**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549




**FORM
      10-Q**




(Mark
      One)




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




**FOR
      THE QUARTERLY PERIOD ENDED JUNE 30, 2008.**




OR




**o TRANSITION
      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 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 August 14, 2008, there were 18,446,045
      outstanding shares of the Registrant's Common Stock, $0.001 par
      value.







**TABLE
      OF CONTENTS**





PagePART
                IItem
                1.
            Financial
                Statements
            
            3Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operation
            
            31Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            37Item
                4T
            Controls
                and Procedures
            
            37PART
                IIItem
                1.
            Legal
                Proceedings
            
            38Item
                1A.
            Risk
                FactorsItem
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            38Item
                3.
            Defaults
                Upon Senior Securities
            
            38Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            38Item
                5.
            Other
                Information
            
            38Item
                6.
            Exhibits
            
            38SIGNATURES
            
            39





2


**PART
      I**


**FINANCIAL
      INFORMATION**




**ITEM
      1. FINANCIAL STATEMENTS**





**SUNWAY
      GLOBAL INC.**





**FINANCIAL
      STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US dollars)(Unaudited)**




3





**SUNWAY
      GLOBAL INC.**





CONTENTS
            
            PAGESREPORT
                  OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
            5CONSOLIDATED
                BALANCE SHEETS
            
            6 -
                7CONSOLIDATED
                STATEMENTS OF INCOME
            
            8 -
                9CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY
            
            10CONSOLIDATED
                STATEMENTS OF CASH FLOWS
            
            11 -
                12NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS
            
            13 -
                30





4





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




To:
      The
      board of directors and stockholders of Sunway
      Global Inc.




**Report
      of Independent Registered Public Accounting Firm**




We
      have
      reviewed the accompanying interim consolidated balance sheets, related
      consolidated statements of income, stockholders’ equity and cash flows statement
      of Sunway Global Inc. and consolidated subsidiaries as of June 30, 2008, and
      for
      the three-month and six-month periods then ended. These interim financial
      information statements are the responsibility of the company's
      management.




We
      conducted our review in accordance with standards established by the American
      Institute of Certified Public Accountants. A review of interim financial
      information consists principally of applying analytical procedures and making
      inquiries of persons responsible for financial and accounting matters. It is
      substantially less in scope than an audit conducted in accordance with generally
      accepted auditing standards, 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 interim financial statements for them to be in conformity
      with accounting principles generally accepted in the United States of
      America.







Hong Kong
            
            Albert
                Wong & Co.August 14, 2008
            
            Certified Public
              Accountants





5




**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                BALANCE SHEETS****AS
                AT JUNE 30, 2008 AND DECEMBER 31, 2007****(Stated
                in US Dollars)**





Notes
            
            June
                30, 2008
            
            December
                31, 2007**ASSETS**
            
            
            
            (Unaudited)
            
            (Audited)Current
                assetsCash
                and cash equivalents
            
            
            
            
            $
            15,001,412
            
            $
            5,820,100Trade
                receivables, net
            
            
            6
            
            
            2,499,943
            
            
            1,525,201Inventories
            
            
            9
            
            
            851,851
            
            
            766,933Advances
                to suppliers
            
            
            
            
            
            2,058,826
            
            
            1,331,159Prepayments
            
            
            
            
            
            16,007
            
            
            125,333Tender
                deposits
            
            
            
            
            
            138,176
            
            
            131,013Travel
                advances to shareholders
            
            
            7
            
            
            58,665
            
            
            30,824Advances
                to employees
            
            
            8
            
            
            473,258
            
            
            548,364Total
                current assets
            
            
            
            
            $
            21,098,138
            
            $
            10,278,927Amount
                due from a related company
            
            
            4
            
            
            21,828
            
            
            585,678Restricted
                cash
            
            
            
            
            
            429,834
            
            
            491,049Amount
                due from a director
            
            
            5
            
            
            1,737,215
            
            
            1,028,474Property,
                plant and equipment, net
            
            
            10
            
            
            5,291,082
            
            
            4,449,619Intangible
                assets, net
            
            
            11
            
            
            6,969,843
            
            
            6,933,491**TOTAL
                ASSETS**
            
            
            
            
            $
            35,547,940
            
            $
            23,767,238**LIABILITIES
                AND****STOCKHOLDERS’
                EQUITY**Current
                liabilitiesAccounts
                payable
            
            
            
            
            $
            -
            
            $
            245,917Income
                tax payable
            
            
            
            
            
            409,847
            
            
            157,877Turnover
                and other taxes
            
            
            
            
            
            260,027
            
            
            143,857Expected
                warranty expenses
            
            
            12
            
            
            58,913
            
            
            55,351Customers
                deposits
            
            
            
            
            
            -
            
            
            208,274Accrued
                liabilities
            
            
            
            
            
            372,459
            
            
            323,464Other
                payables
            
            
            
            
            
            12,118
            
            
            35,984Total
                current liabilities
            
            
            
            
            $
            1,113,364
            
            $
            1,170,724**TOTAL
                LIABILITIES**
            
            
            
            
            $
            1,113,364
            
            $
            1,170,724





See
      accompanying notes to consolidated financial statements





6





**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                BALANCE SHEETS (Continued)****AS
                AT JUNE 30, 2008 AND DECEMBER 31, 2007****(Stated
                in US Dollars)**





Notes
            
            June
                30, 2008
            
            December
                31, 2007(Unaudited)
            
            (Audited)**STOCKHOLDERS’
                EQUITY**Series
                A Convertible PreferredStock
                $0.001 par value; 400,000 sharesauthorized;
                Nil and 246,176 sharesissued
                and outstanding at June 30, 2008and
                December 31, 2007 respectively
            
            
            
            
            $
            -
            
            $
            246Series
                B Convertible PreferredStock
                $0.001 par value; 400,000shares
                authorized; 160,494 and 165,432shares
                issued and outstandingat
                June 30, 2008 and December 31, 2007
            
            
            13
            
            
            160
            
            
            165Common
                stock at $0.001 par value;100,000,000
                shares authorized;18,460,045
                and 223,658 shares issued andoutstanding
                at June 30, 2008and
                December 31, 2007 respectively
            
            
            
            
            
            18,446
            
            
            224Additional
                paid-in capital
            
            
            
            
            
            22,611,362
            
            
            16,099,333Statutory
                reserves
            
            
            
            
            
            2,127,978
            
            
            2,127,978Retained
                earnings
            
            
            
            
            
