UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K


(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, 2008





o
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 ofincorporation
      or organization)
            
            (IRS
      Employer IdentificationNo.)





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. Yes o No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act Yes x No o





(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. Yes x
No o





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 filer o
            Accelerated
      filer oNon-accelerated
      filer o
      (Do not check if a smaller reporting company)
            Smaller
      reporting company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o No x





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 March 24, 2009 was approximately $1,742,906 based
upon the closing price of the common stock of $3.50 as quoted by Nasdaq OTC
Bulletin Board on June 30, 2008.





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.  Yes o
No o





(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
March 24, 2009, 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).













TABLE OF
CONTENTS




PagePART
      IItem
      1.
            BUSINESS
            3Item
      1A
            RISK
      FACTORS
            11Item
      1B
            UNRESOLVED
      STAFF COMMENTS
            21Item
      2.
            PROPERTIES
            21Item
      3.
            LEGAL
      PROCEEDINGS
            22Item
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            22PART
      IIItem
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
            22Item
      6
            SELECTED
      FINANCIAL DATA
            23Item
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            23Item
      7A
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            27Item
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
            28Item
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            29Item
      9A.
            CONTROLS
      AND PROCEDURES
            29Item
      9B.
            OTHER
      INFORMATION
            31PART
      IIIItem
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
            31Item
      11.
            EXECUTIVE
      COMPENSATION
            33Item
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            34Item
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
            35Item
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            35PART
      IVItem
      15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
            36SIGNATURES
            37





2




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 (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. Additionally, statements concerning
future matters are forward-looking statements.





Although
forward-looking statements in this Annual Report on Form 10-K 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. 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, 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.




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 medicine dispensing system (“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 and 2008. 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. We sell our products
both directly, through our sales employees and direct sales office and
indirectly, through thirteen independent sales agents and four direct sales
office. Our sales network covers Beijing, Shanghai, Guangzhou Chengdu, Xian and
13 other provinces in the PRC.





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.




3


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.





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:







Sunway
      Global Inc.
              (a
      Nevada company)





World
      Through Ltd.
              (a
      BVI company)





Sunway
      World Through
              Technology
      Co. Ltd.
              (a
      PRC company)





Daqing
      Sunway Technology Co. Ltd.*
                    (a
      PRC company)
                  
                  Beijing
      Sunway New Force
                    Medical
      Treatment Tech Co., Ltd.
                    (a
      PRC company)*deemed
      a variable interest entity


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.





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 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.





4


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 and 2008 were 785, 1,105, 1,930, 2,575 and 3,669 units
(each unit consists of one workstation in a PTS), respectively. The average
price of our PTS is approximately $150,810 (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.





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 loosing any data or instructions and complete
transport requests given prior to the shut-down when the power supply
resumes.





5


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.








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.




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 SAPD, 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.





6


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 Markets for 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.







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.





7


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
            
            2008
            
            
            2007Customer
      A
            
            
            -
            %
            
            
            11.13
            %Customer
      B
            
            
            -
            %
            
            
            10.89
            %Customer
      D
            
            
            9.65
            %
            
            
            -Customer
      E
            
            
            10.46
            %
            
            
            -Customer
      F
            
            
            9.63
            %
            
            
            -Customer
      G
            
            
            10.46
            %
            
            
            -Customer
      F
            
            
            11.53
            %
            
            
            -Total
            
            
            51.73
            %
            
            
            22.02
            %





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
12 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.





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, 2008 and 2007, respectively, we expended
approximately $36,138 and $175,567 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, 2007 and 2008.




8


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 2007 and 2008:





Time of PRC
            
            Percentage of
              PRC Hospitals
              Adopting PTSName
            
            Brand
            
            Market Entry
            
            2008
            
            2007Daqing
      Sunway Technology Co. Ltd.
            
            
            Suntrans
            
            
            2002
            
            
            48
            %
            
            48.5
            %Company
      A
            
            
            Brand
      A
            
            
            1999
            
            
            4
            %
            
            3.5
            %Company
      B
            
            
            Brand
      B
            
            
            1998
            
            
            20
            %
            
            20
            %Company
      C
            
            
            Brand
      C
            
            
            1996
            
            
            15
            %
            
            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 five
units - in 2008.





.


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.




9


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




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




10




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.





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 228 full-time employees and contractors, out of which 35 are management
and accounting personnel, 12 are R&D personnel, 16 are marketing
and sales personnel and 165 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 “SPC”s (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 Develop 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.




11


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.





12


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.





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.





13


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.




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.





14


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.





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.




15


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 2.0%
appreciation of the RMB against the U.S. dollar. 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.





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.




16


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 severe acute respiratory syndrome, or SARS, or another widespread
public health problem, could adversely affect our operations.





A renewed outbreak of 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:




·
            quarantines
      or closures of some of our offices which would severely disrupt our
      operations,




·
            the
      sickness or death of our key officers and employees,
  and





·
            a
      general slowdown in the economy of the
PRC




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,
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 Chinese 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





17


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.








If
the United States imposes trade sanctions on the PRC due to its currency, export
or other policies, our ability to succeed in the international markets may be
diminished.




The PRC
currently “pegs” its currency to a basket of currencies, including United States
dollar. This means that each unit of Chinese currency has a set ratio for which
it may be exchanged for United States currency, as opposed to having a floating
value like other countries’ currencies. This policy is currently under review by
policy makers in the United States. Trade groups in the United States have
blamed the cheap value of the Chinese currency for causing job losses in
American factories, giving exporters an unfair advantage and making its imports
expensive. There is increasing pressure for the PRC to change its currency
policies to provide for its currency to float freely on international markets.
As a result, Congress is considering the enacting legislation which could result
in the imposition of quotas and tariffs. If the PRC changes its existing
currency policies or if the United States or other countries enact laws to
penalize the PRC for its existing currency policies, our business may be
adversely affected, even though we do not sell outside of the PRC. Further, we
cannot predict what action the PRC may take in the event that the United States
imposes tariffs, quotas or other sanctions on Chinese products. Even though we
do not sell products into the United States market, it is possible that such
action by the PRC may nonetheless affect our business since we are a United
States company, although we cannot predict the nature or extent thereof. Any
government action which has the effect of inhibiting foreign investment could
hurt our ability to raise funds that we need for our operations. The devaluation
of the currency of the PRC against the United States dollar would have adverse
effects on our financial performance and asset values when measured in terms of
the United Stated dollar.




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.




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.





18


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 NASDQ 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.





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:




·
            variations
      in our quarterly operating results;




·
            announcements
      that our revenue or income are below analysts’
    expectations;




·
            general
      economic slowdowns;




·
            matters
      affecting the economy of the PRC and the relationship between the United
      States and the PRC;




·
            changes
      in market valuations of both similar companies and companies whose
      business is primarily or exclusively in the
PRC;




·
            sales
      of large blocks of our common
stock;




·
            announcements
      by us or our competitors of significant contracts, acquisitions, strategic
      partnerships, joint ventures or capital
  commitments;




·
            fluctuations
      in stock market prices and volumes, which are particularly common among
      highly volatile securities of internationally-based
    companies.




·
            concern
      by potential investors that the large number of shares of common stock
      which may be sold pursuant to this prospectus may have a downward effect
      upon the market price of the stock.




·
            the
      effect of sales pursuant to this prospectus on the trading volume of our
      common stock.




19


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




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.




20


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.





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
              of
              land 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, 2052





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 $28,825.





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 three years starting from August 29, 2007 with an
annual rent of approximately $86,507.





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







21


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 Sunway in the amount of RMB
3,000,000 owed to it. The lien will expire 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.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS.





There
were no matters submitted to a vote of our security holders during the fourth
quarter of the fiscal year ended December 31, 2008.








PART
II




ITEM
5.                      MARKET
FOR 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, 2007 through December 31, 2008, 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 2007
            
            $
            1.73
            
            
            $
            0.69Second
      Quarter 2007
            
            $
            4.23
            
            
            $
            0.86Third
      Quarter 2007
            
            $
            2.50
            
            
            $
            0.86Fourth
      Quarter 2007
            
            $
            2.50
            
            
            $
            0.69First
      Quarter 2008
            
            $
            8.00
            
            
            $
            1.51Second
      Quarter 2008
            
            $
            5.00
            
            
            $
            1.55Third
      Quarter 2008
            
            $
            4.00
            
            
            $
            2.25Fourth
      Quarter 2008
            
            $
            5.00
            
            
            $
            2.00





On
December 31, 2008, the last price of the Company’s common stock as reported on
the OTC Bulletin Board was $5.00* per share.





