UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




FORM
10-Q




(Mark
One)




xQUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




FOR
THE QUARTERLY PERIOD ENDED March 31, 2010




OR




oTRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934




FOR
THE TRANSITION FROM _______ TO ________.




COMMISSION
FILE NUMBER 000-27159




SUNWAY GLOBAL
INC.


(Exact
Name of Registrant as Specified in its Charter)




Nevada
              
              26-1650042(State
      or other jurisdiction of
              
              (I.R.S.
      Employerincorporation
      or organization)
              
              Identification
      No.)





Daqing Hi-Tech Industry
Development Zone, Daqing, Heilongjiang, People’s Republic of China,
163316


(Address
of principal executive offices) (Zip Code)





Issuer's
telephone Number: 86-459-604-6043




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
preceding 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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   Yes  ̈  No   ̈




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 12b-2 of the Exchange Act.




Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o
            Smaller
      reporting company x




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




APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS


DURING
THE PRECEDING FIVE YEARS




Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes  o No o




APPLICABLE
ONLY TO CORPORATE ISSUERS




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of May 15, 2010, there were 18,499,736
outstanding shares of the Registrant's Common Stock, $0.0000001 par
value.








TABLE
OF CONTENTS





PagePART
      IItem
      1.
                Financial
      Statements
                
                3Item
      2.
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                
                32Item
      3.
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                37Item
      4T
                Controls
      and Procedures
                
                37PART
      IIItem
      1.
                Legal
      Proceedings
                
                38Item
      1A.
                Risk
      Factors
                
                38Item
      2.
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                38Item
      3.
                Defaults
      Upon Senior Securities
                
                39Item
      4.
                (Removed
      and Reserved)
                
                39Item
      5.
                Other
      Information
                
                39Item
      6.
                Exhibits
                
                39SIGNATURES
                
                40


2


PART I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS


ALBERT
      WONG & CO.
              CERTIFIED
      PUBLIC ACCOUNTANTS
              7th
      Floor, Nan Dao Commercial Building
              359-361
      Queen’s Road Central
              Hong
      Kong
              Tel
      : 2851 7954
              Fax:
      2545 4086
              ALBERT WONG
              B.Soc.,
      Sc., ACA., LL.B.,
              CPA(Practising)


To:
            The
      board of directors and stockholders
of


Sunway
Global Inc. (“the Company”)





Report of Independent
Registered Public Accounting Firm





We have
reviewed the accompanying interim consolidated balance sheets of Sunway Global
Inc. as of March 31, 2010 and 2009, and the related consolidated statements of
income, stockholders’ equity and cash flows for the three-month periods then
ended, in accordance with the standards of the Public Company Accounting
Oversight Board (United States). All information included in these financial
statements is the representation of the management of Sunway Global
Inc.





A review
consists principally of inquiries of company personnel and analytical procedures
applied to financial data. It is substantially less in scope than an audit in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.





Based on
our review, we are not aware of any material modifications that should be made
to the accompanying financial statements in order for them to be in conformity
with U.S. generally accepted accounting principles.





Hong
      Kong
            Albert
      Wong & Co.May
      17, 2010
            Certified
      Public Accountants


3





SUNWAY
GLOBAL INC.





CONSOLIDATED
BALANCE SHEETS


AS
AT MARCH 31, 2010 AND DECEMBER 31, 2009


(Stated
in US Dollars)




Notes
                    
                    March 31, 2010
                      (Unaudited)
                    
                    
                    December 31, 2009
                      (Audited)ASSETSCurrent
      assetsCash
      and cash equivalents
                    2(k)
                    
                    $
                    4,861,514
                    
                    
                    $
                    4,717,240Trade
      receivables, net
                    5
                    
                    
                    5,485,586
                    
                    
                    
                    3,537,395Inventories
                    8
                    
                    
                    643,977
                    
                    
                    
                    589,871Advances
      to suppliers
                    
                    
                    
                    527,233
                    
                    
                    
                    940,872Prepayments
                    
                    
                    
                    99,399
                    
                    
                    
                    127,388Tender
      deposits
                    
                    
                    
                    141,885
                    
                    
                    
                    122,050Travel
      advances to shareholders
                    6
                    
                    
                    116,584
                    
                    
                    
                    71,372Advances
      to employees
                    7
                    
                    
                    258,889
                    
                    
                    
                    217,865Total
      current assets
                    
                    
                    $
                    12,135,067
                    
                    
                    $
                    10,324,053Restricted
      cash
                    
                    
                    
                    253,023
                    
                    
                    
                    283,175Amount
      due from a related company
                    4
                    
                    
                    830
                    
                    
                    
                    830Property,
      plant and equipment, net
                    9
                    
                    
                    12,192,666
                    
                    
                    
                    10,508,415Intangibles,
      net
                    10
                    
                    
                    14,838,444
                    
                    
                    
                    15,109,988Deposit
      for technology-based designed
                    
                    
                    
                    3,131,997
                    
                    
                    
                    4,318,643TOTAL
      ASSETS
                    
                    
                    $
                    42,552,027
                    
                    
                    $
                    40,545,104LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                    
                    
                    $
                    284,472
                    
                    
                    $
                    271,139Income
      tax payable
                    
                    
                    
                    353,037
                    
                    
                    
                    269,082Turnover
      and other taxes
                    
                    
                    
                    278,491
                    
                    
                    
                    154,871Expected
      warranty liabilities
                    11
                    
                    
                    32,624
                    
                    
                    
                    32,618Customer
      deposits
                    
                    
                    
                    221,768
                    
                    
                    
                    304,093Accrued
      liabilities
                    
                    
                    
                    570,922
                    
                    
                    
                    657,215Total
      current liabilities
                    
                    
                    $
                    1,741,314
                    
                    
                    $
                    1,689,018Warrants
      liabilities
                    12
                    
                    
                    42,271,601
                    
                    
                    
                    40,808,327TOTAL
      LIABILITIES
                    
                    
                    $
                    44,012,915
                    
                    
                    $
                    42,497,345





See
accompanying notes to consolidated financial statements


4





SUNWAY
GLOBAL INC.