            6,944,026
            
            
            3,188,280Accumulated
                other comprehensive income
            
            
            
            
            
            2,732,604
            
            
            1,180,288$
            34,434,576
            
            $
            22,596,514**TOTAL
                  LIABILITIES ANDSTOCKHOLDERS’
                  EQUITY**
            
            
            
            
            $
            35,547,940
            
            $
            23,767,238




See
      accompanying notes to consolidated financial statements




7





**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                STATEMENTS OF INCOME****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





Six
                months ended June 30,2008
            
            2007NotesNet
                revenues
            
            
            18
            
            $
            8,090,863
            
            $
            5,659,211Cost
                of net revenues
            
            
            18
            
            
            (2,376,675
            )
            
            (1,699,615
            )Gross
                profit
            
            
            
            
            $
            5,714,188
            
            $
            3,959,596Selling
                expenses
            
            
            
            
            
            (40,600
            )
            
            (48,589
            )General
                and administrative expenses
            
            
            
            
            
            (1,280,119
            )
            
            (665,218
            )Income
                from operation
            
            
            
            
            $
            4,393,469
            
            $
            3,245,789Interest
                expenses
            
            
            
            
            
            -
            
            
            (3,292
            )Interest
                income
            
            
            
            
            
            34,739
            
            
            1,600Income
                before income taxes
            
            
            
            
            $
            4,428,208
            
            $
            3,244,097Income
                taxes
            
            
            15
            
            
            (672,462
            )
            
            (497,491
            )Net
                income
            
            
            
            
            $
            3,755,746
            
            $
            2,746,606Net
                income per share:-Basic
            
            
            
            
            $
            0.32
            
            $
            0.14-Diluted
            
            
            
            
            $
            0.13
            
            $
            0.14Weighted
                average number of common stock-Basic
            
            
            14
            
            $
            11,757,733
            
            $
            19,207,455-Diluted
            
            
            14
            
            $
            29,064,297
            
            $
            19,207,455





See
      accompanying notes to consolidated financial statements




8





**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                STATEMENTS OF INCOME****FOR
                THE THREE MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





Three
                months ended June 30,2008
            
            2007NotesNet
                revenues
            
            
            18
            
            $
            4,499,670
            
            $
            3,195,695Cost
                of net revenues
            
            
            18
            
            
            (1,236,310
            )
            
            (1,055,774
            )Gross
                profit
            
            
            
            
            $
            3,263,360
            
            $
            2,139,921Selling
                expenses
            
            
            
            
            
            (35,489
            )
            
            (35,122
            )General
                and administrative expenses
            
            
            
            
            
            (610,527
            )
            
            (344,537
            )Income
                from operation
            
            
            
            
            $
            2,617,344
            
            $
            1,760,262Interest
                expenses
            
            
            
            
            
            -
            
            
            (115
            )Interest
                income
            
            
            
            
            
            34,991
            
            
            137Income
                before income taxes
            
            
            
            
            $
            2,652,335
            
            $
            1,760,284Income
                taxes
            
            
            15
            
            
            (400,774
            )
            
            (264,367
            )Net
                income
            
            
            
            
            $
            2,251,561
            
            $
            1,495,917Net
                income per share:-Basic
                and diluted
            
            
            
            
            $
            0.15
            
            $
            0.08-Diluted
            
            
            
            
            $
            0.08
            
            $
            0.08Weighted
                average number of common stock-Basic
            
            
            
            
            $
            15,155,118
            
            $
            19,207,455-Diluted
            
            
            
            
            $
            28,619,524
            
            $
            19,207,455





See
      accompanying notes to consolidated financial statements





9





**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY****FOR
                THE YEAR ENDED DECEMBER 31, 2007 AND SIX MONTHS ENDED JUNE 30,
                2008****(Stated
                in US Dollars)(Unaudited)**





Additional
            
            
            
            
            
            AccumulatedPreferred
            
            Preferred
            
            No.
            
            
            
            paid
            
            
            
            
            
            otherSeries
            
            Series
            
            shares
            
            Common
            
            in
            
            Statutory
            
            Retained
            
            comprehensiveA
            
            B
            
            outstanding
            
            stock
            
            capital
            
            reserves
            
            earnings
            
            income
            
            TotalBalance,
                January 1, 2007
            
            $
            246
            
            $
            -
            
            
            223,658
            
            $
            224
            
            $
            4,223,165
            
            $
            1,124,073
            
            $
            4,844,680
            
            $
            843,205
            
            $
            11,035,593Reversal
                    of realized gain on investment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (423,537
            )
            
            (423,537
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            6,047,505
            
            
            -
            
            
            6,047,505Appropriation
                to statutory reserves
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,003,905
            
            
            (1,003,905
            )
            
            -
            
            
            -Issuance
                to Vision re: Debentures
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            199,200
            
            
            -
            
            
            -
            
            
            -
            
            
            199,200Issuance
                of Series B ConvertiblePreferred
                Stock
            
            
            -
            
            
            165
            
            
            -
            
            
            -
            
            
            11,676,968
            
            
            -
            
            
            (6,700,000
            )
            
            -
            
            
            4,977,133Foreign
                  currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            760,620
            
            
            760,620Balance,
                December 31,2007
            
            $
            246
            
            $
            165
            
            
            223,658
            
            $
            224
            
            $
            16,099,333
            
            $
            2,127,978
            
            $
            3,188,280
            
            $
            1,180,288
            
            $
            22,596,514Balance,
                January 1, 2008
            
            $
            246
            
            $
            165
            
            
            223,658
            
            $
            224
            
            $
            16,099,333
            
            $
            2,127,978
            
            $
            3,188,280
            
            $
            1,180,288
            
            $
            22,596,514Conversion
                of Preferred Series Ainto
                Common Stock
            
            
            (246
            )
            
            -
            
            
            13,711,831
            
            
            13,712
            
            
            (13,446
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Conversion
                of Preferred Series Binto
                Common Stock
            
            
            -
            
            
            (5
            )
            
            148,140
            
            
            148
            
            
            (143
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Conversion
                of Warrant Series Jinto
                Common Stock
            
            
            -
            
            
            -
            
            
            4,362,416
            
            
            4,362
            
            
            6,525,638
            
            
            -
            
            
            -
            
            
            -
            
            
            6,530,000Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            3,755,746
            
            
            -
            
            
            3,755,746Foreign
                  currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,552,316
            