As of
March 24, 2009, the Company had approximately 654 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.




22


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.





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, 2008 and 2007.




Results
of Operations





In the
fiscal year ended December 31, 2008, the company’s net sales, gross profit,
operating income and net income all rose as compared with the same period in the
fiscal year ended December 31, 2007. These increases are due in large part to
increased sales of Daqing Sunway’s pneumatic tube transport systems and new
products sold. Cost of sales and operation expenses also increased during these
periods, with selling expenses outpacing the increase in sales. The increase in
cost of sales is due largely to increase in sales.





The
following table summarizes the results of our operations during the fiscal years
ended December 31, 2008 and 2007, respectively, and provides information
regarding the dollar and percentage increase or (decrease) from the fiscal years
ended December 31, 2007 and 2008.






Fiscal Year Ended December
      31,2008
                
                
                2007
                
                
                Change
                
                
                Change
      rateNet
      Revenues
                
                $
                19,845,882
                
                
                $
                11,865,138
                
                
                $
                7,980,744
                
                
                
                67.26
                %Cost
      of net revenue
                
                $
                5,634,143
                
                
                $
                3,473,411
                
                
                $
                2,160,732
                
                
                
                62.21
                %Gross
      Profit
                
                $
                14,211,739
                
                
                $
                8,391,727
                
                
                $
                5,820,012
                
                
                
                69.35
                %Gross
      Margin
                
                
                71.61
                %
                
                
                70.73
                %
                
                
                
                
                
                $
                0.88
                %Operating
      Income
                
                $
                10,718,662
                
                
                $
                5,829,728
                
                
                $
                4,888,934
                
                
                
                83.86
                %Net
      Income
                
                $
                9,058,769
                
                
                $
                6,047,505
                
                
                $
                3,011,264
                
                
                
                49.79
                %Net
      profit margin
                
                
                45.65
                %
                
                
                50.97
                %
                
                
                
                
                
                
                (5.32
                )%


Net
revenue





Net
revenue for the fiscal year ended December 31, 2008, which resulted primarily
from sales of PTS, SADP and spare parts, was $19,845,882, an increase of 67.26%
as compared with the net revenue of $11,865,138 in the same period ended
December 31, 2007. In the fiscal year ended December 31, 2008, we sold 3,669
workstations and 5 SADP units, representing an increase in workstation sales of
42.49% as compared with 2575 workstations sold in the same period ended on
December 31, 2007. This increase was primarily a result of more effective sales
and marketing efforts.





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





Fiscal Year Ended December 31,2008
            
            
            2007
            
            ChangeNet
      revenues
            
            $
            19,845,882
            
            
            $
            11,865,138
            
            
            
            67.26
            %




23


Gross
Profit





Gross
profit increased 69.35% to $14,211,739 for the fiscal year ended December 31,
2008, as compared to $8,391,727 for the fiscal year ended December 31, 2007. Our
gross profit margin rose 0.88% from 70.73% as of the fiscal year ended December
31, 2007 to 71.61% as of the same period of 2008, mainly due to increased
product volume, which brought the fixed costs down, and a 6.67% decrease in
direct materials for cost of manufacture the fiscal year ended December 31,
2008, as compared to the same period in 2007.





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




Fiscal
      Year Ended December 31,2008
            
            
            2007Gross
      profit
            
            
            
            
            
            Gross
      profitUS$
            
            
            margin
            
            
            US$
            
            
            marginGross
      Profit
            
            $
            14,211,739
            
            
            
            71.6
            %
            
            $
            8,391,727
            
            
            
            70.73
            %









Operating
income increased 83.86% to $10,718,662 for the fiscal year ended December
31, 2008, as compared with $5,829,728 for the fiscal year ended December 31,
2007. Our operating margin rose 4.88%, from 49.13% as of the fiscal year ended
December 31, 2007, to 54.01% as of the same period of 2008. The increase was
primarily a result of high revenues and low operating expenses.





Cost
of Net Revenue





Cost of
net revenue increased to $5,634,143 for the fiscal year ended December 31, 2008,
representing a 62.21% increase as compared with $3,473,411for the same period of
2007. This increase is due primarily to increases in sales.





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





Fiscal Year Ended December 31,2008
            
            
            2007
            
            ChangeCost
      of net revenue
            
            $
            5,634,143
            
            
            $
            3,473,411
            
            
            
            62.21
            %





Operating
Expenses





Operating
expenses were $3,493,077 for the fiscal year ended December 31, 2008, an
increase of 36.34% as compared to $2,561,999 for the same period of 2007. This
increase was due primarily to caused by two factors: (i) selling expenses
increased $190,258, or 81.03% to $425,050 in the fiscal year ended December 31,
2008 from $234,792 for the same period of 2007; and (ii) general &
administration expenses increased $740,820, or 31.83% to $3,068,027 in the
fiscal year ended December 31, 2008 from $2,327,207 for the same period of 2007.
In the fiscal year ended December 31, 2008, we increased salary and benefits to
management. Reflecting this change, costs related to salary and benefits
increased 30.03% as compared with the same period of 2007, and amortization of
intangible assets increased $590,932, or 170.75%, in the fiscal year ended
December 31, 2008 from $218,260 as of the same period of 2007.







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





Fiscal Year Ended December 31,2008
            
            
            2007
            
            
            changeSelling
      expenses
            
            $
            425,050
            
            
            $
            234,792
            
            
            $
            81.03
            %General
      & Administrative Expenses
            
            $
            3,068,027
            
            
            $
            2,327,207
            
            
            $
            31.83
            %Total
      operating expenses
            
            $
            3,493,077
            
            
            $
            2,561,999
            
            
            $
            36.34
            %








Net
Income





Net
income was $9,058,769 for the fiscal year ended December 31, 2008, an increase
of 49.79% from $6,047,505 for the same period of 2007. The increase is primarily
attributable to the increase in sales of our workstation and new product-SADP.
Our net profit margin dropped 5.32% from 50.97% as of the fiscal year ended
December 31, 2007 to 45.65% as of the fiscal year ended December 31, 2008. This
decrease was primarily attributable nil in gain on disposal of investments in
the fiscal year ended December 31, 2008 from $1,346,989 as of the same period of
2007. Earnings per share were $0.60 and $0.31 on a diluted basis.





24


Cash
and Cash Equivalents





Cash and
cash equivalents increased to $15,189,941 as of December 31, 2008, as compared
to $5,820,100 as of December 31, 2007. This increase was mainly due to i)
increased net income, ii) the receipt of $6,580,000 for the exercise of warrants
J , and iii) increased investing activities.





Trade
Receivables, net





Trade
receivables, net increased 93.67% to $2,953,919 as of December 31, 2008,
compared with $1,525,201 as of December 31, 2007. This increase in trade
receivables was primarily attributable to a substantial increase in workstation
sales and the launch of SADP sales during the fiscal year ended December 31,
2008.





Inventory





Inventory
consists of raw materials, works in process and finished goods. As of December
31, 2008, the recorded value of our inventory has decreased 22.97% to $590,738
from $766,933 as of December 31, 2007. This decrease is mainly due to: (i) an
increase in raw materials of 13.93%, from $161,005 as of December 31, 2007 to
$183,435 as of December 31,2008, which was due to increase in sales; ii) an
increase in works in process from nil as of December 31, 2007 to $188,855 as of
December 31,2008, which was due to an increase in design capacity; and iii) a
decrease in finished goods from $605,928 as of December 31, 2007 to $218,448 as
of December 31, 2008, a decrease 63.95%, which was due to rapid inventory
turnover.





