association, entity or organization
      that has disciplinary authority over the Company or the executive
      officer/director to have violated a federal or state securities or
      commodities law,or any law or regulation
      prohibiting mail or wire fraud or fraud in connection with any business
      entity, and the judgment or administrative order has not been reversed,
      suspended or vacated.





Board
of Directors





Our
Directors are elected by the vote of a plurality in interest of the holders of
our voting stock and hold office for a term of one year and until a successor
has been elected and qualified.





A
majority of the authorized number of directors constitutes a quorum of the Board
for the transaction of business. The directors must be present at the meeting to
constitute a quorum. However, any action required or permitted to be taken by
the Board may be taken without a meeting if all members of the Board
individually or collectively consent in writing to the action.





The board
held six meetings during the fiscal year of 2009.  These meetings
include meetings that were held by means of a conference telephone call, but do
not include actions taken by unanimous written consent.





Each
director attended at least 75% of the total number of meetings of the board
during the year. Our non-management directors did not meet in executive session
during 2009.





Director
Experience





The Board
believes that each of the Company’s directors should possess the highest
personal and professional ethics, integrity and values, and be committed to
representing the long-term interests of the Company’s shareholders. When
evaluating candidates for election to the Board, the Board seeks candidates with
certain qualities that it believes are important, including integrity, an
objective perspective, good judgment, and leadership skills. The Board has also
considered the fact that all of our directors have worked for, or served on the
boards of directors of, a variety of companies in a range of industries. The
Board believes that through their varying backgrounds, the Company’s directors
bring a wealth of experiences, new ideas and solutions to the Board.
Specifically, the Board has noted that our directors have the following
skills and qualifications that, among others, have made them particularly
suited to serve as a director of Sunway Global:




·
            Mr.
      Liu Bo is 45 years old, bachelor degree, senior engineer, main founder of
      the Sunway Company. Current position is chairman & CEO of Sunway
      global Inc. He was nominated as Excellent Young Entrepreneur in
      Heilongjiang province, Labor Model in Heilongjiang Province, Private
      Science and Technology Entrepreneur in the Northeast, and was awarded
      National Labor Award in 2001. He has been working in automatic control
      area for a long time, and was in charge of the development work for many
      new products since the company’s establishment. From 1998 to 2000, he was
      in charge of the development of power control industrial controlling unit
      software. The software was tested by Electronic and Information Bureau of
      Heilongjiang Province in 1999 and was proved to reach domestic advanced
      level and with some functions reaching globally advanced level. It was
      named as National Major New Product in 2000, awarded First Award of
      Information Technology in the province in 2001 and Third Award of Science
      and Technology of Heilongjiang Province. He was also in charge of the
      development of the first Pneumatic Tube Material Transport System in the
      country in 2001 and 2002, marking a new breakthrough of such products in
      China. In 1996, he took over Industrial Computer System Application
      project under national Ninth Five-Year plan in the company, and was also
      responsible for Real-Time Database and Monitoring System under the
      Tenth Five-Year 863 plan in 2002. He has excellent leadership and
      strategic insight and good understanding of the
  industry.





·
            Mr.
      Liang Deli is 48 years old, bachelor degree, and senior engineer. He
      joined Sunway in 1997. Led R&D team to National New Product Award.
      Graduated with MBA from Tsinghua University. Spent two years training in
      Japan and Singapore.




37




Audit
Committee Financial Expert





Our board
of directors currently acts as our audit committee. Because we only recently
consummated the Reverse Merger and appointed the current members of our board of
directors, our board of directors has not yet determined whether we have a
member who qualifies as an “audit committee financial expert” as defined in Item
407(d)(5) of Regulation S-K, and is “independent” based on the definition of
independence in the listing standards of the National Association of Securities
Dealers. Our board of directors is in the process of searching for a suitable
candidate for this position.