            
            1,552,316Balance,
                June 30,2008
            
            $
            -
            
            $
            160
            
            
            18,446,045
            
            $
            18,446
            
            $
            22,611,362
            
            $
            2,127,978
            
            $
            6,944,026
            
            $
            2,732,604
            
            $
            34,434,576




See
      accompanying notes to consolidated financial statements





10





**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





Six
                months ended June 30,2008
            
            2007Cash
                flows from operating activitiesNet
                income
            
            $
            3,755,746
            
            $
            2,746,606Depreciation
            
            
            375,389
            
            
            458,686Amortization
            
            
            420,972
            
            
            13,697Adjustments
                  to reconcile net incometo
                  net cash provided by operating activities:Trade
                receivables, net
            
            
            (851,682
            )
            
            (733,121
            )Inventories
            
            
            (34,545
            )
            
            (181,655
            )Advances
                to suppliers
            
            
            (623,758
            )
            
            (629,394
            )Prepayments
            
            
            114,059
            
            
            46,126Tender
                deposits
            
            
            1,233
            
            
            9,735Travel
                advances to directors
            
            
            (25,122
            )
            
            (29,819
            )Advances
                to employees
            
            
            107,267
            
            
            (372,507
            )Accounts
                payable
            
            
            (252,954
            )
            
            (16,367
            )Income
                tax payable
            
            
            234,942
            
            
            117,735Turnover
                and other taxes
            
            
            103,875
            
            
            -Expected
                warranty expenses
            
            
            -
            
            
            19,634Customers
                deposits
            
            
            (215,385
            )
            
            78,924Accrued
                liabilities and other payables
            
            
            1,937
            
            
            47,447Net
                cash provided by operating activities
            
            $
            3,111,974
            
            $
            1,575,727Cash
                flows from investing activitiesPurchase
                of plant and equipment
            
            $
            (914,693
            )
            $
            (162,943
            )Sales
                of short term investment
            
            
            (434,674
            )
            
            -Restricted
                cash
            
            
            61,215
            
            
            (1,280,000
            )Advances
                to a related company
            
            
            584,415
            
            
            -Advances
                to a director
            
            
            (624,299
            )
            
            -Net
                cash used in investing activities
            
            $
            (1,328,036
            )
            $
            (1,442,943
            )


Cash
                flows from financing activities
            
            $
            
            
            $Proceeds
                from Vision re: Debentures
            
            
            -
            
            
            199,202Proceeds
                from issuance of Series B ConvertiblePreferred
                Stock
            
            
            -
            
            
            5,557,133Proceeds
                from exercise of Series J ConvertiblePreferred
                Stock
            
            
            6,530,000
            
            
            -Net
                cash provided by financing activities
            
            
            6,530,000
            
            
            5,756,335





11





**SUNWAY
                GLOBAL INC.****CONSOLIDATED
                STATEMENTS OF CASH FLOWS (Continued)****FOR
                THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007****(Stated
                in US Dollars)(Unaudited)**





Six
                months ended June 30,2008
            
            2007Net
                in cash and cash equivalents sourced
            
            $
            8,313,938
            
            $
            5,889,119Effect
                of foreign currency translation oncash
                and cash equivalents
            
            
            867,374
            
            
            229,813Cash
                and cash equivalents-beginning of year
            
            
            5,820,100
            
            
            1,749,048Cash
                and cash equivalents-end of year
            
            $
            15,001,412
            
            $
            7,867,980


Supplementary
                cash flow information:Interest
                received
            
            $
            34,739
            
            $
            1,600Interest
                paid
            
            
            -
            
            
            3,292Tax
                paid
            
            
            672,462
            
            
            487,195




See
      accompanying notes to consolidated financial statements





12




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(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
      $0.001 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.





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.





The
      interim results of operations are not necessarily indicative of the results
      to
      be expected for the fiscal period ending June 30, 2008. The Company’s
      consolidated balance sheet as of December 31, 2007 has been taken from the
      Company’s audited consolidated balance sheet as of the date. All other financial
      statements contained herein are unaudited and, in the opinion of management,
      contain all adjustments (consisting only of normal recurring accruals) necessary
      for a fair presentation of financial position, results of operations and cash
      flows for the period presented. The Company’s accounting policies and certain
      other disclosure are set forth in the notes to the consolidated financial
      statements contained in the Company’s Annual Report on Form 10-K for the year
      ended December 31, 2007. These financial statements should be read in
      conjunction with the Company’s audited consolidated financial statements and
      notes thereto.





13




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**THE
      SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*(a)*
            *Method
                of Accounting*





The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosures of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from those
      estimates. This basis of accounting differs in certain material respects from
      that used for the preparation of the books of account of the Company’s principal
      subsidiaries, which are prepared in accordance with the accounting principles
      and the relevant financial regulations applicable to enterprises with limited
      liabilities established in the PRC and British Virgin Island, the accounting
      standards used in the places of their domicile. The accompanying condensed
      interim consolidated financial statements reflect necessary adjustments not
      recorded in the books of account of the Company's subsidiaries to present them
      in conformity with US GAAP.





*(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 the three subsidiaries since its reverse-merger on October 3,
      2007. The detailed identities of the consolidating subsidiaries would have
      been
      as follows:





Name
                of Company
            
            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%*Note:
                Deemed variable interest entity





14


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued****)**





*(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.





*(e)*
            *Intangibles*





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




Land use rights
            47 yearsTechnology-based design
            10 years




(f)
            Accounting
                for software systems





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




15


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued****)**





*(g)*
            *Property,
                plant and equipment*





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


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




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





*(h)*
            *Maintenance
                and repairs*





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





*(i)*
            *Accounting
                for the impairment of long-lived
                assets*





The
      Group
      periodically evaluates the carrying value of long-lived assets to be held and
      used, including intangible assets subject to amortization, when events and
      circumstances warrant such a review, pursuant to the guidelines established
      in
      SFAS No. 144. The carrying value of a long-lived asset is considered impaired
      when the anticipated undiscounted cash flow from such asset is separately
      identifiable and is less than its carrying value. In that event, a loss is
      recognised based on the amount by which the carrying value exceeds the fair
      market value of the long-lived asset. Fair market value is determined primarily
      using the anticipated cash flows discounted at a rate commensurate with the
      risk
      involved. Losses on long-lived assets to be disposed of are determined in a
      similar manner, except that fair market values are reduced for the cost to
      dispose.





During
      the reporting periods, there was no impairment loss.