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





December 31,
              2008
            
            
            December 31,
              2007
            
            
            changeRaw
      material
            
            $
            183,435
            
            
            $
            161,005
            
            
            
            13.93
            %Work
      in process
            
            $
            188,855
            
            
            $
            -
            
            
            
            -
            %Finished
      goods
            
            $
            218,448
            
            
            $
            605,928
            
            
            
            (63.95
            )
      %Total
      inventory
            
            $
            590,738
            
            
            $
            766,933
            
            
            
            (22.97
            )
      %





Accounts
payable





Accounts
payable amounted to $59,912 as of December 31, 2008, a decrease of 75.64% from
$245,917 as of December 31, 2007. This decrease is mainly due to increased use
of cash to buy 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 31,2008
            
            
            2007
            
            
            ChangeNet
      cash provided by (used in) operating activities
            
            $
            11,022,248
            
            
            $
            4,903,141
            
            
            $
            6,119,107Net
      cash provided by (used in) investing activities
            
            $
            (9,428,330
            )
            
            $
            (5,689,488
            )
            
            $
            (3,738,842
            )Net
      cash provided by (used in) financing activities
            
            $
            6,580,000
            
            
            $
            4,979,412
            
            
            $
            1,600,588Effect
      of foreign currency translation on cash and cash
    equivalents
            
            $
            1,195,923
            
            
            $
            (122,013
            )
            
            $
            1,317,936Cash
      and cash equivalents at beginning of year
            
            $
            5,820,100
            
            
            $
            1,749,048
            
            
            $
            4,071,052Cash
      and cash equivalents–end of year
            
            $
            15,189,941
            
            
            $
            5,820,100
            
            
            $
            9,369,841





Operating
Activities





For the
fiscal year ended December 31, 2008, net cash provided by operating activities
was $11,022,248. This was primarily attributable to our net income of $9,058,769,
adjusted by an add-back of non-cash expenses mainly consisting of depreciation
and amortization of $1,664,921and offset by a $298,558 increase in working
capital. Specifically, the working capital increase was primarily due to five
reasons: (i) a $1,305,806 trade receivables increase, principally due to sales
growth; (ii) a $224,124 inventory decrease, mainly due to the high turnover of
finished goods; (iii) a $858,369 decrease in advance to suppliers to purchase
raw materials; and (iv) a $305,511 decrease in prepayments, tender deposits,
travel advances to directors and advances to employees, consisting primarily of
prepayments for raw materials supplies in advance of shipment; partially offset
by a $216,360 increase in accounts payable, other payables, tax payable,
customer deposits and accrued liabilities.





25


Investing
Activities





For the
fiscal year ended December 31, 2008, net cash used in investing activities was
$9,428,330. This was primarily attributable to (i) a $1,172,432 capital
expenditure to rebuild plant and equipment; (ii) a $7,725,445 capital
expenditure in the form of an advance payment for purchase of Liheng Enterprise
Company Limited; (iii) a $1,723,593 capital expenditure for the acquisition of
computer software; (iv) a $112,683 decrease in restricted cash; and (v) a
$1,080,457 decrease in amount due from a director.





Financing
Activities





For the
fiscal year ended December 31, 2008, net cash provided by financing
activities was $6,580,000. This was primarily attributable to the warrants J
that were exercised.





As of
December 31, 2008, we had cash and cash equivalents of $15,189,941, up
$9,369,841 from $5,820,100 at December 31, 2007.





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, 2008.





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 SFAS No. SFAS No. 144. 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.





26


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, 2008.








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





Not
Applicable.












27




ITEM
8.                      FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.




SUNWAY
GLOBAL INC.





INDEX
TO FINANCIAL STATEMENTS





PageReports
      of Independent Registered Public Accounting Firms
            
            F-2Consolidated
      Balance Sheets as of December 31, 2008 and December 31,
    2007
            
            F-3 –
      F-4Consolidated
      Statements of Operations for the Years Ended December 31, 2008 and
      December 31, 2007
            
            F-5Consolidated
      Statements of Shareholders' Equity for the Years Ended December 31, 2008
      and December 31, 2007
            
            F-6Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008 and
      December 31, 2007
            
            F-7 –
      F-8Notes
      to Consolidated Financial Statements
            
            F-9 – F-26








28















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., LL.B., P.C.LL., Barrister-at-law, C.P.A.(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, 2008 and 2007 and the related consolidated
statements of 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, 2008
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, 2008 and 2007 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

              March
      16, 2009
            
            Albert
      Wong & Co.
              Certified
      Public Accountants




F-2




SUNWAY
      GLOBAL INC.CONSOLIDATED
      BALANCE SHEETSAS
      AT DECEMBER 31, 2008 AND 2007(Stated
      in US Dollars)




Notes
            
            
            2008
            
            
            2007ASSETSCurrent assetsCash
      and cash equivalents
            
            
            
            
            $
            15,189,941
            
            
            $
            5,820,100Trade
      receivables, net
            
            
            6
            
            
            
            2,953,919
            
            
            
            1,525,201Inventories
            
            
            9
            
            
            
            590,738
            
            
            
            766,933Advances
      to suppliers
            
            
            
            
            
            
            547,952
            
            
            
            1,331,159Prepayments
            
            
            
            
            
            
            -
            
            
            
            125,333Tender
      deposits
            
            
            
            
            
            
            112,735
            
            
            
            131,013Travel
      advances to shareholders
            
            
            7
            
            
            
            38,733
            
            
            
            30,824Advances
      to employees
            
            
            8
            
            
            
            429,804
            
            
            
            548,364Total
      current assets
            
            
            
            
            
            $
            19,863,822
            
            
            $
            10,278,927Restricted
      cash
            
            
            
            
            
            
            378,366
            
            
            
            491,049Amount
      due from a related company
            
            
            4
            
            
            
            830
            
            
            
            585,678Amount
      due from a director
            
            
            5
            
            
            
            -
            
            
            
            1,028,474Property,
      plant and equipment, net
            
            
            10
            
            
            
            5,069,871
            
            
            
            4,449,619Intangibles,
      net
            
            
            11
            
            
            
            6,576,769
            
            
            
            6,933,491Deposit
      for acquisition of computersoftware
            
            
            
            
            
            
            1,750,751
            
            
            
            -Deposit
      for acquisition of subsidiary
            
            
            
            
            
            
            7,725,445
            
            
            
            -TOTAL
      ASSETS
            
            
            
            
            
            $
            41,365,854
            
            
            $
            23,767,238LIABILITIES
      ANDSTOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
            
            
            
            
            
            $
            59,912
            
            
            $
            245,917Income
      tax payable
            
            
            
            
            
            
            632,893
            
            
            
            157,877Turnover
      and other taxes
            
            
            
            
            
            
            406,839
            
            
            
            143,857Expected
      warranty liabilities
            
            
            12
            
            
            
            50,396
            
            
            
            55,351Customers
      deposits
            
            
            
            
            
            
            -
            
            
            
            208,274Accrued
      liabilities
            
            
            
            
            
            
            301,461
            
            
            
            323,464Other
      payables
            
            
            
            
            
            
            15,168
            
            
            
            35,984Total
      current liabilities
            
            
            
            
            
            $
            1,466,669
            
            
            $
            1,170,724TOTAL
      LIABILITIES
            
            
            
            
            
            $
            1,466,669
            
            
            $
            1,170,724





See
accompanying notes to consolidated financial statements




F-3


SUNWAY
      GLOBAL INC.CONSOLIDATED
      BALANCE SHEETS (Continued)AS
      AT DECEMBER 31, 2008 AND 2007(Stated
      in US Dollars)





Notes
            
            
            2008
            
            
            2007STOCKHOLDERS’
      EQUITYSeries
      A Convertible PreferredStock
      $0.0000001 par value; 400,000shares
      authorized; Nil and 228,530 sharesissued
      and outstanding at December 31,2008
      and 2007 respectively
            
            
            
            
            $
            -
            
            
            $
            1Series
      B Convertible PreferredStock
      $0.0000001 par value; 400,000shares
      authorized; 160,494 and165,432
      shares issued andoutstanding
      at December 31, 2008and
      2007 respectively
            
            
            13
            
            
            
            1
            
            
            
            1Common
      stock at $0.0000001 parvalue;
      100,000,000 shares authorized;18,499,736
      and 223,658 shares issued andoutstanding
      at December 31, 2008and
      2007 respectively
            
            
            
            
            
            
            2
            
            
            