Audit
Committee





We have
not yet appointed an audit committee, and our board of directors currently acts
as our audit committee. At the present time, we believe that the members of
board of directors are collectively capable of analyzing and evaluating our
financial statements and understanding internal controls and procedures for
financial reporting. Our company, however, recognizes the importance of good
corporate governance and intends to appoint an audit committee comprised
entirely of independent directors, including at least one financial expert,
during our 2010 fiscal year.





Code
of Ethics





We have
not adopted a code of ethics to apply to our principal executive officer,
principal financial officer, principal accounting officer and controller, or
persons performing similar functions because, until recently, we have not been
an operating company. We expect to prepare a Code of Ethics in the near
future.





Board
Leadership and Risk Oversight





Our Chief
Executive Officer also serves as Chairman of the Board. We have two other
directors, one of whom is independent. The Board believes that the Company’s
Chief Executive Officer is best situated to serve as Chairman of the Board
because he is the director most familiar with our business and industry and the
director most capable of identifying strategic priorities and executing our
business strategy. In addition, having one person serve as both Chairman and
Chief Executive Officer eliminates potential for confusion and provides clear
leadership for the Company, with a single person setting the tone and managing
our operations. The Board oversees specific risks, including, but not limited
to:




·
            appointing,
      retaining and overseeing the work of the independent auditors, including
      resolving disagreements between the management and the independent
      auditors relating to financial
reporting;





·
            approving
      all auditing and non-auditing services permitted to be performed by the
      independent auditors;





·
            reviewing
      annually the independence and quality control procedures of the
      independent auditors;





·
            reviewing,
      approving, and overseeing risks arising from proposed related party
      transactions;





·
            discussing
      the annual audited financial statements with the
    management;





·
            meeting
      separately with the independent auditors to discuss critical accounting
      policies, management letters, recommendations on internal controls, the
      auditor’s engagement letter and independence letter and other material
      written communications between the independent auditors and the
      management; and





·
            monitoring
      the risks associated with management resources, structure, succession
      planning, development and selection processes, including evaluating the
      effect the compensation structure may have on risk
    decisions.





Nominating
Procedures





During
2009 there were no material changes to the procedures by which security holders
may recommend nominees to our Board of Directors.





Section
16 Beneficial Ownership Compliance





Section
16(a) of the Securities and Exchange Act of 1934, as amended, requires our
executive officers and directors, and persons who beneficially own more than 10%
of the Company’s common stock, to file initial reports of ownership and reports
of changes in ownership of our common stock with the SEC.


38




Based
solely on the reports received by the Company and on written representations
from certain reporting persons, we believe that the directors, executive
officers and persons who beneficially own more than 10% of the Company’s common
stock during the fiscal year ended December 31, 2009 have been in
compliance with Section 16(a).





ITEM
11. EXECUTIVE COMPENSATION.





The
following table sets forth information concerning the total compensation that we
have paid or that has accrued on behalf of our Chief Executive Officer and other
executive officers during the years ended December 31, 2009 and
2008.





Summary
Compensation Table





The
following is a summary of the compensation paid by us to the individuals who
have served as our CEO and any executive officers who have received compensation
in excess of $100,000 for the two years ended December 31, 2009 and
2008.





Salary
                                      (cash or
                                      non-cash)
                                    
                                    Bonus
                                      (cash or
                                      non-cash)
                                    
                                    Stock
                                      Awards
                                    
                                    Option
                                      Awards
                                    
                                    Non-Equity
                                      Incentive Plan
                                      Compensation
                                    
                                    Non-Qualified
                                      Deferred
                                      Compensation
                                      Earnings
                                    
                                    All Other
                                      Compensation
                                    
                                    TotalName and Principal Position
                                    
                                    Year
                                    
                                    ($)
                                    
                                    ($)
                                    
                                    ($)
                                    
                                    ($)
                                    
                                    ($)
                                    
                                    ($)
                                    
                                    ($)
                                    
                                    ($)Liu
      BoCEO
      and Director (current)
                                    
                                    2009
                                    
                                    89,153
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    89,1522008
                                    
                                    86,180
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    86,180Samuel
      ShengCFO
      (current)
                                    