*(j)*
            *Inventories*





Inventories
      consist of finished goods and raw materials, and stated at the lower of cost
      or
      market value. Substantially all inventory costs are determined using the
      weighted average basis. Finished goods are comprised of direct materials, direct
      labor and an appropriate proportion of overhead.




16


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.
      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (** **Continued** **)**





*(k)*
            *Trade
                receivables*





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





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





*(l)*
            *Cash
                and cash equivalents*





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





**June
                30, 2008**
            
            **December
                31, 2007**Bank
                of Communications, Branch of DaqingCity
                Economic Zone
            
            
            8,033,893
            
            
            5,398,866Daqing
                City Commercial Bank
            
            
            4,508,010
            
            
            72,690HSBC
            
            
            2,452,297
            
            
            348,362Cash
                on hand
            
            
            7,212
            
            
            18215,001,412
            
            
            5,820,100





*(m)*
            *Restricted
                cash*





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





*(n)*
            *Revenue
                recognition*





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




-
      Persuasive evidence of an arrangement exists;




-
      Delivery has occurred or services have been rendered, and;




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





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




17


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued****)**




*(o)*
            *Warranty
                liabilities*





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





*(p)*
            *Costs
                of sales*





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





*(q)*
            *Leases*




The
      Group
      did not have lease which met the criteria of capital lease. Leases which do
      not
      qualify as capital lease are classified as operating lease. Operating lease
      rental payment included in general and administrative expenses were 23,851
      and
      $14,016 for the six months ended June 30, 2008 and 2007
      respectively.





*(r)*
            *Advertising*





The
      Group
      expensed all advertising costs as incurred. Advertising expenses included in
      selling expenses were
      $10,115 and  $26,805
      for the six months ended June 30, 2008 and 2007 respectively.





*(s)*
            *Shipping
                and handling*





All
      shipping and handling are expensed as incurred. Shipping and handling expenses
      included in selling expenses
      were $10,389 and $15,090
      for the six months ended June 30, 2008 and 2007 respectively.





*(t)*
            *Research
                and development*





All
      research and development costs are expensed as incurred. The research and
      development costs included in general and administrative expenses were
      nil
      and $83 ,536
      and
      for the six months ended June 30, 2008 and 2007 respectively.





*(u)*
            *Retirement
                benefits*





Retirement
      benefits in the form of contributions under defined contribution retirement
      plans to the relevant authorities are charged to the statements of income as
      incurred. The retirement benefit expenses included in general and administrative expenses
      were $17,964 and $27 ,297
      for
      the six months ended June 30, 2008 and 2007 respectively.





18





**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued****)**





*(v)*
            *Income
                taxes*





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





*(w)*
            *Foreign
                currency translation*





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





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





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





**June
                30, 2008**
            
            **December
                31, 2007**
            
            **June
                30, 2007**Twelve
                months ended
            
            
            -
            
            
            7.3141
            
            
            -RMB
                : USD exchange rateSix
                months ended
            
            
            6.8718
            
            
            -
            
            
            7.6248RMB
                : USD exchange rateAverage
                six months ended
            
            
            7.0726
            
            
            -
            
            
            7.7300RMB
                : USD exchange rateAverage
                three months ended
            
            
            6.9696
            
            
            -
            
            
            7.6896RMB
                : USD exchange rate




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.




19




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued****)**





*(x)*
            *Statutory
                reserves*





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





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




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




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




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




*(y)*
            *Comprehensive
                income*





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





*(z)*
            *Recent
                accounting pronouncements*





In
      February 2007, FASB issued Statement of Financial Accounting Standards No.
      (“SFAS”) 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”).
      SFAS 159 permits entities to choose to measure many financial instruments and
      certain other items at fair value. Entities that elect the fair value option
      will report unrealized gains and losses in earnings at each subsequent reporting
      date. The fair value option may be elected on an instrument-by-instrument basis,
      with a few exceptions. SFAS 159 also establishes presentation and disclosure
      requirements to facilitate comparisons between entities that choose different
      measurement attributes for similar assets and liabilities. The requirements
      of
      SFAS 159 are effective for our fiscal year beginning on January 1, 2008.




The
      Company does not anticipate that the adoption of this standard will have a
      material impact on these consolidated financial statements.





In
      December 2007, the SEC issued Staff Accounting Bulletin No. 110 (“SAB 110”). SAB
      110 permits companies to continue to use the simplified method, under certain
      circumstances, in estimating the expected term of “plain vanilla” options beyond
      December 31, 2007. SAB 110 updates guidance provided in SAB 107 that previously
      stated that the Staff would not expect a company to use the simplified method
      for share option grants after December 31, 2007. Adoption of SAB 110 is not
      expected to have a material impact on the Company’s consolidated financial
      statements.




20


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued****)**





*(z)*
            *Recent
                accounting pronouncements
                (continued)*





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





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




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





21


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(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 accounts receivable as of June 30, 2008 and December 31,
      2007. The Group performs ongoing evaluations of its cash position and credit
      evaluations to ensure collections and minimize losses.





As
      of
      June 30, 2008 and December 31, 2007, the Group’s bank deposits were all placed
      with banks in the PRC where there is currently no rule or regulation in place
      for obligatory insurance of bank accounts.





For
      the
      six months ended June 30, 2008 and 2007, all of the Group’s sales were generated
      from the PRC. In addition, all accounts receivable as of June 30, 2008 and
      December 31, 2007 also arose in the PRC.





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





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





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





For
                the six months ended June 30,2008
            
            2007Customer
                A
            
            $
            989,731
            
            $
            -Customer
                B
            
            
            870,963
            
            
            538,811Customer
                C
            
            
            821,477
            
            
            -Customer
                D
            
            
            781,887
            
            
            -Customer
                E
            
            
            -
            
            
            733,507Customer
                G
            
            
            -
            
            
            466,365Customer
                J
            
            
            -
            
            
            439,198Customer
                K
            
            
            
            
            
            479,949





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





June
                30, 2008
            
            December
                31, 2007Customer
                B
            
            $
            419,523
            
            $
            221,510Customer
                D
            
            
            274,120
            
            
            159,005Customer
                E
            
            
            288,422
            
            
            235,149Customer
                G
            
            
            -
            
            
            269,861Customer
                H
            
            
            -
            
            
            -Customer
                I
            
            
            257,435
            
            
            275,851Customer
                J
            
            
            240,749
            
            
            -Customer
                K
            
            
            -
            
            
            146,688




22




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(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 shareholder. The amount is unsecured,
      interest free and repayable on demand. The amount is hold by Rise Elite because
      of a recent development of representative offices in sundry location of China
      and this arrangement would be a better working capital arrangement.