            1Additional
      paid-in capital
            
            
            
            
            
            
            22,679,965
            
            
            
            16,099,965Statutory
      reserves
            
            
            
            
            
            
            2,127,978
            
            
            
            2,127,978Retained
      earnings
            
            
            
            
            
            
            12,247,049
            
            
            
            3,188,280Accumulated
      other comprehensive income
            
            
            
            
            
            
            2,844,190
            
            
            
            1,180,288$
            39,899,185
            
            
            $
            22,596,514TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
            
            
            
            
            
            $
            41,365,854
            
            
            $
            23,767,238





See
accompanying notes to consolidated financial statements




F-4




SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF INCOME AND COMPREHENSIVE INCOMEFOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 2007(Stated
      in US Dollars)




2008
            
            
            2007NotesNet
      revenues
            
            
            17
            
            
            $
            19,845,882
            
            
            $
            11,865,138Cost
      of net revenues
            
            
            17
            
            
            
            (5,634,143
            )
            
            
            (3,473,411
            )Gross
      profit
            
            
            
            
            
            $
            14,211,739
            
            
            $
            8,391,727Selling
      expenses
            
            
            
            
            
            
            (425,050
            )
            
            
            (234,792
            )General
      and administrative expenses
            
            
            
            
            
            
            (3,068,027
            )
            
            
            (2,327,207
            )Income
      from operation
            
            
            
            
            
            $
            10,718,662
            
            
            $
            5,829,728Gain
      on disposal of investments
            
            
            
            
            
            
            -
            
            
            
            1,346,989Interest
      income
            
            
            
            
            
            
            66,935
            
            
            
            51,852Income
      before income taxes
            
            
            
            
            
            $
            10,785,597
            
            
            $
            7,228,569Income
      taxes
            
            
            15
            
            
            
            (1,726,828
            )
            
            
            (1,181,064
            )Net
      income
            
            
            
            
            
            $
            9,058,769
            
            
            $
            6,047,505Foreign
      currency translation
            
            
            
            
            
            
            1,663,902
            
            
            
            760,620Reclassification
      adjustment
            
            
            
            
            
            
            -
            
            
            
            (423,537
            )Comprehensive
      income
            
            
            
            
            
            $
            10,722,671
            
            
            $
            6,384,588Net
      income per share:-Basic
            
            
            14
            
            
            $
            0.60
            
            
            $
            27.04-Diluted
            
            
            14
            
            
            $
            0.31
            
            
            $
            0.41Weighted
      average number of common stock-Basic
            
            
            14
            
            
            
            15,127,645
            
            
            
            223,658-Diluted
            
            
            14
            
            
            
            28,870,595
            
            
            
            14,814,958





See
accompanying notes to consolidated financial statements




F-5


SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITYFOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 2007(Stated
      in US Dollars)




Additional
              
              
              
              
              
              
              
              
              AccumulatedPreferred
              
              
              Preferred
              
              
              No.
              
              
              
              
              
              paid
              
              
              
              
              
              
              
              
              otherSeries
              
              
              Series
              
              
              shares
              
              
              Common
              
              
              in
              
              
              Statutory
              
              
              Retained
              
              
              comprehensiveA
              
              
              
              B
              
              
              outstanding
              
              
              stock
              
              
              capital
              
              
              reserves
              
              
              earnings
              
              
              income
              
              
              TotalBalance,
      January 1, 2007
              
              $
              1
              
              
              $
              1
              
              
              
              223,658
              
              
              $
              1
              
              
              $
              4,223,632
              
              
              $
              1,124,073
              
              
              $
              4,844,680
              
              
              $
              843,205
              
              
              $
              11,035,593Reversal
      of realized gain on investment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (423,537
              )
              
              
              (423,537
              )Net
      income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              6,047,505
              
              
              
              -
              
              
              
              6,047,505Appropriation
      to statutory reserves
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,003,905
              
              
              
              (1,003,905
              )
              
              
              -
              
              
              
              -Issuance
      to Vision re: Debentures
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              199,200
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              199,200Issuance
      of Series B ConvertiblePreferred
      Stock
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              11,677,133
              
              
              
              -
              
              
              
              (6,700,000
              )
              
              
              -
              
              
              
              4,977,133Foreign
      currency translation adjustment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              760,620
              
              
              
              760,620Balance,
      December 31,2007
              
              $
              1
              
              
              $
              1
              
              
              
              223,658
              
              
              $
              1
              
              
              $
              16,099,965
              
              
              $
              2,127,978
              
              
              $
              3,188,280
              
              
              $
              1,180,288
              
              
              $
              22,596,514Balance,
      January 1, 2008
              
              $
              1
              
              
              $
              1
              
              
              
              223,658
              
              
              $
              1
              
              
              $
              16,099,965
              
              
              $
              2,127,978
              
              
              $
              3,188,280
              
              
              $
              1,180,288
              
              
              $
              22,596,514Conversion
      of Preferred Series A into Common Stock
              
              
              (1
              )
              
              
              -
              
              
              
              13,711,831
              
              
              
              -
              
              
              
              1
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Conversion
      of Preferred Series B into Common Stock
              
              
              -
              
              
              
              -
              
              
              
              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 translation adjustment
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,663,902
              
              
              
              1,663,902Balance,
      December 31,2008
              
              $
              -
              
              
              $
              1
              
              
              
              18,499,736
              
              
              $
              2
              
              
              $
              22,679,965
              
              
              $
              2,127,978
              
              
              $
              12,247,049
              
              
              $
              2,844,190
              
              
              $
              39,899,185


See
accompanying notes to consolidated financial statements




F-6





SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 2007(Stated
      in US Dollars)





2008
            
            
            2007Cash
      flows from operating activitiesNet
      income
            
            $
            9,058,769
            
            
            $
            6,047,505Depreciation
            
            
            855,729
            
            
            
            1,186,203Amortization
            
            
            809,192
            
            
            
            218,260Profit
      on disposal of investments
            
            
            -
            
            
            
            (1,346,989
            )Adjustments
      to reconcile net incometo
      net cash provided by operating activities:Trade
      receivables, net
            
            
            (1,305,806
            )
            
            
            42,054Inventories
            
            
            224,124
            
            
            
            (349,802
            )Advances
      to suppliers
            
            
            858,369
            
            
            
            (975,910
            )Prepayments
            
            
            131,668
            
            
            
            223,112Tender
      deposits
            
            
            26,649
            
            
            
            (81,747
            )Travel
      advances to shareholders
            
            
            (5,750
            )
            
            
            (21,764
            )Advances
      to employees
            
            
            152,944
            
            
            
            (470,106
            )Accounts
      payable
            
            
            (197,352
            )
            
            
            178,921Income
      tax payable
            
            
            457,219
            
            
            
            (104,819
            )Turnover
      and other taxes
            
            
            249,400
            
            
            
            24,330Expected
      warranty liabilities
            
            
            (8,533
            )
            
            
            29,737Customers
      deposits
            
            
            (218,802
            )
            
            
            131,064Accrued
      liabilities
            
            
            (42,702
            )
            
            
            141,730Other
      payables
            
            
            (22,870
            )
            
            
            31,362Net
      cash provided by operating activities
            
            $
            11,022,248
            
            
            $
            4,903,141Cash
      flows from investing activitiesDecrease/(increase) in restricted cash
            
            $
            112,683
            
            
            $
            (491,049
            )Sale
      of short term investments
            
            
            -
            
            
            
            6,073,136Advances
      to related company
            
            
            -
            
            
            
            (562,406
            )Repayment
      from/(advances) to a director
            
            
            1,080,457
            
            
            
            (988,757
            )Purchase
      of short term investments
            
            
            -
            
            
            
            (3,413,328
            )Purchase
      of plant and equipment
            
            
            (1,172,432
            )
            
            
            (619,627
            )Purchase
      of intangibles
            
            
            -
            
            
            
            (5,687,457
            )Deposit
      for the acquisition of computer software
            
            
            (1,723,593
            )
            
            
            -Deposit
      for the acquisition of subsidiary
            
            
            (7,725,445
            )
            
            
            -Net
      cash used in investing activities
            
            $
            (9,428,330
            )
            
            $
            (5,689,488
            )Cash
      flows from financing activitiesProceeds
      from vision re: Debentures
            