                                    2009
                                    
                                    70,278
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    70,2782008
                                    
                                    68,940
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    68,940Sun
      WeishanCOO
      (current)
                                    
                                    2009
                                    
                                    70,278
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    70,2782008
                                    
                                    68.940
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    -
                                    
                                    -
                                    
                                    
                                    68.940





Outstanding
Equity Awards at Fiscal Year-End





As of our
fiscal years ended December 31, 2009 and 2008, we did not have any stock option
plan or stock incentive plan and there were no outstanding equity awards as of
our fiscal years ended December 31, 2009 and 2008. No equity awards were granted
during the year ended December 31, 2009.





Employment
Contracts and Termination of Employment and Change-In-Control
Arrangements





We have
the following employment contracts with the named executive
officers:





Sun
Weishan has an employment agreement with the Company. Pursuant to this
employment agreement, Mr. Sun shall receive an annual base salary of $40,540
(RMB300,000) and may also receive a year-end performance bonus to be determined
by the Board. Mr. Sun’s initial term as Secretary terminates December 30, 2010.
If the Mr. Sun and the Company have not agreed to new employment terms within a
month of expiration of the term, Mr. Sun’s terms of employment will be extended,
and Mr. Sun will continue to serve as Secretary under the original terms of the
employment agreement for up to three years thereafter.





Samuel
Sheng has an employment agreement with the Company for a renewable three-year
term beginning December 1, 2007. Pursuant to this employment agreement, Mr.
Sheng shall receive an annual base salary of approximately $40,540 (RMB300,000),
subject to a year-end bonus to be determined by the Board of
Directors.





Director
Compensation





Other
than as disclosed in the Summary Compensation Table above, Liang Deli received
$70,278 for his services as a member of the Board of Directors for an initial
term expiring on June 30, 2012. Our directors are also reimbursed for reasonable
travel and other expenses incurred in connection with attending meetings of the
board and its committees, if any.


39





ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.





The
following table lists stock ownership of our common stock as of March 24,
2010.  The information includes beneficial ownership by (i) holders of more
than 5% of our common stock, (ii) each of our current directors and executive
officers and (iii) all of our directors and executive officers as a
group.





The
information is determined in accordance with Rule 13d-3 promulgated under the
Exchange Act based upon information furnished by the persons listed or contained
in filings made by them with the Commission. Except as noted below, to our
knowledge, each person named in the table has sole voting and investment power
with respect to all shares of our common stock been beneficially owned by
them.





Amount
and Nature of Beneficial Ownership




Name and Address of
                                  Beneficial Owner
                                
                                Director/Officer
                                
                                Amount and Nature of
                                  Beneficial Ownership (1)
                                
                                Percentage
                                  of Class (2)Rise
      Elite International Limited
                                
                                
                                
                                
                                12,653,160
                                (2)
                                68.40
                                %Vision
      Opportunity Master Fund, Ltd.
                                
                                
                                
                                
                                4,751,795
                                (3)
                                25.69
                                %Vision
      Capital Advantage Fund. L.P.
                                
                                
                                
                                
                                596,808
                                (3)
                                3.23
                                %Liu
      Bo
                                
                                President,
                                  Chief
      Executive Officer and Director
                                
                                
                                8,906,580
                                (2)
                                48.14
                                %Liang
      Deli
                                
                                Vice President and
      Director
                                
                                
                                969,240
                                (2)
                                5.24
                                %Samuel
      Sheng
                                
                                Chief Financial Officer
                                
                                
                                -
                                
                                -Sun
      Weishan
                                
                                Chief Operating Officer
      and Secretary
                                
                                
                                -
                                
                                -All
      directors and officers as a group
                                
                                
                                
                                
                                9,875,820
                                
                                53.38
                                %









(1)
Applicable percentage ownership is based on 18,499,736 shares of common stock
outstanding as of March 24, 2010, together with securities exercisable or
convertible into shares of common stock within 60 days of March 24, 2010 for
each stockholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock that are
currently exercisable or exercisable within 60 days of March 24, 2010 are deemed
to be beneficially owned by the person holding such securities for the purpose
of computing the percentage of ownership of such person, but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.