CONSOLIDATED
BALANCE SHEETS (Continued)


AS
AT MARCH 31, 2010 AND DECEMBER 31, 2009


(Stated
in US Dollars)





Notes
                      
                      March
      31, 2010
                      
                      
                      December
      31,
                        2009(Unaudited)
                      
                      
                      (Audited)STOCKHOLDERS’
      EQUITYSeries
      B Convertible Preferred Stock $0.0000001 par value; 400,000 shares
      authorized; 160,494 shares issued and outstanding at March 31, 2010
      and  December 31, 2009
                      13
                      
                      $
                      1
                      
                      
                      $
                      1Common
      stock at $0.0000001 par value; 100,000,000 shares authorized; 18,499,736
      shares issued and outstanding at March 31, 2010 and December 31,
      2009
                      
                      
                      
                      2
                      
                      
                      
                      2Additional
      paid-in capital
                      
                      
                      
                      18,689,023
                      
                      
                      
                      18,689,023Statutory
      reserves
                      
                      
                      
                      3,033,855
                      
                      
                      
                      3,033,855Accumulated
      deficit
                      
                      
                      
                      (26,105,686
                      )
                      
                      
                      (26,590,859
                      )Accumulated
      other comprehensive income
                      
                      
                      
                      2,921,917
                      
                      
                      
                      2,915,737$
                      (1,460,888
                      )
                      
                      $
                      (1,952,241
                      )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                      
                      
                      $
                      42,552,027
                      
                      
                      $
                      40,545,104





See
accompanying notes to consolidated financial statements


5





SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)




Notes
                  
                  Three
      months ended March 31,2010
                  
                  
                  2009Net
      revenues
                  17
                  
                  $
                  5,200,091
                  
                  
                  $
                  2,933,573Cost
      of net revenues
                  17
                  
                  
                  (1,757,452
                  )
                  
                  
                  (893,980
                  )Gross
      profit
                  
                  
                  $
                  3,442,639
                  
                  
                  $
                  2,039,593Selling
      expenses
                  
                  
                  
                  (406,247
                  )
                  
                  
                  (180,349
                  )General
      and administrative expenses
                  
                  
                  
                  (742,655
                  )
                  
                  
                  (631,894
                  )Income
      from operations
                  
                  
                  $
                  2,293,737
                  
                  
                  $
                  1,227,350Interest
      income
                  
                  
                  
                  4,363
                  
                  
                  
                  23,577Impairment
      on investment
                  
                  
                  
                  -
                  
                  
                  
                  (4,831,386
                  )Changes
      in fair value of warrants
                  
                  
                  
                  (1,463,274
                  )
                  
                  
                  (20,481,276
                  )Income/(loss)
      before income tax
                  
                  
                  $
                  834,826
                  
                  
                  $
                  (24,061,735
                  )Income
      tax expense
                  14
                  
                  
                  (349,653
                  )
                  
                  
                  (207,996
                  )Net
      income/(loss)
                  
                  
                  $
                  485,173
                  
                  
                  $
                  (24,269,731
                  )Net
      income/(loss) per
      share:-Basic
                  
                  
                  $
                  0.03
                  
                  
                  $
                  (1.31
                  )-Diluted
                  
                  
                  $
                  0.02
                  
                  
                  $
                  (1.31
                  )Weighted
      average number of common stock-Basic
                  15
                  
                  
                  18,499,736
                  
                  
                  
                  18,499,736-Diluted
                  15
                  
                  
                  27,772,675
                  
                  
                  
                  18,499,736





See
accompanying notes to consolidated financial statements


6





SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR
THE YEAR ENDED DECEMBER 31, 2009 AND THREE MONTHS ENDED MARCH 31,
2010


(Stated
in US Dollars)(Unaudited)





Additional
                                
                                
                                
                                
                                
                                
                                
                                
                                AccumulatedPreferred
                                
                                
                                No. of
                                
                                
                                
                                
                                
                                paid
                                
                                
                                
                                
                                
                                
                                
                                
                                otherSeries
                                
                                
                                shares
                                
                                
                                Common
                                
                                
                                in
                                
                                
                                Statutory
                                
                                
                                Accumulated
                                
                                
                                comprehensiveB
                                
                                
                                outstanding
                                
                                
                                stock
                                
                                
                                capital
                                
                                
                                reserves
                                
                                
                                deficit
                                
                                
                                income
                                
                                
                                TotalBalance,
      January 1, 2009
                                
                                $
                                1
                                
                                
                                
                                18,499,736
                                
                                
                                $
                                2
                                
                                
                                $
                                22,679,965
                                
                                
                                $
                                2,127,978
                                
                                
                                $
                                12,247,049
                                
                                
                                $
                                2,844,190
                                
                                
                                $
                                39,899,185Reclassification
      of warrants from equity to derivative liabilities
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (3,990,942
                                )
                                
                                
                                -
                                
                                
                                
                                (65,910,931
                                )
                                
                                
                                -
                                
                                
                                
                                (69,901,873
                                )Net
      income
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                27,978,900
                                
                                
                                
                                -
                                
                                
                                
                                27,978,900Appropriations
      to statutory reserves
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                905,877
                                
                                
                                
                                (905,877
                                )
                                
                                
                                -
                                
                                
                                
                                -Foreign
      currency translation adjustment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                71,547
                                
                                
                                
                                71,547Balance,
      December 31, 2009
                                
                                $
                                1
                                
                                
                                
                                18,499,736
                                
                                
                                $
                                2
                                
                                
                                $
                                18,689,023
                                
                                
                                $
                                3,033,855
                                
                                
                                $
                                (26,590,859
                                )
                                
                                $
                                2,915,737
                                
                                
                                $
                                (1,952,241
                                )Balance,
      January 1, 2010
                                
                                $
                                1
                                
                                
                                
                                18,499,736
                                
                                
                                $
                                2
                                
                                
                                $
                                18,689,023
                                
                                
                                $
                                3,033,855
                                
                                
                                $
                                (26,590,859
                                )
                                
                                $
                                2,915,737
                                
                                
                                $
                                (1,952,241
                                )Net
      income
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                485,173
                                
                                
                                
                                -
                                
                                
                                
                                485,173Foreign
      currency translation adjustment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                6,180
                                
                                
                                
                                6,180Balance,
      March 31, 2010
                                
                                $
                                1
                                
                                
                                
                                18,499,736
                                
                                
                                $
                                2
                                
                                
                                $
                                18,689,023
                                
                                
                                $
                                3,033,855
                                
                                
                                $
                                (26,105,686
                                )
                                
                                $
                                2,921,917
                                
                                
                                $
                                (1,460,888
                                )





See
accompanying notes to consolidated financial statements


7





SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars) (Unaudited)





Three
      months ended March 31,2010
                
                
                2009Cash
      flows from operating activitiesNet
      income/(loss)
                
                $
                485,173
                
                
                $
                (24,269,731
                )Depreciation
                
                
                440,058
                
                
                
                240,444Amortization
                
                
                370,359
                
                
                
                253,803Changes
      in fair value of warrants
                
                
                1,463,274
                
                
                
                20,481,276Impairment
      on investment
                
                
                -
                
                
                
                4,831,386Adjustments
      to reconcile net income to net cash provided by operating
      activities:Trade
      receivables, net
                
                
                (1,947,650
                )
                
                
                255,153Inventories
                
                
                (54,012
                )
                
                
                (430,489
                )Advances
      to suppliers
                
                
                413,797
                
                
                