            $
            -
            
            
            $
            199,202Proceeds
      from issuance of Series B ConvertiblePreference
      Stock
            
            
            -
            
            
            
            4,977,133Proceeds
      from exercise of Series J ConvertiblePreferred
      Stock
            
            
            6,580,000
            
            
            
            -Bank
      loan repayments
            
            
            -
            
            
            
            (196,923
            )Net
      cash provided by financing activities
            
            $
            6,580,000
            
            
            $
            4,979,412






F-7





SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Continued)FOR
      THE YEARS ENDED DECEMBER 31, 2008 AND 2007(Stated
      in US Dollars)





2008
            
            
            2007Net
      in cash and cash equivalents sourced
            
            $
            8,173,918
            
            
            $
            4,193,065Effect
      of foreign currency translation oncash
      and cash equivalents
            
            
            1,195,923
            
            
            
            (122,013
            )Cash
      and cash equivalents–beginning of year
            
            
            5,820,100
            
            
            
            1,749,048Cash
      and cash equivalents–end of year
            
            $
            15,189,941
            
            
            $
            5,820,100








2008
            
            
            2007Supplementary
      cash flow information:Tax
      paid
            
            $
            1,269,609
            
            
            $
            1,117,678Interest
      received
            
            
            66,935
            
            
            
            61,983Interest
      paid
            
            
            -
            
            
            
            9,442







See
accompanying notes to consolidated financial statements




F-8


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(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. 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.





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.





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








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-9


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


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





Name of subsidiaries
            
            Place of incorporation
            
            Attributable interestWorld
      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%*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-10


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(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
              47
      yearsTechnology-based
      design
              10
      years




(f)
            Accounting
      for software systems





The
Company adopts FASB No. 86 for accounting of software systems, in that all
expenditures incurred from start-up to completion of feasibility are expensed;
development costs, after the feasibility study through system completion, are
capitalized, and are depreciated over a useful life of three years. Expenditures
incurred after completion are expensed as repairs and maintenance.





(g)
            Property,
      plant and equipment





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 plant and
equipment are as follows:




Buildings
                20
      yearsMachinery
      and equipment
                6
      yearsMolding
                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.





(h)
            Maintenance
      and repairs





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





(i)
              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
SFAS No. 144. 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.




During
the reporting years, there was no impairment loss.




F-11


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(j)
            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.





(k)
            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.





(l)
            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 only in the PRC. The Company does not maintain any bank accounts
in the United States of America.





2008
            
            
            2007Bank
      of Communications, Branch of DaqingCity
      Economic Zone
            
            $
            9,606,188
            
            
            $
            5,398,866Daqing
      City Commercial Bank
            
            
            4,536,667
            
            
            
            72,690Agricultural
      Bank of China
            
            
            930,332
            
            
            
            -HSBC
            
            
            109,151
            
            
            
            348,362Cash
      on hand
            
            
            7,603
            
            
            
            182$
            15,189,941
            
            
            $
            5,820,100





(m)
            Restricted
      cash





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





(n)
            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-12


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(n)
            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 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.





(o)
            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.





(p)
            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.





(q)
            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 $86,507 and
nil and cost of sales were $28,825 and nil for the years ended December 31, 2008
and 2007 respectively.





(r)
            Advertising




The Group
expensed all advertising costs as incurred.  Advertising expenses
included in selling expenses were $47,453 and $72,835 for the years ended
December 31, 2008 and 2007 respectively.





(s)
            Shipping
      and handling





All
shipping and handling are expensed as incurred.  Shipping and handling
expenses included in selling expenses were $29,217 and $35,577 for the years
ended December 31, 2008 and 2007 respectively.





(t)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $36,138
and $175,567 for the years ended December 31, 2008 and 2007
respectively.








F-13





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(u)
            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 $18,485 and $26,970 for the years ended December 31, 2008 and 2007
respectively.




(v)
            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.





(w)
            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 and Beijing
Sunway 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:





2008
            
            
            2007Year
      end RMB : USD exchange rate
            
            
            6.8542
            
            
            
            7.3141Average
      yearly RMB : USD exchange rate
            
            
            6.9622
            
            
            
            7.6172




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-14


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(x)
            Statutory
      reserves





As
stipulated by the PRC’s Company Law and as provided in the SWT, and Sunway’s
Articles of Association, SWT and Sunway’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.





(y)
            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.





(z)
            Recent
      accounting pronouncements





In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 160, "Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51”.  SFAS
160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary.  SFAS 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15,
2008.  As such, the Company is required to adopt these provisions at
the beginning of the fiscal year ended December 31, 2009.  The Company
is currently evaluating the impact of SFAS 160 on its consolidated financial
statements but does not expect it to have a material effect





In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (“SFAS”) No. 141(R), "Business
Combinations”.  SFAS 141(R) establishes principles and requirements
for how the acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, an any noncontrolling
interest in the acquiree, recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase, and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination.  SFAS
141(R) is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008.  As such, the Company
is required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009.  The Company is currently evaluating the impact of
SFAS 141(R) on its consolidated financial statements but does not expect it to
have a material effect.








F-15


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(z)
            Recent
      accounting pronouncements
(Continued)





In March
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative
Instruments and Hedging Activities”. SFAS 161 is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity’s financial position, financial performance, and cash flows. It is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. The
Company is currently evaluating the impact of SFAS 161 on its consolidated
financial statements but does not expect it to have a material
effect.





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with GAAP. SFAS 162 directs the GAAP hierarchy to the entity, not the
independent auditors, as the entity is responsible for selecting accounting
principles for financial statements that are presented in conformity with GAAP.
SFAS 162 is effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to remove the GAAP hierarchy from the
auditing standards. SFAS 162 is not expected to have a material impact on the
Company’s financial statements.




F-16


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(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, 2008 and 2007. The
Group performs ongoing evaluations of its cash position and credit evaluations
to ensure collections and minimize losses.





As of
December 31, 2008 and 2007, the Group’s bank deposits were all placed with banks
in the PRC where there is currently no rule or regulation in place for
obligatory insurance of bank accounts.





For the
years ended December 31, 2008 and 2007, all of the Group’s sales were generated
from the PRC. In addition, all trade receivables as of December 31, 2008 and
2007 also arose in the PRC.





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:





2008
            
            
            2007Customer
      A
            
            $
            -
            
            
            $
            1,323,321Customer
      B
            
            
            -
            
            
            
            1,295,752Customer
      D
            
            
            1,915,343
            
            
            
            -Customer
      E
            
            
            2,076,212
            
            
            
            -Customer
      F
            
            
            1,910,316
            
            
            
            -Customer
      G
            
            
            2,076,212
            
            
            
            -Customer
      H
            
            
            2,287,352
            
            
            
            -





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





2008
            
            
            2007Customer
      A
            
            $
            -
            
            
            $
            275,851Customer
      B
            
            
            -
            
            
            
            269,861Customer
      C
            
            
            -
            
            
            
            235,149Customer
      D
            
            
            -
            
            
            
            221,510Customer
      E
            
            
            325,129
            
            
            
            159,005Customer
      F
            
            
            387,263
            
            
            
            -Customer
      H
            
            
            396,822
            
            
            
            -Customer
      I
            
            
            499,583
            
            
            
            -Customer
      J
            
            
            371,218
            
            
            
            -




F-17




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





4.
            AMOUNT
      DUE FROM A RELATED COMPANY





As at
December 31, 2007, the amount was due from Beijing Sunway New-force Medical
Treatment Tech Co.,Ltd (Beijing Sunway), a related company where Mr Liang Deli,
the director of the Group is a shareholder.   The amount is
unsecured, interest free and repayable on demand.  The amount is held
by Beijing Sunway for the proposed development of representative offices in
Beijing, Hang Zhou, Xian & Shanghai. This arrangement would be a better
working capital arrangement.





As at
December 31, 2008, the amount was due from Rise Elite International Ltd (Rise
Elite), a related company where Mr. Liu Bo, the director of the Company is a
shareholder.   The amount is unsecured, interest free and
repayable on demand.  The amount was held by Rise Elite for the
initial setup expenses.