(2) Liu
Bo and Liang Deli are shareholders of Rise Elite, holding 70.39% and 7.66%
ownership interest in Rise Elite, respectively. Neither Mr. Liu or Mr. Liang
hold any shares in their own right.  Mr. Liu, the majority shareholder
and sole officer and director of Rise Elite, has voting and dispositive control
over the shares of common stock held by Rise Elite.  and therefore may
be deemed to beneficial own all of the common shares of Sunway Global held by
Rise Elite.





Mr. Liang
is a shareholder of Rise Elite, however Mr. Liang does not hold voting or
dispositive control over the common stock of Sunway Global held by Rise Elite
and as such disclaims beneficial ownership except to the extent of his pecuniary
interest in these shares.





(3)
Vision Capital Advisors, LLC (“Vision Capital Advisors”) serves as investment
manager to Vision Opportunity Master Fund, Ltd. and Vision Capital Advantage
Fund. L.P. (collectively, the “Funds”). Adam Benowitz, Managing Member of Vision
Capital Advisors and Director of each of the Funds, holds the power to vote and
dispose of the subject shares.


40




In
addition to those holdings disclosed in the table above, Vision Opportunity
Master Fund, Ltd. and Vision Capital Advantage Fund, L.P. (collectively,
“Vision”) owned warrants A, B, C and D to purchase up to 13,765,846 shares of
common stock and 4,962,963 shares of Series B Convertible Preferred Stock, each
share of which is convertible into 30 shares of common
stock.  However, Vision is contractually prohibited from exercising
these warrants and converting the Series B Convertible Preferred Stock if the
number of shares of our common stock to be issued pursuant to such exercise
would cause Vision to hold in excess of 9.9% of our then issued and outstanding
shares of common stock. Vision is permitted to waive such restrictions on
exercise and conversion upon providing us sixty-one (61) days
notice.





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE.





Certain
Relationships and Related Transactions





Except as
in the transactions set forth below, there have been no material transactions
during the past two years between us and any officer, director or any
shareholder owning greater than 5% of our outstanding shares, or any of their
immediate family members:





As of the
beginning of fiscal year 2008, $585,678 was due from Beijing Sunway New-Force
Medical Treatment Tech Co., Ltd. (“Beijing Sunway”), a related company in which
Liang Deli, a director of Sunway Global, held a 44% equity interest prior to
March 2008. All of this loan was paid off in March 2008.





As of the
beginning of fiscal year 2008 and as of December 31, 2008, a nominal amount of
$830, was due from Rise Elite, a related company owned by Liu Bo, our chief
executive officer and chairman of the board of directors, and Liang Deli, a
director.





As of the
beginning of fiscal year 2008, $1,028,474 was due from Liu Bo for the proposed
development of representative offices in Beijing, Hang Zhou, Xi’an &
Shanghai. This loan was paid off in June 2008 and as of December 31, 2008, no
amounts were outstanding.





On March
16, 2008, SWT acquired Beijing Sunway as its wholly-owned
subsidiary.  SWT acquired all of the outstanding shares of Beijing
Sunway from the three owners of Beijing Sunway, Liang Deli, Sun Xitao, and Yao
Liyan, for the purchase price of RMB1,000,000 (approximately
US$145,000).  Mr. Liang also serves as a director of the
Company.





Beijing
Sunway was incorporated in Beijing, PRC on May 24, 2007, and is primarily
engaged in the sale of medical equipment manufactured by Sunway. It was
incorporated with the proceeds of a loan from the Company in the amount of RMB3,
992,229 borrowed by Mr. Liang, Mr. Sun, and Ms. Yao, in the first quarter of
2008. The loan was unsecured, interest free and repayable on demand, and was
held by Mr. Liang, Mr. Sun and Ms. Yao on Beijing Sunway’s behalf for the
purpose of proposed developments of representative offices for the Company in
various locations in China so as to provide for a better working capital
arrangement for the Company. As of March 26, 2008, the loan has been
repaid.