                (776,077
                )Prepayments
                
                
                28,010
                
                
                
                (178,370
                )Tender
      deposits
                
                
                (19,816
                )
                
                
                94,457Travel
      advances to shareholders
                
                
                (45,202
                )
                
                
                (18,699
                )Advances
      to employees
                
                
                (40,990
                )
                
                
                98,741Accounts
      payable
                
                
                13,290
                
                
                
                652,243Income
      tax payable
                
                
                83,913
                
                
                
                (422,216
                )Turnover
      and other taxes
                
                
                123,597
                
                
                
                (289,028
                )Customer
      deposits
                
                
                (82,375
                )
                
                
                202,073Accrued
      liabilities
                
                
                (86,391
                )
                
                
                316,414Net
      cash provided by operating activities
                
                $
                1,145,035
                
                
                $
                1,041,381Cash
      flows from investing activitiesUsed
      of restricted cash
                
                $
                30,152
                
                
                $
                22,320Purchase
      of plant and equipment
                
                
                (147,804
                )
                
                
                (78,781
                )Purchase
      of intangibles assets
                
                
                (96,378
                )
                
                
                (596,754
                )Purchase
      of technology assets designed
                
                
                (787,482
                )
                
                
                (3,505,390
                )Net
      cash used in investing activities
                
                $
                (1,001,512
                )
                
                $
                (4,158,605
                )Cash
      flows from financing activities
                
                $
                -
                
                
                $
                -Net
      cash provided by financing activities
                
                $
                -
                
                
                $
                -


8





SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





Three
      months ended March 31,2010
                  
                  
                  2009Net
      in cash and cash equivalents sourced/(used)
                  
                  $
                  143,523
                  
                  
                  $
                  (3,117,225
                  )Effect
      of foreign currency translation on cash and cash
    equivalents
                  
                  
                  751
                  
                  
                  
                  139,715Cash
      and cash equivalents–beginning of period
                  
                  
                  4,717,240
                  
                  
                  
                  15,189,941Cash
      and cash equivalents–end of period
                  
                  $
                  4,861,514
                  
                  
                  $
                  12,212,431





Three
      months ended March 31,2010
                  
                  
                  2009Supplementary
      cash flow information:Tax
      paid
                  
                  $
                  265,740
                  
                  
                  $
                  630,304Interest
      received
                  
                  
                  4,363
                  
                  
                  
                  23,577





SUPPLEMENTAL
NON-CASH DISCLOSURES:





1.
            During
      the three months ended March 31, 2010 and 2009, an amount of nil and
      $1,752,695 were transferred from “deposit for the acquisition of computer
      software” to “property, plant and equipment”,
  respectively.





2.
            During
      the three months ended March 31, 2010 and 2009, an amount of $1,974,839
      and nil were transferred from “Deposit for technology-based designed” to
      “property, plant and equipment”,
respectively.





3.
            During
      the three months ended March 31, 2010 and 2009, an amount of nil and
      $7,725,445 were transferred from “deposit for the acquisition of
      subsidiary” to “acquisition of subsidiary, net of cash
      acquisition”.





See
accompanying notes to consolidated financial statements


9





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





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





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





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





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





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





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Method
      of accounting





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


10


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(b)
            Principles
      of consolidation





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





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





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
                                
                                PRC
                                
                                
                                100
                                %Co.,
      LtdQingdao
      Liheng Textiles Co Ltd
                                
                                PRC
                                
                                
                                100
                                %*Note:
      Deemed variable interest entity





(c)
            Use
      of estimates





The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.  Management makes these estimates using
the best information available at the time the estimates are made; however
actual results could differ materially from those estimates.





(d)
            Economic
      and political risks





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





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


11


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(e)
            Intangibles





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





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





(f)
              Property,
      plant and equipment





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





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





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





(g)
            Maintenance
      and repairs





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





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





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





For the
three months ended March 31, 2010 and 2009, impairment loss was nil and
$4,831,386 respectively.


12


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(i)
              Inventories





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





(j)
              Trade
      receivables





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





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





(k)
            Cash
      and cash equivalents





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





March 31, 2010
                  
                  
                  December 31, 2009Bank
      of Communications, Branch of DaqingCity
      Economic Zone
                  
                  $
                  4,702,324
                  
                  
                  $
                  4,402,294China
      Construction Bank, Beijing Branch
                  
                  
                  54,674
                  
                  
                  
                  147,273Qingdao
      bank
                  
                  
                  58,549
                  
                  
                  
                  16,111Agricultural
      Bank of China
                  
                  
                  -
                  
                  
                  
                  100,025HSBC
                  
                  
                  34,951
                  
                  
                  
                  35,106Cash
      on hand
                  
                  
                  11,016
                  
                  
                  
                  16,431$
                  4,861,514
                  
                  
                  $
                  4,717,240


(l)
              Restricted
      cash





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





(m)
            Revenue
      recognition





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


-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


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


-
Collection is reasonably assured.


13


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(m)
            Revenue
      recognition (Continued)





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





(n)
            Expected
      warranty liabilities





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





(o)
            Cost
      of sales





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





(p)
            Leases





The Group
did not have lease which met the criteria of capital lease. Leases which do not
qualify as capital lease are classified as operating lease. Operating lease
rental payment included in general and administrative expenses were $24,517 and
$26,333, and cost of sales were $1,492  and
$6,297   for the three months ended March 31, 2010 and 2009
respectively.





(q)
            Advertising





The Group
expensed all advertising costs as incurred. Advertising expenses included in
selling expenses were $16,852 and nil for the three months ended March 31, 2010
and 2009 respectively.





(r)
            Shipping
      and handling





All
shipping and handling are expensed as incurred. shipping and handling expenses
included in selling expenses were $22,300 and $5,728 for the three months ended
March 31, 2010 and 2009 respectively.





(s)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $42,204
and $20,534 for the three months ended March 31, 2010 and 2009
respectively.


14


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(t)
              Retirement
      benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit expenses included in general and administrative
expenses were $46,651 and $26,719 for the three months ended March 31, 2010 and
2009 respectively.




(u)
            Income
      taxes





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





(v)
            Foreign
      currency translation





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





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





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





March 31, 2010
                  
                  
                  December 31, 2009
                  
                  
                  March 31, 2009Twelve
      months endedRMB
      : USD exchange rate
                  
                  
                  -
                  
                  
                  
                  6.8372
                  
                  
                  
                  -Three
      months endedRMB
      : USD exchange rate
                  
                  
                  6.8361
                  
                  
                  
                  -
                  
                  
                  
                  6.8456Average
      three months endedRMB
      : USD exchange rate
                  
                  
                  6.8360
                  
                  
                  
                  -
                  
                  
                  
                  6.8466




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.