5.
            AMOUNT
      DUE FROM A DIRECTOR





Amount
due from Liu Bo, the director of the company is unsecured, interest free and
repayable on demand.  The amount was held for the proposed development
of representative offices in Beijing, Hang Zhou, Xian & Shanghai. This
arrangement would be a better working capital arrangement.


6.
              TRADE
      RECEIVABLES, NET




2008
            
            
            2007Trade
      receivables, gross
            
            $
            2,962,333
            
            
            $
            1,533,085Provision
      for doubtful debts
            
            
            (8,414
            )
            
            
            (7,884
            )$
            2,953,919
            
            
            $
            1,525,201





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,
2008 and 2007 is as follows:




2008
            
            
            2007Balance
      at beginning of year
            
            $
            7,884
            
            
            $
            7,377Addition
      of the provision
            
            
            -
            
            
            
            -Foreign
      exchange adjustment
            
            
            530
            
            
            
            507Balance
      at end of year
            
            $
            8,414
            
            
            $
            7,884





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 collectibility of outstanding accounts. The Group evaluates
the credit risks of its customers utilizing historical data and estimates of
future performance.




F-18




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





7.
            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.


2008
            
            
            2007Bo
      Liu
            
            $
            23,495
            
            
            $
            4,244Qichai
      Zhao
            
            
            -
            
            
            
            700Deli
      Liang
            
            
            15,238
            
            
            
            6,568Weishan
      Sun
            
            
            -
            
            
            
            19,312$
            38,733
            
            
            $
            30,824





8.
            ADVANCES
      TO EMPLOYEES





Advances
to employees are advances for purchases and travelling. They are unsecured,
interest free and repayable on demand.





9.
            INVENTORIES





Inventories
comprise the followings:





2008
            
            
            2007Finished
      goods
            
            $
            218,448
            
            
            $
            161,005Work
      in process
            
            
            188,855
            
            
            
            -Raw
      materials
            
            
            183,435
            
            
            
            605,928$
            590,738
            
            
            $
            766,933








10.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net comprise the followings:





2008
            
            
            2007At
      costBuilding
            
            $
            1,447,402
            
            
            $
            1,356,392Machinery
      and equipment
            
            
            1,116,941
            
            
            
            1,022,960Moldings
            
            
            4,155,598
            
            
            
            2,992,166Computer
      software
            
            
            2,073,181
            
            
            
            1,942,823Office
      equipment and motor vehicles
            
            
            288,736
            
            
            
            80,439$
            9,081,858
            
            
            $
            7,394,780Less:
      accumulated depreciation
            
            
            (4,011,987
            )
            
            
            (2,945,161
            )$
            5,069,871
            
            
            $
            4,449,619




F-19





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





10.
            PROPERTY,
      PLANT AND EQUIPMENT, NET
(Continued)





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





2008
            
            
            2007Cost
      of sales
            
            $
            786,844
            
            
            $
            598,077General
      and administrative expenses
            
            
            68,885
            
            
            
            588,126$
            855,729
            
            
            $
            1,186,203





11.
            INTANGIBLES





Details
of intangibles are as follows:


2008
            
            
            2007Land
      use rights, at cost
            
            $
            1,354,308
            
            
            $
            1,269,151Less:
      accumulated amortization
            
            
            (91,249
            )
            
            
            (58,508
            )$
            1,263,059
            
            
            $
            1,210,643Technology-based
      design, at cost
            
            $
            6,320,577
            
            
            $
            5,923,149Less:
      accumulated amortization
            
            
            (1,006,867
            )
            
            
            (200,301
            )$
            5,313,710
            
            
            $
            5,722,848$
            6,576,769
            
            
            $
            6,933,491





Patent of
the Pneumatic Tube System has been registered with the PRC government under
Serial No. 264-2004 2005 with a registration fee of $347 (RMB 2,800) which was
expensed in 2003.  This amount was immaterial for
capitalization.





The Group
acquired the rights to use a parcel of land totalling 26,522 square meters, for
a consideration of $1,149,788 (RMB 9,282,700), located at Daqing Hi-Tech
Industry Development Zone, Daqing, Heilongjiang in the People’s Republic of
China 163316 for a term of 46 years from September 16, 2005 to June 13,
2052.  The land has been used to build the Group’s
facility.





Amortization
expense included in the general and administrative expenses for the years ended
2008 and 2007 were $809,192and $218,260 respectively.






F-20


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





12.
            EXPECTED
      WARRANTY LIABILITIES





An
analysis of the expected warranty liabilities for the years ended December 31,
2008 and 2007 is as follows:





2008
            
            
            2007Balance
      at beginning of year
            
            $
            55,351
            
            
            $
            22,811Addition
      of warranty liabilities
            
            
            -
            
            
            
            55,918Warranty
      expense for the year
            
            
            (8,533
            )
            
            
            (23,378
            )Foreign
      currency difference
            
            
            3,578
            
            
            
            -Balance
      at end of year
            
            $
            50,396
            
            
            $
            55,351




13.
            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
            
            A
      Warrant
            
            B
      Warrant
            
            J
      Warrant
            
            C
      Warrant
            
            D
      WarrantVision
      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





Series
      of Warrant
            Number
      of shares
            Exercise
      Price
            Expiry
      DateSeries
      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
17,644 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-21


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)







13.
            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 13,711,800 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-22


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(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:





2008
            
            
            2007Earnings:Earnings
      for the purpose of basicearnings per
      share
            
            $
            9,058,769
            
            
            $
            6,047,505Effect
      of dilutive potential commonstock
            
            
            -
            
            
            
            -Earnings
      for the purpose of dilutiveearnings per
      share
            
            $
            9,058,769
            
            
            $
            6,047,505Number
      of shares:Weighted
      average number ofcommon
      stock for the purpose of basicearnings per
    share
            
            
            15,127,645
            
            
            
            223,658Effect
      of dilutive potential common stock–
      conversion of Series A convertible preferred stock
            
            
            1,386,169
            
            
            
            9,628,340–
      conversion of Series B convertible preferred stock
            
            
            4,883,223
            
            
            
            4,962,960–
      conversion of Warrant Series A
            
            
            2,349,426
            
            
            
            -–
      conversion of Warrant Series B
            
            
            773,773
            
            
            
            -–
      conversion of Warrant Series J
            
            
            1,917,519
            
            
            
            -–
      conversion of Warrant Series C
            
            
            1,886,496
            
            
            
            -–
      conversion of Warrant Series D
            
            
            546,344
            
            
            
            -Weighted
      average number of commonstock
      for the purpose of dilutiveearnings per
      share
            
            
            28,870,595
            
            
            
            14,814,958






F-23




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





15.
            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 and Beijing Sunway (see note
1).





SWT,
Sunway and Beijing Sunway, 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 25% and 33% respectively for the years ended December
31, 2008 and 2007.





However,
Sunway is a high technology company, and in accordance with the relevant
regulations regarding the favorable 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.





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, 2008 and
2007.





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





2008
            
            
            2007U.S.
      statutory rate
            
            
            34
            %
            
            
            34
            %Foreign
      income not recognized in the U.S.
            
            
            (34
            )%
            
            
            (34
            )%PRC
      CIT
            
            
            25
            %
            
            
            33
            %Tax
      holiday
            
            
            (10
            )%
            
            
            (18
            )%Provision
      for income taxes
            
            
            15
            %
            
            
            15
            %




The
provision for income taxes consists of the following:





2008
            
            
            2007Current
      tax - PRC CIT
            
            $
            1,726,828
            
            
            $
            1,181,064Deferred
      tax provision
            
            
            -
            
            
            
            -Income
      tax expenses
            
            $
            1,726,828
            
            
            $
            1,181,064






F-24





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





16.
            COMMITMENTS
      AND CONTINGENCIES





The Group
has entered into a tenancy agreement for factory expiring through 2008. Total
rental expenses for the year ended December 31, 2008 and 2007 amounted to
$115,332 and $14,016 respectively.