Director
Independence





The
Company currently has two directors, Liu Bo and Liang Deli. Neither director
qualifies as an “independent” director as that term is defined under the
National Association of Securities Dealers Automated Quotation system. Our
company, however, recognizes the importance of good corporate governance and
intends to appoint an audit committee comprised entirely of independent
directors, including at least one financial expert, during our 2010 fiscal
year.





ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.





Audit
Fees. The aggregate fees incurred by the Company’s independent registered public
accounting firms, for professional services rendered for the audit of our annual
financial statements for the years ended December 31, 2009 and December 31,
2008, and for the reviews of the financial statements included in our Quarterly
Reports on Form 10-Q and other SEC filings during those fiscal years were
approximately $76,000 and $50,000, respectively.





Audit-Related
Fees. The aggregate fees incurred by the Company’s independent registered public
accounting firms were $3,600 and $3,097, respectively, for audit-related
services during the years ended December 31, 2009 and December 31,
2008.


41




Tax Fees.
The Company did not incur any tax fees from its independent registered public
accounting firms for services rendered to the Company for the fiscal years ended
December 31, 2009 and December 31, 2008.





All Other
Fees. The Company did not incur any other fees from its independent registered
public accounting firms for services rendered to the Company, other than the
services covered in “Audit Fees” for the fiscal years ended December 31, 2009
and December 31, 2008.





ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





Exhibits:





ExhibitNo.
              
              DescriptionofExhibit3.1
              
              Articles
      of Incorporation, as amended and corrected. (1)3.2
              
              Bylaws.
      (2)3.3
              
              Specimen
      of Common Stock certificate. (1)3.4
              
              Certificate
      of Designations authorizing the Series A Convertible Preferred Stock, as
      amended and corrected. (1)3.5
              
              Certificate
      of Designations authorizing the Series B Convertible Preferred Stock, as
      amended and corrected. (1)4.1
              
              Series
      B Stock Purchase Agreement, dated as of June 5, 2007, by and among the
      Company, Vision Opportunity Master Fund, Ltd. and each of the other
      investors party thereto. (1)4.2
              
              Registration
      Rights Agreement, dated as of June 5, 2007, by and between the Company and
      Vision Opportunity Master Fund, Ltd. (1)4.3
              
              Lock-Up
      Agreement, dated as of June 5, 2007, by and among the Company and Rise
      Elite. (1)4.4
              
              Form
      of Series A Warrant. (1)4.5
              
              Form
      of Series B Warrant. (1)4.6
              
              Form
      of Series C Warrant. (1)4.7
              
              Form
      of Series D Warrant. (1)4.8
              
              Form
      of Series J Warrant. (1)4.9
              
              Form
      of Series E Warrant issued to Kuhns Brothers. (1)10.1
              
              Share
      Exchange Agreement, dated as of June 5, 2007, by and between the Company,
      Rise Elite and World Through Limited. (1)10.2
              
              Securities
      Purchase Agreement, dated as of June 5, 2007, by and between the Company,
      Rise Elite, Vision Opportunity Master Fund, Richard Astrom, Christopher
      Astrom, and certain other parties signatory thereto.
(1)10.3
              
              Form
      of Escrow Agreement, dated June 5, 2007, by and between the Company, Rise
      Elite, Vision and Loeb and Loeb LLP. (3)10.4
              
              Engagement
      Letter Agreement, dated September 1, 2006, by and
      between Sunway and Kuhns Brothers, Inc. (1)10.5
              
              Form
      of Securities Escrow Agreement, dated June 5, 2007, by and between the
      Company, Vision Opportunity Master Fund, Ltd., Rise Elite and Loeb and
      Loeb LLP. (1)10.6
              