15


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(w)
            Statutory
      reserves





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





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


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


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


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





(x)
            Comprehensive
      income





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





(y)
            Recent
      accounting pronouncements





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


16





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(y)
            Recent
      accounting pronouncements
(Continued)





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





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


17


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(y)
            Recent
      accounting pronouncements
(Continued)





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





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





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


18


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(y)
            Recent
      accounting pronouncements
(Continued)





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





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





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





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





We are
currently evaluating the impact this update will have on our financial
statements.


19


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





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 March 31, 2010 and December 31,
2009. The Group performs ongoing evaluations of its cash position and credit
evaluations to ensure collections and minimize losses.





As of
March 31, 2010 and December 31, 2009, the Group’s bank deposits were all placed
with banks in the PRC and Hong Kong where there is currently no rule or
regulation in place for obligatory insurance of bank accounts.





For the
three months ended March 31, 2010 and 2009, the group’s sales were generated
from the PRC and Western Europe. Trade receivables as of March 31, 2010 and
December 31, 2009 arose in the PRC and overseas.





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





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





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





For the three months ended March 31,2010
                  
                  
                  2009Customer
      A
                  
                  $
                  486,396
                  
                  
                  $
                  -Customer
      B
                  
                  $
                  404,476
                  
                  
                  $
                  398,738Customer
      D
                  
                  $
                  450,556
                  
                  
                  $
                  -Customer
      E
                  
                  $
                  435,196
                  
                  
                  $
                  -Customer
      K
                  
                  $
                  -
                  
                  
                  $
                  552,099Customer
      L
                  
                  $
                  -
                  
                  
                  $
                  350,539





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





March 31, 2010
                  
                  
                  December 31, 2009Customer
      A
                  
                  $
                  433,250
                  
                  
                  $
                  347,195Customer
      B
                  
                  $
                  426,527
                  
                  
                  $
                  373,223Customer
      C
                  
                  $
                  315,037
                  
                  
                  $
                  310,245Customer
      D
                  
                  $
                  424,794
                  
                  
                  $
                  421,177Customer
      E
                  
                  $
                  394,694
                  
                  
                  $
                  214,417Customer
      F
                  
                  $
                  378,143
                  
                  
                  $
                  287,106


20


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





4.
            AMOUNT
      DUE FROM A RELATED COMPANY





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





5.
            TRADE
      RECEIVABLES, NET





Trade
receivables comprise the followings:




March
      31, 2010
                          
                          
                          December
      31, 2009Trade
      receivables, gross
                          
                          $
                          5,503,572
                          
                          
                          $
                          3,555,378Provision
      for doubtful debts
                          
                          
                          (17,986
                          )
                          
                          
                          (17,983
                          )Trade
      receivables, net
                          
                          $
                          5,485,586
                          
                          
                          $
                          3,537,395





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


An
analysis of the allowance for doubtful accounts for the three months ended March
31, 2010 and for the year ended December 31, 2009 is as
follows:




March 31, 2010
                  
                  
                  December 31, 2009Balance
      at beginning of period/year
                  
                  $
                  17,983
                  
                  
                  $
                  8,414Addition
      of the provision
                  
                  
                  -
                  
                  
                  
                  9,549Foreign
      exchange adjustment
                  
                  
                  3
                  
                  
                  
                  20Balance
      at end of period/year
                  
                  $
                  17,986
                  
                  
                  $
                  17,983





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


21


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





6.
            TRAVEL
      ADVANCES TO SHAREHOLDERS





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





March 31, 2010
                  
                  
                  December 31, 2009Bo
      Liu
                  
                  $
                  38,259
                  
                  
                  $
                  28,015Deli
      Liang
                  
                  
                  78,325
                  
                  
                  
                  43,357$
                  116,584
                  
                  
                  $
                  71,372





The
following table provides the rollforward of the activity in thetravel advances to
shareholders:




March 31, 2010
                          
                          
                          December 31, 2009Beginning
      balance, January 1
                          
                          $
                          71,372
                          
                          
                          $
                          38,733Add:
      Advanced during the period/year
                          
                          
                          45,212
                          
                          
                          
                          122,997Less:
      Transferred to income statement
                          
                          
                          -
                          
                          
                          
                          (90,358
                          )Ending
      balance
                          
                          $
                          116,584
                          
                          
                          $
                          71,372





7.
            ADVANCES
      TO EMPLOYEES





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





March 31, 2010
                          
                          
                          December 31, 2009Beginning
      balance, January 1
                          
                          $
                          217,865
                          
                          
                          $
                          429,804Add:
      Advanced during the period/year
                          
                          
                          131,177
                          
                          
                          
                          610,677Less:
      Transferred to income statement
                          
                          
                          (73,286
                          )
                          
                          
                          (418,288
                          )Recollected from employees
                          
                          
                          (16,867
                          )
                          
                          
                          (404,328
                          )Ending
      balance
                          
                          $
                          258,889
                          
                          
                          $
                          217,865





8.
            INVENTORIES





Inventories
comprise the followings:





March 31, 2010
                  
                  
                  December 31, 2009Finished
      goods
                  
                  $
                  265,539
                  
                  
                  $
                  241,831Work
      in process
                  
                  
                  63,446
                  
                  
                  
                  26,152Raw
      materials
                  
                  
                  314,992
                  
                  
                  
                  321,888$
                  643,977
                  
                  
                  $
                  589,871


22


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





9.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net comprise the followings:





March 31, 2010
                          
                          
                          December 31, 2009At
      costBuildings
                          
                          $
                          1,848,373
                          
                          
                          $
                          1,848,075Machinery
      and equipment
                          
                          
                          2,662,058
                          
                          
                          
                          1,087,332Moldings
                          
                          
                          8,968,015
                          
                          
                          
                          8,966,572Computer
      software
                          
                          
                          2,101,845
                          
                          
                          
                          2,101,507Office
      equipment and motor vehicles
                          
                          
                          504,189
                          
                          
                          
                          97,728$
                          16,084,480
                          
                          
                          $
                          14,101,214Less:
      accumulated depreciation
                          
                          
                          (5,119,372
                          )
                          
                          
                          (4,678,587
                          )$
                          10,965,108
                          
                          
                          $
                          9,422,627Construction
      in progress
                          
                          
                          1,227,558
                          
                          
                          
                          1,085,788$
                          12,192,666
                          
                          
                          $
                          10,508,415





Construction
in progress represents direct costs of construction incurred for factory
infrastructure. Capitalization of these costs ceases and the construction in
progress is transferred to property, plant and equipment when substantially all
the activities necessary to prepare the assets for their intended use are
completed. No depreciation is provided until it is completed and ready for
intended use.