As at
December 31, 2008, the Group’s commitments for minimum lease payments under
these leases for the next one year are as follows:





December
      31,2009
            
            $
            70,9222010
      and thereafter
            
            
            -$
            70,922





17.
            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 five 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:





2008
            
            Workstation
            
            
            Workstation
            
            
            WorkstationType
      A
            
            
            Type
      B
            
            
            Type
      C
            
            
            SADP
            
            
            Others
            
            
            ConsolidatedNet
      revenues
            
            $
            3,634,627
            
            
            $
            7,596,018
            
            
            $
            7,213,955
            
            
            $
            1,364,511
            
            
            $
            36,771
            
            
            $
            19,845,882Cost
      of netrevenues
            
            
            (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





2007
            
            Workstation
            
            
            Workstation
            
            
            WorkstationType
      A
            
            
            Type
      B
            
            
            Type
      C
            
            
            SADP
            
            
            Others
            
            
            ConsolidatedNet
      revenues
            
            $
            4,221,531
            
            
            $
            7,643,607
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            11,865,138Cost
      of netrevenues
            
            
            (1,229,000
            )
            
            
            (2,244,411
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3,473,411
            )$
            2,992,531
            
            
            $
            5,399,196
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            8,391,727





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-25




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


(Stated
in US Dollars)





18.
            FAIR
      VALUE OF FINANCIAL INSTRUMENTS





The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties.  The
carrying amounts of financial assets and liabilities, such as cash and cash
equivalents, trade receivables, other receivables, accounts payable, and other
payables, approximate their fair values because of the short maturity of these
instruments and the availability of the market rates of interest.





19.
            SUBSEQUENT
      EVENT





On August
31, 2008, the Group entered an agreement with a third party, Liheng Enterprise
Company Limited, to acquire its 100% of the share capital, for a cash
consideration of approximately $7.29 million (RMB$50,000,000). The whole amount
of $ 7,725,445 was paid and classified as “Deposit for the acquisition of
subsidiary” as at December 31, 2008. The transaction was planned to have closed
on December 1, 2008, but due to PRC authority processing delays, was completed
on January 16, 2009.





Details
of net assets acquired and goodwill are as follows:




Purchase
      consideration
            
            $
            7,725,445Less:
      Fair value of net assets acquired (see below)
            
            
            (2,894,059
            )Goodwill
            
            $
            4,831,386











The
assets and liabilities arising from the acquisition, provisionally determined,
are as follows:





Fair
      valueCash
      and cash equivalents
            
            $
            73,193Property,
      plant and equipment
            
            
            955,208Land
      use right
            
            
            1,133,323Other
      receivables
            
            
            1,127,949Turnover
      and other taxes
            
            
            28,477Other
      payables
            
            
            (424,091
            )Net
      assets acquired
            
            $
            2,894,059








F-26







ITEM
9.                      CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND   FINANCIAL
DISCLOSURE.





On May
31, 2007, the Company’s board of directors approved the dismissal of Bagell
Josephs Levine & Co. (“Bagell Josephs Levine”) as our registered independent
certified public accounting firm effective on June 11, 2007. At the same time,
the Company’s board of directors appointed Samuel H. Wong & Co., LLP (“SWC”)
as its new registered independent certified public accounting firm.





The
reason for the change in accounting firm was that Sunway’s operating businesses
had previously been audited by SWC, and our new management elected to continue
this existing relationship. During the fiscal years ended September 30, 2005 and
2006, there were no disagreements between our company and Bagell Josephs Levine
on any matter listed under Item 304 Section (a)(1)(iv) A to E of Regulation S-B,
including accounting principles or practices, financial statement disclosure or
auditing scope or procedure which, if not resolved to the satisfaction of Bagell
Josephs Levine would have caused Bagell Josephs Levine to make reference to the
matter in its reports on our financial statements.





Bagell
Josephs Levine’s audit opinions on the financial statements for the fiscal years
ended September 30, 2005 and 2006 did not contain an adverse opinion or
disclaimer of opinion, nor was either opinion qualified or modified as to
uncertainty, audit scope or accounting principles, except that the reports of
Bagell Josephs Levine for the fiscal years ended December 31, 2005 and 2006
indicated conditions which raised substantial doubt about the Company's ability
to continue as a going concern.





Prior to
engaging Bagell Josephs Levine, Bagell Josephs Levine did not provide our
company with either written or oral advice that was an important factor
considered by our company in reaching a decision to change our independent
registered public accounting firm from Bagell Josephs Levine to
SWC.





On
January 28, 2008, Sunway Global Inc. (the “Company”) notified SWC that it was
being terminated as the Company’s independent registered public accounting firm.
The decision to dismiss SWC  as
the Company’s independent registered public accounting firm was approved by the
Company’s Board of Directors on January 28, 2008. At the same time, the
Company’s Board of Directors approved the engagement Albert Wong & Co. LLP
(“Albert Wong & Co.”) as its independent registered public accounting firm
for the Company’s fiscal year ended December 31, 2007.





The
Company engaged SWC from May 31, 2007 through January 28, 2008 (the “Engagement
Period”). During the Engagement Period, SWC did not issue any reports on the
Company’s financial statements for either of the Company’s two most recent
fiscal years that contained an adverse opinion or a disclaimer of opinion or was
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Engagement Period, the Company did not have any disagreements with
SWC on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved
to SWC’s satisfaction, would have caused them to make reference thereto in their
reports on the Company’s financial statements for such years.





The
Company has provided SWC with a copy of its disclosures on Form 8-K/A dated as
of February 20, 2008 prior to the filing of these disclosures and has requested
that SWC furnish a letter addressed to the Securities and Exchange Commission
stating whether or not SWC agrees with the statements made herein above and, if
not, stating in which respects SWC does not agree. The Company will file an
amendment to the Form 8-K/A as an exhibit a copy of the requested letter from
SWC upon receipt.





During
the fiscal year ended December 31, 2007, the Company did not consult with Albert
Wong & Co. regarding (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company’s financial statements, and no
written report or oral advice was provided to the Company that was an important
factor to be considered by the Company in reaching a decision as to an
accounting, auditing or financial reporting issue; or (ii) any matter or event
that was the subject of disagreement, as that term is defined in Item
304(a)(1)(v) of Regulation S-B and the related instructions to Item 304 of
Regulation S-B.





Prior to
engaging Albert Wong & Co., Albert Wong & Co. did not provide our
company with either written or oral advice that was an important factor
considered by our company in reaching a decision to change our independent
registered public accounting firm from SWC to Albert Wong & Co.





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.




29





During
the course of internal evaluation, our accounting staff found misstatements in
our previously reported financial statements for the fiscal year ended December
31, 2007 that required correction, relating to the improper use of exchange
rates for shareholders’ equity items, which resulted in an overstatement of
Series A Convertible Preferred Stock by $18, additional paid-in capital by
$253,482, statutory reserves by $37,309, retained earnings by $128,861, and the
understatement of accumulated other comprehensive income and foreign currency
translation by $419,670 and $47,296 respectively for the year ended December 31,
2007.





Moreover,
during the course of internal evaluation, there was a reclassification of
restricted cash $491,049 from current asset to non- current asset and there was
a correction for the basic and diluted weighted average number of common stock
from 223,653 to 223,658 and from 14,814,953 to 14,814,958 respectively for the
year ended December 31, 2007.





Finally,
during the course of internal evaluation, the Company’s management determined
that it was necessary to (i) restate consolidated balance sheets, consolidated
income statements, consolidated statements of stockholders’ equity and
consolidated statement of cash flows and accompanying notes and text for the
first quarter 2008 as a result of improper use of exchange rates of
shareholders’ equity items and the inclusion of the financial figures of
expenses incurred in the Company’s acquisition of Beijing Sunway, a wholly-owned
subsidiary; (ii) restate the diluted weighted average number of common stock
because of the exclusion of the dilutive effects of the Series A and B
Convertible Preferred Stock and Warrants A, B, C, D and J; (iii) reclassify
restricted cash from current asset to non-current asset and the items in selling
expense and general and administrative expenses; and (iv) clarify principles of
consolidation, accounting policies of revenue recognition and expected warranty
liabilities and the notes of organization and principal activities, amount due
from a director, Series B Convertible Preferred stock and associated warrants,
earnings per share and segment information.





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, the Company's disclosure controls and procedures are effective to ensure
that information required to be included in the Company's periodic SEC filings
is recorded, processed, summarized, and reported within the time periods
specified in the SEC rules and forms.