**5.**
            **AMOUNT
                DUE FROM A DIRECTOR**





Amount
      due from Mr. Liu Bo, the director of the company is unsecured, interest free
      and
      repayable on demand. The amount is hold by Beijing Sunway because of proposed
      development of representative offices in sundry location of China and this
      arrangement would be a better working capital arrangement.





**6.**
            **TRADE
                RECEIVABLES, NET**




June
                30, 2008
            
            December
                31, 2007Trade
                receivables, gross
            
            $
            2,508,335
            
            $
            1,533,085Provision
                for doubtful debts
            
            
            (8,392
            )
            
            (7,884
            )$
            2,499,943
            
            $
            1,525,201





All
      of
      the above accounts receivable are due within one year of aging.





An
      analysis of the allowance for doubtful accounts for the six months ended June
      30, 2008 and December 31, 2007 is as follows:




June
                30, 2008
            
            December
                31, 2007Balance
                at beginning of period/year
            
            $
            7,884
            
            $
            7,377Foreign
                exchange adjustment
            
            
            508
            
            
            507Balance
                at end of period/year
            
            $
            8,392
            
            $
            7,884





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





23




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**7.**
            **TRAVEL
                ADVANCES TO SHAREHOLDERS**





Travel
      advances were made to Shareholders. These shareholders are also the management
      of the company and these advances are used to enable their execution of
      operational duties such as marketing and sales promotion. The following table
      provides an analysis of the outstanding accounts.




June
                30, 2008
            
            December
                31, 2007Bo
                Liu
            
            $
            17,614
            
            $
            4,244Qichai
                Zhao
            
            
            9,939
            
            
            700Deli
                Liang
            
            
            -
            
            
            6,568Weishan
                Sun
            
            
            31,112
            
            
            19,312$
            58,665
            
            $
            30,824





**8.**
            **ADVANCES
                TO EMPLOYEES**





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





**9.**
            **INVENTORIES**





Inventories
      comprise the followings:




June
                30, 2008
            
            December
                31, 2007Finished
                goods
            
            $
            621,445
            
            $
            161,005Raw
                materials
            
            
            230,406
            
            
            605,928$
            851,851
            
            $
            766,933





**10.**
            **PROPERTY,
                PLANT AND EQUIPMENT, NET**





Property,
      plant and equipment, net comprise the followings:




June
                30, 2008
            
            December
                31, 2007At
                costBuilding
            
            $
            1,443,695
            
            $
            1,356,392Machinery
                and equipment
            
            
            1,097,167
            
            
            1,022,960Moldings
            
            
            4,141,171
            
            
            2,992,166Computer
                software
            
            
            2,040,623
            
            
            1,942,823Office
                  equipment and motorvehicles
            
            
            85,617
            
            
            80,439$
            8,808,273
            
            $
            7,394,780Less:
                accumulated depreciation
            
            
            (3,517,191
            )
            
            (2,945,161
            )$
            5,291,082
            
            $
            4,449,619





24




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





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





Depreciation
      and amortization expense is included in the statement of income and comprehensive
      income as follows:





For
                the six months ended June 30,2008
            
            2007Cost
                of sales
            
            $
            368,794
            
            $
            376,324General
                and administrative expenses
            
            
            6,595
            
            
            82,362$
            375,389
            
            $
            458,686




**11.**
            **INTANGIBLE
                ASSETS, NET**





Intangible
      assets, net are as follows:




June
                30, 2008
            
            December
                31, 2007Land
                use rights, at cost
            
            $
            1,350,840
            
            $
            1,269,151Less:
                accumulated amortization
            
            
            (76,645
            )
            
            (58,508
            )$
            1,274,195
            
            $
            1,210,643Technology-based
                design,
                at cost
            
            $
            6,304,389
            
            $
            5,923,149Less:
                accumulated amortization
            
            
            (608,741
            )
            
            (200,301
            )$
            5,695,648
            
            $
            5,722,848$
            6,969,843
            
            $
            6,933,491





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





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





Amortization
      expense included in the general and administrative expenses for the six-months
      ended 2008 and 2007 were $420,972 and $13,697 respectively.





25


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**12.**
            **WARRANTY
                LIABILITIES**





An
      analysis of the warranty liabilities as at June 30, 2008 and December 2007
      is as
      follows:





2008
            
            2007Balance
                at beginning of period/year
            
            $
            55,351
            
            $
            22,811Addition
                of warranty liabilities
            
            
            -
            
            
            55,918Warranty
                expense for the year
            
            
            -
            
            
            (23,378
            )Foreign
                currency difference
            
            
            3,562
            
            
            -Balance
                at end of period/year
            
            $
            58,913
            
            $
            55,351





**13.**
            **SERIES
                B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED
                WARRANTS**




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




**Investment**
              **Amount**
            
            **Preferred
                B**
            
            **A
                Warrant**
            
            **B
                Warrant**
            
            **J
                Warrant**
            
            **C
                Warrant**
            
            **D
                Warrant****Vision
                Opportunity Master Fund, Ltd.**
            
            
            6,500,000
            
            
            160,494
            
            
            4,814,815
            
            
            2,407,407
            
            
            4,362,416
            
            
            4,362,416
            
            
            2,181,208**Columbia
                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
                Date****Series
                A**
            
            4,962,963
            
            $
                1.76
            
            6
                /5 /2012**Series
                B**
            
            2,481,481
            
            2.30
            
            6
                /5 /2012**Series
                J**
            
            4,496,644
            
            1.49
            
            6
                /5 /2008**Series
                C**
            
            4,496,644
            
            1.94
            
            6
                /5 /2012**Series
                D**
            
            2,248,322
            
            2.53
            
            6
                /5 /2012




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.