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





March 31, 2010
                  
                  
                  March 31, 2009Cost
      of net revenues
                  
                  $
                  397,745
                  
                  
                  $
                  219,089General
      and administrative expenses
                  
                  
                  25,919
                  
                  
                  
                  11,702Selling
      expenses
                  
                  
                  16,394
                  
                  
                  
                  9,653Total
      depreciation expenses
                  
                  $
                  440,058
                  
                  
                  $
                  240,444


23


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





10.
            INTANGIBLES,
      NET





Details
of intangibles are as follows:


March 31, 2010
                  
                  
                  December 31, 2009Land
      use rights, at cost
                  
                  $
                  2,606,090
                  
                  
                  $
                  2,502,082Technology-based
      design, at cost
                  
                  
                  14,814,368
                  
                  
                  
                  14,811,984$
                  17,420,458
                  
                  
                  $
                  17,314,066Less:
      accumulated amortization
                  
                  
                  (2,582,014
                  )
                  
                  
                  (2,204,078
                  )Total
      intangibles, net
                  
                  $
                  14,838,444
                  
                  
                  $
                  15,109,988





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





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





Amortization
expense included in the general and administrative expenses for the three months
ended 2010 and 2009 were $370,359 and $253,803 respectively.


24


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





11.
            EXPECTED
      WARRANTY LIABILITIES





An
analysis of the expected warranty liabilities for the three months ended March
31, 2010 and for the year ended December 31, 2009 is as follows:





March 31, 2010
                  
                  
                  December 31, 2009Balance
      at beginning of period/year
                  
                  $
                  32,618
                  
                  
                  $
                  50,396Warranty
      expense for the period/year
                  
                  
                  -
                  
                  
                  
                  (17,903
                  )Foreign
      currency difference
                  
                  
                  6
                  
                  
                  
                  125Balance
      at end of period/year
                  
                  $
                  32,624
                  
                  
                  $
                  32,618





12.
            WARRANTS
      LIABILITIES





Valued at
fair value using the Black-Scholes valuation method using the quoted price of
the company’s common stock in an active market, volatility based on the actual
market activity of the company’s stock, the remaining life of the warrant and
the risk free interest rate for the three months ended March 31, 2010 and for
the year ended December 31, 2009 is as follows:





March 31, 2010
                  
                  
                  December 31, 2009Balance
      at beginning of period/year
                  
                  $
                  40,808,327
                  
                  
                  $
                  69,901,873Changes
      in fair value of warrants
                  
                  
                  1,463,274
                  
                  
                  
                  (29,093,546
                  )Balance
      at end of period/year
                  
                  $
                  42,271,601
                  
                  
                  $
                  40,808,327





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


25


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)




13.     SERIES
B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED WARRANTS


(Continued)




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.




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




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




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




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




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




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




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


26


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





13.     SERIES
B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED WARRANTS


(Continued)





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





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





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





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





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





14.
              INCOME
      TAXES





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





SWT,
Sunway, Beijing Sunway and Liheng, being registered in the PRC, are subject to
PRC’s Corporate Income Tax (“CIT”). Under applicable income tax laws and
regulations, an enterprise located in PRC, including the district where our
operations are located, is subject to a rate of 25% for the three months ended
March 31, 2010 and 2009.


27





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





14.
            INCOME
      TAXES (Continued)





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





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 March 31, 2010 and
December 31, 2009.





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





March 31, 2010
                  
                  
                  March 31, 2009U.S.
      statutory rate
                  
                  
                  34
                  %
                  
                  
                  34
                  %Foreign
      income not recognized in the U.S.
                  
                  
                  (34
                  )%
                  
                  
                  (34
                  )%PRC
      CIT
                  
                  
                  25
                  %
                  
                  
                  25
                  %Tax
      holiday
                  
                  
                  (10
                  )%
                  
                  
                  (10
                  )%Provision
      for income taxes
                  
                  
                  15
                  %
                  
                  
                  15
                  %





The
provision for income taxes consists of the following:





March 31, 2010
                  
                  
                  March 31, 2009Current
      tax - PRC CIT
                  
                  $
                  349,653
                  
                  
                  $
                  207,996Deferred
      tax provision
                  
                  
                  -
                  
                  
                  
                  -Income
      tax expenses
                  
                  $
                  349,653
                  
                  
                  $
                  207,996


28


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





15.
            EARNINGS/
      LOSS PER SHARE





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





For the three months ended March 31,2010
                  
                  
                  2009Income:Income/(loss)
      for the purpose of basic earnings per share
                  
                  $
                  485,173
                  
                  
                  $
                  (24,269,731
                  )Effect
      of dilutive potential common Stock
                  
                  
                  -
                  
                  
                  
                  -Income/(loss)
      for the purpose of dilutive earnings/(loss) per share
                  
                  $
                  485,173
                  
                  
                  $
                  (24,269,731
                  )Number
      of shares:Weighted
      average number of common stock for the purpose of basic earnings per
      share
                  
                  
                  18,499,736
                  
                  
                  
                  18,499,736Effect
      of dilutive potential common stock-conversion
      of Series Aconvertible preferred stock
                  
                  
                  -
                  
                  
                  
                  --conversion
      of Series Bconvertible preferred stock
                  
                  
                  4,814,820
                  
                  
                  
                  --conversion
      of Warrant Series A
                  
                  
                  2,027,368
                  
                  
                  
                  --conversion
      of Warrant Series B
                  
                  
                  563,337
                  
                  
                  
                  --conversion
      of Warrant Series C
                  
                  
                  1,536,828
                  
                  
                  
                  --conversion
      of Warrant Series D
                  
                  
                  330,586
                  
                  
                  
                  -Weighted
      average number of common stock for the purpose of dilutive earnings per
      share
                  
                  
                  27,772,675
                  
                  
                  
                  18,499,736


29


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





16.
            COMMITMENTS
      AND CONTINGENCIES





The Group
has entered into a tenancy agreement for factory expiring through 2011. Total
rental expenses for the three months ended March 31, 2010 and 2009 amounted to
$26,009 and $32,630 respectively.





As at
March 31, 2010, the Group’s commitments for minimum lease payments under these
leases for the next one year are as follows:





March
      31,2011
                  
                  $
                  84,3622012
      and thereafter
                  
                  
                  -$
                  84,362





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 four types of product altogether, workstation type A, workstation
type B, workstation type C and Sunway Automatic Dispensing and Packing (“SADP”)
and others .  Workstation types A, B and C are of the same function
but with different product design.