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, 2008.  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, 2008, 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.




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.





30


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





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, 2008.  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 or omission in any report we have filed
with or submitted to the Commission.




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.





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.





On August
31, 2008, the Company entered an agreement with a third party, Liheng
Enterprise Company Limited, to acquire its 100% of the share capital, for a cash
consideration of approximately $7,29 million (RMB$50,000,000). The whole amount
of $7,725,445 was paid and classified as "Deposit for the acquisition of
subsidiary" as at December 31, 2008. The transaction was planned to have
closed on December 1, 2008, but due to PRC authority processing delays, was
completed on January 16, 2009.





Liheng
Enterprise Company Limited is engaged in the business of processing babies'
wear. The Company plans to use its newly acquired subsidiary as a geographic
base from which to (i) increase design capacity; (2) recruit new employees with
technical and R&D expertise; (3) decrease carriage fees.







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.





31


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




Directors
      and Executive Officers
            
            Position/Title
            
            AgeLiu
      Bo
            
            President,
      Chief Executive Officer and Director
            
            43Samuel
      Sheng
            
            Chief
      Financial Officer
            
            38Sun
      Weishan
            
            Chief
      Operating Officer and Secretary
            
            47Liang
      Deli
            
            Director
            
            46




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.





To our
knowledge, during the last five 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 been subject 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,
      or the Commodities Futures Trading Commission to have violated a federal
      or state securities or commodities law, and the judgment has not been
      reversed, suspended or vacated.


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
401(e) of Regulation S-B, and is "independent" as the term is used in Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act. 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 2008 fiscal year.





32


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.




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.





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, 2008 have been in compliance
with Section 16(a), except that Samuel Sheng and Sun Weishan did not timely file
Form 3s with respect to their appointment as chief operating officer and chief
financial officer on December 1, 2007 and November 31, 2007,
respectively.




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, 2008 and
2007.





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, 2008 and
2007.





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
      Bo
              CEO
      and Director (current)
            
            
            2008
            
            
            86,180
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            86,1802007
            
            
            63,158
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            63,158Richard
      Astrom
              CEO
      (former)
            
            
            2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2007
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Samuel
      Sheng
              CFO
      (current)
            
            
            2008
            
            
            68,940
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            68,9402007
            
            
            3,378
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,378David
      Wang
              CFO
      (former)
            
            
            2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -2007
            
            
            39,473
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            39,473




Sun
      Weishan
              COO
      (current)
            
            
            2008
            
            
            68.940
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            68,9402007
            
            
            39,380
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            39,380







Outstanding
Equity Awards at Fiscal Year-End





As of our
fiscal years ended December 31, 2008 and 2007, 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, 2008 and 2007. No equity awards were granted
during the year ended December 31, 2008.





33


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
$68,940 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.





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,
2009.  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)(4)
            
            5.24
            %Samuel
      Sheng
            
            
            Chief Financial Officer
            
            
            -
            (5)
            
            -Sun
      Weishan
            
            
            Chief Operating Officer
              and Secretary
            
            
            -
            (5)
            
            -All
      directors and officers as a group
            
            
            
            
            
            9,875,820
            
            
            53.38
            %







34


(1) Applicable percentage ownership is based on
18,499,736 shares of common stock outstanding as of March 24, 2009, together
with securities exercisable or convertible into shares of common stock within 60
days of March 24, 2009 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, 2009 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.





(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.





(4) Liang
Deli was appointed and Richard Astrom resigned as a director of the Company
in connection with the consummation of the Share Exchange Agreement effective on
the tenth day following the mailing of an information statement on Schedule
14F-1 relating to the change in control of our board of directors, which the
Company filed with the SEC on June 4, 2007.





(5)
Samuel Sheng was appointed as Chief Financial Officer and Sun Weishan was
appointed as Secretary to replace David Wang, who resigned as Chief Financial
Officer and Secretary on November 6, 2007.




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:




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 2009 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, 2008 and December 31,
2007, 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 $50,000 (Albert Wong), respectively.





Audit-Related
Fees. The aggregate fees incurred by the Company’s independent registered public
accounting firms were $3,097 (Albert Wong), respectively, for audit-related
services during the years ended December 31, 2008 and December 31,
2007.





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, 2008 and December 31, 2007.





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, 2008
and December 31, 2007.





35


ITEM
15.                      EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.





Exhibits:





Exhibit
              No.
            
            Description
      of Exhibit3.1
            
            Articles
      of Incorporation, as amended and corrected.*3.2
            
            Bylaws.**3.3
            
            Specimen
      of Common Stock certificate.*3.4
            
            Certificate
      of Designations authorizing the Series A Convertible Preferred Stock, as
      amended and corrected.*3.5
            
            Certificate
      of Designations authorizing the Series B Convertible Preferred Stock, as
      amended and corrected.*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.*4.2
            
            Registration
      Rights Agreement, dated as of June 5, 2007, by and between the Company and
      Vision Opportunity Master Fund, Ltd.*4.3
            
            Lock-Up
      Agreement, dated as of June 5, 2007, by and among the Company and Rise
      Elite.*4.4
            
            Form
      of Series A Warrant.*4.5
            
            Form
      of Series B Warrant.*4.6
            
            Form
      of Series C Warrant.*4.7
            
            Form
      of Series D Warrant.*4.8
            
            Form
      of Series J Warrant.*4.9
            
            Form
      of Series E Warrant issued to Kuhns Brothers.*10.1
            
            Share
      Exchange Agreement, dated as of June 5, 2007, by and between the Company,
      Rise Elite and World Through Limited.*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.*10.3
            
            Form
      of Escrow Agreement, dated June 5, 2007, by and between the Company, Rise
      Elite, Vision and Loeb and Loeb LLP.***10.4
            
            Engagement
      Letter Agreement, dated September 1, 2006, by and
      between Sunway and Kuhns Brothers, Inc.*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.*10.6
            
            Form
      of Consignment Agreement, dated as of June 5, 2007, between Rise Elite and
      the Shareholders of Sunway.***10.7
            
            Form
      of Consignment Transfer Agreement, dated as of June 5, 2007, between Rise
      Elite and WTL.***10.8
            
            Exclusive
      Purchase Option Agreement, dated as of June 5, 2007, between shareholders
      of Sunway and WTL.***10.9
            
            Intellectual
      Property Transfer Agreement, dated as of June 5, 2007, between Sunway and
      SWT.***10.10
            
            Intellectual
      Property Licensing Agreement, dated as of June 5, 2007, between Sunway and
      SWT.***10.11
            
            Consigned
      Management Agreement, dated as of June 5, 2007, between SWT, Sunway, and
      the shareholders of Sunway.***10.12
            
            Loan
      Agreement, dated as of June 5, 2007, between Sunway and
      SWT.***10.13
            
            Equipment
      Lease Agreement, dated as of June 5, 2007, between Sunway and
      SWT.***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.
              Amendment
      to Registration Rights Agreement dated June 19, 2008 by and between the
      Company and Vision Opportunity Master Fund, Ltd.****10.16
            
            Capital
      Transfer Agreement, dated March 16, 2008, by and among SWT, Liang DeLi,
      Sun Xitao, and Yao Liyan.*****10.17
            
            Share
      and Asset Transfer Agreement, dated August 31, 2008, by and between Liheng
      Enterprise Company Limited and SWT.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.10.19
            
            Lease
      Agreement, datedMarch
      18, 2008,
      by and between Daqing Sunway
      andDaqing
      Zhuangye Guangchang Co., Ltd.21.1
            
            List
      of Subsidiaries.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.





*
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.


**
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.


*** 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.


****
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.


*****
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.





36





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.March
      30, 2009
              By:
              /s/ Liu
      BoLiu
      BoChief
      Executive Officer and Chairman (principal executiveofficer)




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
            
            DateChief
      Executive Officer and Chairman of the
            
            March
      30, 2009/s/
      Liu Bo
            
            Board
      of DirectorsLiu
      BoChief
      Financial Officer (principal financial
            
            March
      30, 2009/s/
      Samuel Sheng
            
            and
      accounting officer)Samuel
      Sheng/s/
      Liang Deli
            
            Director
            
            March
      30, 2009Liang
      Deli







37