26


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**13.**
            **SERIES
                B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED
                WARRANTS**




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, Vision Opportunity Master Fund Ltd. converted 246,176 shares
      of Preferred Series A into 13,711,831 shares of common stock




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




27


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**




**14.**
            **EARNINGS
                PER SHARE**





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





For
                the six months ended June 30,2008
            
            2007Earnings:Earnings
                  for the purpose of basicearnings
                  per share
            
            $
            3,755,746
            
            $
            2,746,606Effect
                  of dilutive potential commonstock
            
            
            -
            
            
            -Earnings
                  for the purpose of basicearnings
                  per share
            
            $
            3,755,746
            
            $
            2,746,606Number
                of shares:Weighted
                average number ofcommon
                stock for the purpose of basicearnings
                per share
            
            
            11,757,733
            
            
            19,207,455Effect
                of dilutive potential common stock-
                conversion of Series Aconvertible
                preferred stock
            
            
            2,787,570
            
            
            --
                conversion of Series Bconvertible
                preferred stock
            
            
            4,952,379
            
            
            --
                conversion of various warrants
            
            
            9,566,615
            
            
            -Weighted
                average number of commonstock
                for the purpose of dilutiveearnings
                per share
            
            
            29,064,297
            
            
            19,207,455




28


**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**15.**
            **INCOME
                TAXES**





The
      Company is registered in the State of Nevada whereas its subsidiary, WTL being
      incorporated in the British Virgin Islands is not subject to any income tax
      and
      conducts all of its business through its PRC subsidiary, SWT and Sunway (see
      note 1).





SWT
      and
      Sunway, being registered in the PRC, are subject to PRC’s Enterprise Income Tax.
      Under applicable income tax laws and regulations, an enterprise located in
      PRC,
      including the district where our operations are located, is subject to a 25%
      enterprise income tax (“EIT”).





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





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





For
                the six month ended June 30,2008
            
            2007U.S.
                statutory rate
            
            
            34
            %
            
            34
            %Foreign
                income not recognized in the U.S.
            
            
            (34
            %)
            
            (34
            %)PRC
                Enterprise Income Tax
            
            
            25
            %
            
            33
            %Tax
                holiday
            
            
            (10
            %)
            
            (18
            %)Provision
                for income taxes
            
            
            15
            %
            
            15
            %





**16.**
            **FAIR
                VALUE OF FINANCIAL
                INSTRUMENTS**





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





**17.**
            **COMMITMENTS
                AND CONTINGENCIES**





The
      Group
      has entered into a tenancy agreement for factory expiring through 2008. Total
      rental expenses for the six months ended June 30, 2008 and 2007 amounted to
      $23,851 and $14,016 respectively.





As
      at
      June 30, 2008, the Group’s commitments for minimum lease payments under these
      leases for the next one year and thereafter are as follows:




June
                30,2008
            
            $
            24,5482009
                - 2012 and thereafter
            
            
            -$
            24,548




29




**SUNWAY
      GLOBAL INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX MONTHS ENDED JUNE 30, 2008 AND 2007**


**(Stated
      in US Dollars)(Unaudited)**





**18.**
            **SEGMENT
                INFORMATION**





The
      Group
      currently is engaged in the manufacturing and selling of logistic transport
      systems and operating in one segment only. 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”).
      These three types of workstation are of the same function but with different
      product design.





Net
      revenues and cost of revenues by product:





*For
                the six months ended June 30, 2008*
            
            *Workstation*
            
            *Workstation*
            
            *Workstation**Type
                A*
            
            *Type
                B*
            
            *Type
                C*
            
            *SADP*
            
            *Consolidated*Net
                revenues
            
            $
            1,654,785
            
            $
            3,503,647
            
            $
            2,395,149
            
            $
            537,282
            
            $
            8,090,863Cost
                  of netrevenues
            
            
            (428,782
            )
            
            (1,042,584
            )
            
            (700,954
            )
            
            (204,355
            )
            
            (2,376,675
            )$
            1,226,003
            
            $
            2,461,063
            
            $
            1,694,195
            
            $
            332,927
            
            $
            5,714,188





*For
                the six months ended June 30, 2007*
            
            *Workstation*
            
            *Workstation*
            
            *Workstation**Type
                A*
            
            *Type
                B*
            
            *Type
                C*
            
            *SADP*
            
            *Consolidated*Net
                revenues
            
            $
            2,304,074
            
            $
            3,355,137
            
            $
            -
            
            $
            -
            
            $
            5,659,211Cost
                  of netrevenues
            
            
            (691,976
            )
            
            (1,007,639
            )
            
            -
            
            
            -
            
            
            (1,699,615
            )$
            1,612,098
            
            $
            2,347,498
            
            $
            -
            
            $
            -
            
            $
            3,959,596








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




30





**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**




As
      a
      result of the reverse merger, financing and related transactions described
      in our current report on Form 8-K/A filed with the SEC on June 27, 2007, the
      Company ceased to be a shell company and became a holding company for entities
      that, through contractual relationships, control the business of Daqing Sunway,
      a company organized under the laws of the PRC that designs, manufactures and
      sells logistic transport systems and medicine dispensing systems and equipment
      that are principally used by hospitals and other medical facilities in the
      PRC.
      Because Sunway’s operations are the only significant operations of the Company
      and its affiliates, this discussion and analysis focuses on the business results
      of Sunway, comparing its results in the three and six months ended June 30,
      2008
      to the three and six months ended June 30, 2007. We began selling our new core
      product—a medicine dispensation and packaging system also designed for use in
      hospitals and pharmacies—in the first quarter of 2008.




**Three-month
      periods ended June 30, 2008 and June 30, 2007**





**Results
      of Operations**





In
      the
      three months ended June 30, 2008, company net revenues and gross profit rose
      substantially as compared with the same period in the same period of 2007,
      operating expenses also increased during these periods, bring on company net
      income rose substantially increased. These increases are due in large part
      to
      increased sales of Daqing Sunway’s pneumatic tube transport systems . Cost of
      sales only slightly increased during these periods. The slightly increase in
      cost of sales is due to increased product volume brought drop to the fixed
      costs. The increase in operating expense is primarily due to an increase in
      amortization of intangible assets.





The
      following table summarizes the results of our operations during the three months
      ended June 30, 2008 and 2007, respectively, and provides information regarding
      the dollar and percentage increase or (decrease) from the three months ended
      June 30, 2008 and 2007.