Net
revenues and cost of revenues by product:





For
      the three months ended
                      
                      Workstation
                      
                      
                      Workstation
                      
                      
                      WorkstationMarch
      31, 2010
                      
                      Type A
                      
                      
                      Type B
                      
                      
                      Type C
                      
                      
                      SADP
                      
                      
                      Others
                      
                      
                      ConsolidatedNet
      revenues
                      
                      $
                      1,536,366
                      
                      
                      $
                      203,928
                      
                      
                      $
                      2,908,000
                      
                      
                      $
                      475,820
                      
                      
                      $
                      75,977
                      
                      
                      $
                      5,200,091Cost
      of netrevenues
                      
                      
                      (493,139
                      )
                      
                      
                      (50,247
                      )
                      
                      
                      (1,017,833
                      )
                      
                      
                      (193,798
                      )
                      
                      
                      (2,435
                      )
                      
                      
                      (1,757,452
                      )$
                      1,043,227
                      
                      
                      $
                      153,681
                      
                      
                      $
                      1,890,167
                      
                      
                      $
                      282,022
                      
                      
                      $
                      73,542
                      
                      
                      $
                      3,442,639





For
      the three months ended
                      
                      Workstation
                      
                      
                      Workstation
                      
                      
                      WorkstationMarch
      31, 2009
                      
                      Type A
                      
                      
                      Type B
                      
                      
                      Type C
                      
                      
                      SADP
                      
                      
                      Others
                      
                      
                      ConsolidatedNet
      revenues
                      
                      $
                      1,088,862
                      
                      
                      $
                      368,066
                      
                      
                      $
                      1,476,645
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      2,933,573Cost
      of netrevenues
                      
                      
                      (307,439
                      )
                      
                      
                      (101,667
                      )
                      
                      
                      (484,874
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (893,980
                      )$
                      781,423
                      
                      
                      $
                      266,399
                      
                      
                      $
                      991,771
                      
                      
                      $
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      2,039,593





The
Group’s operations are located in the PRC.  All revenues are derived
from customers in the PRC and overseas. 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.


30


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


(Stated
in US Dollars)(Unaudited)





18.
FAIR VALUE MEASUREMENTS





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


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





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





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





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




19.
SUBSEQUENT EVENTS
  In
preparing these financial statements, the Company evaluated the events and
transactions that occurred from April 1, 2010 through May 17, 2010, the date
these financial statements were issued. The Company has made the required
additional disclosures in reporting periods in which subsequent events
occur.
  On April
5, 2010, the Company entered into a Security Escrow Agreement as an inducement
to the holders of warrants to enter into the Security Exchange Agreement, the
principal shareholders of the Company have agreed to place an amount of common
stock equal to one million shares into escrow for the benefit of the holders in
the event the Company fails to achieve certain milestones by December 31,
2010.


31





ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





Forward-Looking
Statements





The
information in this report contains forward-looking statements. All statements
other than statements of historical fact made in this report are forward
looking. In particular, the statements herein regarding industry prospects and
future results of operations or financial position are forward-looking
statements. These forward-looking statements can be identified by the use of
words such as "believes," "estimates," "could," "possibly," "probably,"
anticipates," "projects," "expects," "may," "will," or "should" or other
variations or similar words. No assurances can be given that the future results
anticipated by the forward-looking statements will be achieved. Forward-looking
statements reflect management's current expectations and are inherently
uncertain. Our actual results may differ significantly from management's
expectations.





The
following discussion and analysis should be read in conjunction with our
financial statements, included herewith. This discussion should not be construed
to imply that the results discussed herein will necessarily continue into the
future, or that any conclusion reached herein will necessarily be indicative of
actual operating results in the future. Such discussion represents only the best
present assessment of our management.





Overview





Since
June 27, 2007, the Company has operated as a holding company for entities that,
through contractual relationships, control the business of Daqing Sunway
Technology Co., Ltd. (“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. Currently our Company is the only
producer of two products in the PRC. We have served approximately 300 customers
in the PRC from our facilities in Daqing. We generate our revenue from sales in
two product categories: pneumatic transport systems (“PTS”) and medicine
dispensing systems (“SADP”).




Affected
by the financial crisis and affected by equivocal reform of the medical
institutions in the PRC, bring about hospital’s investment declines, the company
sales growth quickly in the first quarter of 2010. However, our strong balance
sheet and liquidity position should allow us to not only weather the current
economic environment but potentially benefit and continue to execute growth
strategies and pursue the numerous opportunities.





This
discussion and analysis focuses on the business results of Daqing Sunway,
comparing its results in the three month period ended March 31, 2010 with the
three month period ended March 31, 2009.





Three-month
period ended March 31, 2010 and March 31, 2009





Results
of Operations





In the
three months ended March 31, 2010, the Company’s net revenue, gross profit and
operation income was growing quickly as compared with the same period of 2009.
These increases were primarily attributable to a result of more effective sales
and marketing efforts.





The
following table summarizes the results of our operations during the three months
ended March 31, 2010 and 2009, respectively, and provides information regarding
the dollar and percentage increase or (decrease) from the three months ended
March 31, 2010 and 2009.




Three Months Ended March 312010
                    
                    
                    2009
                    
                    
                    Change
                    
                    
                    Change rateNet
      Revenue
                    
                    $
                    5,200,091
                    
                    
                    $
                    2,933,573
                    
                    
                    $
                    2,266,518
                    
                    
                    
                    77.26
                    %Cost
      of net revenue
                    
                    $
                    1,757,452
                    
                    
                    $
                    893,980
                    
                    
                    $
                    863,472
                    
                    
                    
                    96.59
                    %Gross
      Profit
                    
                    $
                    3,442,639
                    
                    
                    $
                    2,039,593
                    
                    
                    $
                    1,403,046
                    
                    
                    
                    68.79
                    %Gross
      Margin
                    
                    
                    66.20
                    %
                    
                    
                    69.53
                    %
                    
                    
                    -
                    
                    
                    
                    (3.33
                    )
      %Operating
      Income
                    
                    $
                    2,293,737
                    
                    
                    $
                    1,227,350
                    
                    
                    $
                    1,066,387
                    
                    
                    
                    86.89
                    %Changes
      in fair value of warrants
                    
                    $
                    1,463,274
                    
                    
                    $
                    20,481,276
                    
                    
                    $
                    21,944,550
                    
                    
                    
                    (107.14
                    )
      %Impairment
      on investment
                    
                    $
                    -
                    
                    
                    $
                    4,831,386
                    
                    
                    $
                    4,831,386
                    
                    
                    
                    -Net
      Income/(loss)
                    
                    $
                    485,173
                    
                    
                    $
                    (24,269,731
                    )
                    
                    $
                    24,754,904
                    
                    
                    
                    -Net
      profit margin
                    
                    
                    9.33
                    %
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -


32





Net
Revenue




Net
revenue for the three months ended March 31, 2010, which resulted entirely from
sales, was $5,200,091, an increase of 77.26% as compared with net revenue of
$2,933,573 for the three months ended March 31, 2009. In the three months ended
March 31, 2010, we sold 904 workstations, an increase of 59.72% as compared with
566 workstations in the three months ended March 31, 2009. During the same
period of 2010, we also sold 5 units of SADP. The increase was due primarily to
the positive results of more effective sales and marketing efforts.