              Form
      of Consignment Agreement, dated as of June 5, 2007, between Rise Elite and
      the Shareholders of Sunway. (3)10.7
              
              Form
      of Consignment Transfer Agreement, dated as of June 5, 2007, between Rise
      Elite and WTL. (3)




42




10.8
              
              Exclusive
      Purchase Option Agreement, dated as of June 5, 2007, between shareholders
      of Sunway and WTL. (3)10.9
              
              Intellectual
      Property Transfer Agreement, dated as of June 5, 2007, between Sunway and
      SWT. (3)10.10
              
              Intellectual
      Property Licensing Agreement, dated as of June 5, 2007, between Sunway and
      SWT. (3)10.11
              
              Consigned
      Management Agreement, dated as of June 5, 2007, between SWT, Sunway, and
      the shareholders of Sunway. (3)10.12
              
              Loan
      Agreement, dated as of June 5, 2007, between Sunway and SWT.
      (3)10.13
              
              Equipment
      Lease Agreement, dated as of June 5, 2007, between Sunway and SWT.
      (3)10.14
                
                10.15
              
              Amendment
      to Registration Rights Agreement dated July 24, 2007 by and between the
      Company, Vision Opportunity Master Fund, Ltd., and Columbia China Capital
      Group, Inc. (4)
                Amendment
      to Registration Rights Agreement dated June 19, 2008 by and between the
      Company and Vision Opportunity Master Fund, Ltd. (4)10.16
              
              Capital
      Transfer Agreement, dated March 16, 2008, by and among SWT, Liang DeLi,
      Sun Xitao, and Yao Liyan. (5)10.17
              
              Share
      and Asset Transfer Agreement, dated August 31, 2008, by and between Liheng
      Enterprise Company Limited and SWT. (6)10.18
              
              Lease
      Agreement, by and between Beijing Jiahai Realty Development Co., Ltd.,
      Beijing Jiahai Property Management Co., Ltd., and Beijing Sunway New-force
      Medical Treatment Tech Co., Ltd.  (6)10.19
              
              Lease
      Agreement, dated March 18, 2008, by and between Daqing Sunway and Daqing
      Zhuangye Guangchang Co., Ltd. (6)21.1
              
              List
      of Subsidiaries. (6)31.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes Oxley Act of 2002 Section
      302.31.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes Oxley Act of 2002 Section
      302.32.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes-Oxley Act of 2002 Section
      906.32.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes-Oxley Act of 2002 Section
      906.









(1)
Incorporated by reference to the exhibit of the same number to our report on
form 8-K filed with the SEC on June 12, 2007.





(2)
Incorporated by reference to the exhibit of the same number to our report on
form 8-K/A filed with the SEC on June 20, 2007.





(3)
Incorporated by reference to the exhibit of the same number to our report on
form 8-K/A filed with the SEC on June 27, 2007.





(4)
Incorporated by reference to the exhibit of the same number to our registration
statement on form S-1 filed with the SEC on September 23, 2008.





(5)
Incorporated by reference to the exhibit to our quarterly report for the period
ended March 31, 2008 on Form 10-Q/A filed with the SEC on March 6,
2009.





(6)
Incorporated by reference to the exhibit to our annual report for the period
ended December 31, 2008 on Form 10-K filed with the SEC on March 30,
2009.


43





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.




SUNWAY
      GLOBAL INC.February
      14, 2011
              By:
              /s/ Liu BoLiu
      BoChief
      Executive Officer and Chairman
                (principal
      executive officer)





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.





Name
                  
                  Title
                  
                  Date/s/ Liu Bo
                  
                  Chief Executive Officer and
                  
                  February 14, 2011Liu Bo
                  
                  Chairman of the Board of Directors/s/ Samuel Sheng
                  
                  Chief Financial Officer (principal financial
                  
                  February 14, 2011Samuel Sheng
                  
                  and accounting officer)/s/ Liang Deli
                  
                  Director
                  
                  February 14, 2011Liang Deli




44