Three
                Months Ended June 30,2008
            
            2007
            
            Change
            
            Change
                rateNet
                Revenues
            
            $
            4,499,670
            
            $
            3,195,695
            
            $
            1,303,975
            
            
            40.80
            %Cost
                of net revenues
            
            $
            1,236,310
            
            $
            1,055,774
            
            $
            180,536
            
            
            17.10
            %Gross
                Profit
            
            $
            3,263,360
            
            $
            2,139,921
            
            $
            1,123,439
            
            
            52.50
            %Gross
                Margin
            
            
            72.52
            %
            $
            66.96
            %
            
            
            
            
            5.56
            %Operating
                Income
            
            $
            2,617,344
            
            $
            1,760,262
            
            $
            857,082
            
            
            48.69
            %Net
                Income
            
            $
            2,251,561
            
            $
            1,495,917
            
            $
            755,644
            
            
            50.51
            %Net
                profit margin
            
            
            50.04
            %
            
            46.81
            %
            
            
            
            
            3.23
            %





**Net
      revenue**





Net
      revenue for the three months ended June 30, 2008, which resulted entirely from
      sales of pneumatic material transport system workstations (“PTS”) were
      $4,499,670, an increase of 40.80% as compared with the net revenue of $3,195,695
      for the three months ended June 30, 2007. In the three months ended June 30,
      2008, we sold 885 workstations, an increase of 27.89% as compared with 692
      workstations sold in the three months ended June 30, 2007. The increase was
      primarily a result of more effective sales and marketing efforts.





31




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




Three
                Months Ended June 30,2008
            
            2007Sales
            
            % of total sales
            
            Sales
            
            % of total salesPTS
            
            $
            4,499,670
            
            
            100.00
            %
            $
            3,195,695
            
            
            100.00
            %SADP
            
            $
            
            
            
            
            %
            $Total
                net revenues
            
            $
            4,499,670
            
            
            100.00
            %
            $
            3,195,695
            
            
            100.00
            %





**Gross
      Profit**





Gross
      profit increased 52.50% to $3,263,360 for the three months ended June 30, 2008,
      as compared to $2,139,921 for the three months ended June 30, 2007. Our gross
      profit margin rose 5.56% from 66.96% as of the three months ended June 30,
      2007
      to 72.52% as of the same period of 2008, mainly due to increased product volume
      brought drop to the fixed costs.





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





Three
                Months Ended June 30,2008
            
            2007US$
            
            Gross
                profit
              margin
            
            US$
            
            Gross
                profit
              marginGross
                Profit
            
            $
            3,263,360
            
            
            72.52
            %
            $
            2,139,921
            
            
            66.96
            %





**Income
      from Operations**





Operating
      income increased 48.69% to $2,617,344 for the three months ended June 30,
      2008, as compared with $1,760,262 for the three months ended June 30, 2007.
      The
      increase was primarily a result of the higher revenue by cost reductions during
      the three months ended June 30, 2008 as compared to the same period of
      2007.





**Cost
      of Net revenues**





Cost
      of
      net revenues increased to $1,236,310 for the three months ended June 30, 2008,
      representing 17.10% increase as compared with $1,055,774 for the same period
      of
      2007. The increase is primarily due to increased net revenue and decreased
      manufacturing overhead from the three months ended June 30, 2008 to the same
      period of 2007. The manufacturing expenses decreased 9.88% for the three months
      ended June 30, 2008, as compared to the same period of 2007.





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





Three
                Months Ended June 30,2008
            
            2007
            
            ChangeCost
                of net revenues
            
            $
            1,236,310
            
            $
            1,055,774
            
            
            17.10
            %





**Operating
      Expenses**





Operating
      expenses were $646,016 for the three months ended June 30, 2008, an increase
      of
      70.16% as compared to $379,659 for the same period of 2007. The increase was
      composed by two reasons: (1) selling expenses increased $367 or 1.04% to $35,489
      in the three months ended June 30, 2008 from $35,122 for the same period of
      2007; and (2) general & administration expenses increased $265,990, or
      77.20% to $610,527 in the three months ended June 30, 2008 from $344,537 for
      the
      same period of 2007. In the three months ended June 30, 2008, we increased
      salary and benefits of management andincreased amortization of intangible
      assets. Reflecting this change, costs related to salary and benefits increased
      65.63% in the three months ended June 30, 2008, compared with the same period
      of
      2007; and amortization of intangible assets increased $357.73% in the three
      months ended June 30, 2008 compared with the same period of 2007.





32





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





Three
                Months Ended June 30,2008
            
            2007
            
            changeSelling
                expenses
            
            $
            35,489
            
            $
            35,122
            
            
            1.04
            %General
                and administrative expenses
            
            $
            610,527
            
            $
            344,537
            
            
            77.20
            %Total
                operating expenses
            
            $
            646,016
            
            $
            379,659
            
            
            70.16
            %





**Net
      Income**





Net
      income was $2,251,561 for the three months ended June 30, 2008, an increase
      of
      50.51% from $1,495,917 for the same period of 2007. This
      increase is primarily due to a substantial net revenue increase partially
      offset by the higher general and administrative expenses .





**Six-month
      periods ended June 30, 2008 and June 30, 2007**





**Results
      of Operations**





In
      the
      six months ended June 30, 2008, company net sales, gross profit, operating
      income and net income all rose substantially as compared with the same period
      in
      the same period of 2007. These increases are due in large part to increased
      sales of Daqing Sunway’s pneumatic tube transport systems and new
      product ó a
      medicine dispensation and packaging system. Cost of sales and operating expense
      also increased during these periods, somewhat outpacing the increase in sales.
      The increase in cost of sales is due largely to increased sales; the increase
      in
      operating expenses is due largely to increased amortization of intangible assets
      and salary.





The
      following table summarizes the results of our operations during the six months
      ended June 30, 2008 and 2007, respectively, and provides information regarding
      the dollar and percentage increase or (decrease) from the six months ended
      June
      30, 2008 and 2007.




Six
                Months Ended June 30,2008
            
            2007
            
            Change
            
            Change
                rateNet
                Revenues
            
            $
            8,090,863
            
            $
            5,659,211
            
            $
            2,431,652
            
            
            42.97
            %Cost
                of net revenues
            
            $
            2,376,675
            
            $
            1,699,615
            
            $
            677,060
            
            
            39.84
            %Gross
                Profit
            
            $
            5,714,188
            
            $
            3,959,596
            
            $
            1,754,592
            
            
            44.31
            %Gross
                Margin
            
            
            70.63
            %
            $
            69.97
            %
            
            
            
            
            0.66
            %Operating
                Income
            
            $
            4,393,469
            
            $
            3,245,789
            
            $
            1,147,680
            
            
            35.36
            %Net
                Income
            
            $
            3,755,746
            
            $
            2,746,606
            
            $
            1,009,140
            
            
            36.74
            %Net
                profit margin
            
            
            46.42
            %
            
            48.53
            %
            
            
            
            
            -2.11
            %





**Net
      revenue**





Net
      revenue for the six
      months ended June 30, 2008, which resulted entirely from sales of pneumatic
      material transport system workstations (“PTS”) and Automatic Medicine Dispensing
& Packing System (“SADP’), were $8,090,863, an increase of 42.97% as
      compared with the net revenue of $5,659,211 for the six months ended June 30,
      2007. In the six months ended June 30, 2008, we sold 1,507 workstations, an
      increase of 21.93% as compared with 1,236 workstations sold in the six months
      ended June 30, 2007. The increase was primarily a result of more effective
      sales
      and marketing efforts.