The
following table breaks down application categories as percentage of total net
revenue.




Three Months Ended March 31,2010
                        
                        
                        2009sales
                        
                        
                        % of total sales
                        
                        
                        sales
                        
                        
                        % of total salesPTS
                        
                        $
                        4,648,294
                        
                        
                        
                        89.39
                        %
                        
                        $
                        2,933,573
                        
                        
                        
                        100.00
                        %SADP
                        
                        $
                        475,820
                        
                        
                        
                        9.15
                        %
                        
                        $
                        -
                        
                        
                        
                        -
                        %Other
                        
                        $
                        75,977
                        
                        
                        
                        1.46
                        
                        
                        $
                        -
                        
                        
                        
                        -
                        %Total
      net revenue
                        
                        $
                        5,200,091
                        
                        
                        
                        100.00
                        %
                        
                        $
                        2,933,573
                        
                        
                        
                        100.00
                        %





Gross
Profit





Gross
profit increased 68.79% to $3,442,639 for the three months ended March 31, 2010,
as compared to $2,039,593 for the three months ended March 31, 2009, mainly due
to sale growth. Our gross profit margin dropped 3.33% from 69.53% as of the
three months ended March 31, 2009 to 66.20% as of the same period of 2010,
mainly due to a decrease in product output caused by the rise of average fixed
cost per unit and an approximately 33% decrease in the pricing of SADP
units.





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





Three Months Ended March 31,2010
                  
                  
                  2009US$
                  
                  
                  Gross profit
                    margin
                  
                  
                  US$
                  
                  
                  Gross profit
                    marginGross
      Profit
                  
                  $
                  3,442,639
                  
                  
                  
                  66.20
                  %
                  
                  $
                  2,039,593
                  
                  
                  
                  69.53
                  %





Income
from Operations





Operating
income increased 86.89% to $2,293,737 for the three months ended March 31, 2010,
as compared to $1,227,350 for the three months ended March 31, 2009. The
increase was primarily attributable to the higher sales growth during this
period.





Cost
of Net Revenue





Cost of
net revenue increased to $1,757,452 for the three months ended March 31, 2010,
representing a 96.59% increase as compared with $893,980 for the same period of
2009. The increase was primarily due to sales growth and a decrease in product
volume caused by the rise of average fixed cost per unit.





The table
below presents information about our cost of net revenue for the periods
indicated:





Three Months Ended March 31,2010
                      
                      
                      2009
                      
                      
                      ChangeCost
      of net revenue
                      
                      $
                      1,757,452
                      
                      
                      $
                      893,980
                      
                      
                      
                      96.59
                      %





Operating
Expenses





Operating
expenses were $1,148,902 for the three months ended March 31, 2010, an increase
as compared with $812,243 for the same period of 2009. The increase was
primarily due to two reasons: (i) selling expenses increased $225,898, or
125.26% to $406,247 in the three months ended March 31, 2010 from $180,349 for
the same period of 2009; and (ii) general and administration expenses increased
$110,761, or 17.53% to $742,655 in the three months ended March 31, 2010 from
$631,894 for the same period of 2009. In the three months ended March 31, 2010,
we increased direct sales office expenses. Reflecting this change, costs related
to direct sales offices expenses were $292,416 for the three months ended March
31, 2010, as compared to 117,321 for the same period of 2009.


33


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





Three Months Ended March
      31,2010
                  
                  
                  2009
                  
                  ChangeSelling
      expenses
                  
                  $
                  406,247
                  
                  
                  $
                  180,349
                  
                  
                  
                  125.26
                  %General
      & Administrative expenses
                  
                  $
                  742,655
                  
                  
                  $
                  631,894
                  
                  
                  
                  17.53
                  %Total
      operating expenses
                  
                  $
                  1,148,902
                  
                  
                  $
                  812,243
                  
                  
                  
                  41.45
                  %





Changes in fair value of
warrants





Changes
in fair value of warrants were $1,463,274 for the three months ended March 31,
2010. This is recorded as a non-cash charge, which resulted from the change in
fair value of warrants issued to investors in conjunction with the Company’s
issuance of warrants in June of 2007 pursuant to provisions of FASB ASC Topic
815, “Derivative and Hedging” (ASC 815). The accounting treatment of the
warrants resulted from a provision providing anti-dilution protection to the
warrant holders. On March 18, 2010, the Company entered into a Security Exchange
Agreement intending to exchange all warrants into common stock. As a result of
this agreement, on the closing date of the agreement, the Company will issue
2,000,000 shares of common stock in exchange for the retirement of all of the
outstanding warrants owned by Vision Opportunity Master Fund Ltd. and its
affiliates. The closing of the agreement is conditioned upon a closing of a
financing with minimum proceeds of $10 million to the Company.





Net
Income





Net
income was $485,173 for the three months ended March 31, 2010, an increase as
compared with $24,269,731 of net loss for the same period of 2009. In the first
quarter of 2010, our net income was impacted by a non-cash charge of $1,463,274
unrelated to the Company’s operations. Excluding the changes in fair value of
warrants in non-cash charge, the Company’s net income from operations would have
been $ 1,948,447 for the three months ended March 31, 2010 and $1,042,931 for
the three months ended March 31, 2009, representing an increase of 86.82% from
the first quarter of 2009 to the first quarter of 2010. The increase was
primarily due to sales growth.





Earnings
Per Share





Basic and
diluted earnings per share for the three months ended March 31, 2010 were $0.03
and $0.02 compared to loss per share for the same period of 2009 were $1.31 and
$1.13. The weighted average number of shares outstanding to calculate basic EPS
was 18,499,736 and 18,499,736 for the three months ended March 31, 2010 and
March 31, 2009, respectively. The weighted average number of shares outstanding
to calculate diluted EPS was 27,772,675 and 18,499,736 for the three months
ended March 31, 2010 and 2009.





Trade
Receivables, net





Trade
receivables, net increased 55.07% to $5,485,586 as of March 31, 2010, compared
with $3,537,395 as of December 31, 2009. The increase in trade receivables was
primarily attributable to change in our sales policy. In the third quarter of
2009, we changed our trade receivables policy to require that the remaining 5
percent of the amount due under the purchase contract is received within one
year after the acceptance test is completed. Previously, we required receipt of
the remaining 5 percent immediately after the acceptance test was
completed.





Inventory





Inventory
consists of raw materials, finished goods and work in progress. As of March 31,
2010, the recorded value of our inventory has increased 9.17% to $643,977 from
$589,871 as of December 31, 2009. The increase was mainly due to an increase of
9.80% in finished goods from $241,831 as of December 31, 2009 to $ 265,539 as of
March 31, 2010; a decrease of 2.14% in raw material inventory from $321,888 as
of December 31, 2009 to $314,992 as of March 31, 2010, an increase of 142.60% in
work in progress inventory from $26,152 as of December 31, 2009 to $63,446 as of
March 31, 2010. The increase was primarily attributable to our sales volume
growth.


34





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





Item
                  
                  March 31, 2010,
                  
                  
                  December 31, 2009
                  
                  
                  ChangeFinished
      goods
                  
                  $
                  265,539
                  
                  
                  $
                  241,831
                  
                  
                  
                  9.80
                  %Work
      in progress
                  
                  $
                  63,446
                  
                  
                  $
                  26,152
                  
                  
                  
                  142.60
                  %Raw
    material
                  
                  $
                  314,992
                  
                  
                  $
                  321,888
                  
                  
                  
                  (2.14
                  )
      %Total
                  
                  $
                  643,977
                  
                  
                  $
                  589,871
                  
                  
                  
                  9.17
                  %





Accounts
Payable





Accounts
payable amounted to $284,472 as of March 31, 2010, an increase as compared with
$271,139 as of December 31, 2009. The increase was primarily attributable to
product volume growth, which resulted in an increase in raw material
purchases.





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




Three months ended March
31,2010
                
                
                2009
                
                
                ChangeNet
      cash provided by (used in) operating activities
                
                $
                1,145,035
                
                
                $
                1,041,381
                
                
                $
                103,654Net
      cash provided by (used in) investing activities
                
                $
                (1,001,512
                )
                
                $
                (4,158,605
                )
                
                $
                3,157,093Net
      cash provided by (used in) financing activities
                
                $
                -
                
                
                $
                -
                
                
                $
                -Effect
      of foreign currency translation on cash and cash
    equivalents
                
                $
                751
                
                
                $
                139,714
                
                
                $
                (138,963
                )Beginning
      cash and cash equivalent
                
                $
                4,717,240
                
                
                $
                15,189,941
                
                
                $
                (10,472,701
                )Ending
      cash and cash equivalent
                
                $
                4,861,514
                
                
                $
                12,212,431
                
                
                $
                (7,350,917
                )




Operating
Activities





For the three months ended March 31,
2010, net cash provided by operating
activities was $1,145,035. This was primarily attributable to our
netincomeof $485,173, adjusted by an add-back of non-cash
charges mainly consisting of depreciation, amortization, and charges in
fair value of warrants of $440,058,$370,359,and $1,463,274respectively, offset by a $1,613,829decrease in working capital.
Specifically, decrease in working capital was primarily due to:(i) a $1,947,650trade receivablesincrease driven by aincreaseinsales;(ii) a $54,012increase<
font style="DISPLAY: inline; COLOR: #000000"> in inventories, principally of finished goods and work in progress inventory, due to
our sales
growth ; ( iii) a $ 413,797  de crease in advances to suppliers to buy
raw materials; ( iv) a $ 77,998 increase in prepayments, travel
advances to shareholders, tender deposits and advances to employees,
consisting primarily of prepayments for raw materials and other supplies in
advance of shipment, working capital for sales staff and payment of
clie nt deposits; partially
offset by a $ 52,034  in crease in accounts payable, tax payable,
customer deposits, accrued liabilities and other
payables.





Investing Activities





For the three months ended March 31,
2010, net cash used in investing activities
was $1,001,512.This was primarily attributable to:(i) a $147,804capital expenditure for purchase of new
plant and equipment;(ii) a $96,378capital expenditure for purchase of new
intangible assets;(iii) a $787,482capital expenditure for the purchase of
technology-based designs,
and $30,152in restricted cash.





Cash and Cash
Equivalents





Our cash and cash equivalents as at the
beginning of March 31, 2010, were $4,717,240andincreased to $4,861,514by the end of the
period.





In future periods, we believe
thatour 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 next9months. 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.


35




Trends





We are not aware of any trends, events
or uncertainties that have or are reasonably likely to have a material impact on
our short-term or long-term liquidity.





Inflation





We believe that inflation has not had a
material or significant impact on our revenue or our results of
operations.





Obligations
under Material Contracts





We do not
have any material contractual obligations as of March 31, 2010.





Critical
Accounting Policies





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





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





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





Trade receivable. 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.





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. A 30% deposit is received from
client when the contract is signed. A 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.


36




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.





Warrantsliabilities.Valued at fair value using
the Black-Scholes valuation method using the quoted price of the company’s
common stock in an active market, volatility based on the actual market activity
of the company’s stock.





Off-Balance
Sheet Arrangements




We have
no off-balance sheet arrangements as of March 31, 2010.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





N/A.





ITEM
4. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.





Pursuant
to Rule 13a-15(b) under the Exchange Act the Company carried out an evaluation
with the participation of the Company’s management, including Liu Bo, the
Company’s Chief Executive Officer (“CEO”) and Samuel Sheng, the Company’s Chief
Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure
controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act)
as of the three months ended March 31, 2010. Based upon their evaluation, the
Company’s CEO and CFO concluded that, in spite of the significant deficiencies
in internal control over financial reporting described below, the Company’s
disclosure controls and procedures are effective as of March 31,
2010.





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 March 31, 2010.  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 March 31, 2010, 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.


37





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





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





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





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





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





Management
believes that these deficiencies do not amount to a material weakness, and it
has concluded that our internal controls over financial reporting were effective
as of March 31, 2010.





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





Our
management is not aware of any material weaknesses in our internal control over
financial reporting, and nothing has come to the attention of management that
causes them to believe that any material inaccuracies or errors exist in our
financial statements as of March 31, 2010.  The reportable conditions and
other areas of our internal control over financial reporting identified by us as
needing improvement have not resulted in a material restatement of our financial
statements. Nor are we aware of any instance where such reportable conditions or
other identified areas of weakness have resulted in a material misstatement of
omission in any report we have filed with or submitted to the Commission.
Accordingly, we believe that our financial controls were effective.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.





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.





PART
II





OTHER
INFORMATION





ITEM
1 - LEGAL PROCEEDINGS





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





ITEM
1A. RISK FACTORS





Not
Applicable.





ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.


38


ITEM
3 - DEFAULTS UPON SENIOR SECURITIES





To our
knowledge, there are no material defaults upon senior securities.





ITEM
4 – (REMOVED AND RESERVED)





ITEM
5 - OTHER INFORMATION





None.





ITEM
6 - EXHIBITS.





Exhibit No.
              
              Description of Exhibit31.1
              
              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.


39





SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




SUNWAY
      GLOBAL, INC.Dated:
        May 17, 2010
                By:
                /s/ Liu BoName:
      Liu BoTitle:
      Chief Executive Officer





Dated:
        May 17, 2010
              By:
              /s/ Samuel ShengName:
      Samuel ShengTitle:
      Chief Financial Officer




40