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




Six
                Months Ended June 30,2008
            
            2007Sales
            
            % of total sales
            
            Sales
            
            % of total salesPTS
            
            $
            7,553,581
            
            
            93.36
            %
            $
            5,659,211
            
            
            100.00
            %SADP
            
            $
            537,282
            
            
            6.64
            %
            $
            
            
            
            -Total
                net revenues
            
            $
            8,090,863
            
            
            100.00
            %
            $
            5,659,211
            
            
            100.00
            %





33




**Gross
      Profit**





Gross
      profit increased 44.31% to $5,714,188 for the six months ended June 30, 2008,
      as
      compared to $3,959,596 for the six months ended June 30, 2007. Our gross profit
      margin rose 0.66% from 69.97% for the six months ended June 30, 2007 to 70.63%
      as of the same period of 2008, mainly due to increased product volume brought
      drop to the fixed costs.





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





Six
                Months Ended June 30,2008
            
            2007US$
            
            Gross
                profit
              margin
            
            US$
            
            Gross
                profit
              marginGross
                Profit
            
            $
            5,714,188
            
            
            70.63
            %
            $
            3,959,596
            
            
            69.97
            %





**Income
      from Operations**





Operating
      income increased 35.36% to $4,393,469 for the six months ended June 30,
      2008, as compared with $3,245,789 for the six months ended June 30, 2007. The
      increase was primarily a result of the higher revenue partially
      offset by the
      higher general and administrative reduces during the six months ended June
      30,
      2008 as compared to the same period of 2007.





**Cost
      of Net revenues**





Cost
      of
      net revenues increased to $2,376,675 for the six months ended June 30, 2008,
      representing 39.84% increase as compared with $1,699,615 for the same period
      of
      2007. The increase is due primarily to increased revenues and decreased by
      manufacturing expenses from the six months ended June 30, 2008 to the same
      period of 2007. The manufacturing expenses decreased 13.53% for the six months
      ended June 30, 2008, as compared to the same period of 2007.





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





Six
                Months Ended June 30,2008
            
            2007
            
            ChangeCost
                of net revenues
            
            $
            2,376,675
            
            $
            1,699,615
            
            
            39.84
            %





**Operating
      Expenses**





Operating
      expenses were $1,320,719 for the six months ended June 30, 2008, an increase
      of
      85.02% as compared to $713,807 for the same period of 2007. The increase was
      primarily caused by two factors: (1) selling expenses decreased $7,989, or
      16.44% to $40,600 in the six months ended June 30, 2008 from $48,589 for the
      same period of 2007; and (2) general & administration expenses increased
      $614,901, or 92.44% to $1,280,119 in the six months ended June 30, 2008 from
      $665,218 for the same period of 2007. In the six months ended June 30, 2008,
      we
      increased salary and benefits of management. Reflecting this change, costs
      related to salary and benefits increased 72.19% in the six months ended June
      30,
      2008, compared with the same period of 2007; and amortization of intangible
      assets increased $336,788, or 400.06% to $420,974 in the six months ended June
      30, 2008 from $84,186 as of the same period of 2007; and cost of direct sales
      offices were increased from $0 as of the six months ended June 30, 2007 to
      $140,458 as of the same period of 2008.





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





Six
                Months Ended June 30,2008
            
            2007
            
            changeSelling
                expenses
            
            $
            40,600
            
            $
            48,589
            
            
            -16.44
            %General
                & Administrative expenses
            
            $
            1,280,119
            
            $
            665,218
            
            
            92.44
            %Total
                operating expenses
            
            $
            1,320,719
            
            $
            713,807
            
            
            85.02
            %





**Net
      Income**





Net
      income was $3,755,746 for the six months ended June 30, 2008, an increase of
      36.74% from $2,746,606 for the same period of 2007. The
      increase is primarily due to i) substantial net revenue increase; ii)
      partially offset by higher operating expenses **.**  Earnings
      per share was $0.32 and $0.13 on a diluted basis.




34





**Cash
      and Cash Equivalents**





Cash
      and
      Cash Equivalents increased to $15,001,412 as of the six months ended June 30,
      2008, as compared to $5,820,100 as of the fiscal year ended December 31, 2007.
      The increase was mainly due to i) net income increase; ii) the warrants J
      exercised for approximately $6.53 million on June 5, 2008.





**Accounts
      Receivable**





Accounts
      Receivable increased 63.91% to $2,499,943 as of the six months ended June 30,
      2008, compared with $1,525,201 as of in the fiscal year ended December 31,
      2007.
      This increase in accounts receivable was primarily attributable to a substantial
      increase in workstation and new product-Automatic Medicine Dispensing and
      Packing System sales during the six months ended June 30, 2008.





**Inventory**





Inventory
      consists of raw materials and finished goods. As of the six months ended June
      30, 2008, the recorded value of our inventory has increased 11.07% to $851,851
      from $766,933 as of the fiscal year ended December 31, 2007. The increase is
      mainly due to increase in finished goods from $161,005 as of December 31, 2007
      to $621,445 as of June 30, 2008, an increase of 285.99%. In raw materials
      decreased from $605,928 as of December 31, 2007 to $230,406 as of June 30,
      2008,
      a decrease of 61.97%, which was due to increased sales and designed
      capacity.





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





Item
            
            June
                30, 2008
            
            December
                31, 2007
            
            ChangeRaw
                material
            
            $
            230,406
            
            $
            605,928
            
            
            -61.97
            %Finished
                goods
            
            $
            621,445
            
            $
            161,005
            
            
            285.99
            %Total
            
            $
            851,851
            
            $
            766,933
            
            
            11.07
            %





**Accounts
      payable**





Accounts
      payable amounted to $0 as of the six months ended June 30, 2008, a decrease
      from
      $245,917 as of the fiscal year ended December 31, 2007. This decrease is mainly
      due to cash purchases of raw materials.




**Liquidity
      and Capital Resources**





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





On
      June
      6, 2007, we raised $6.7 million in gross proceeds through private placement
      offering of our series B convertible preferred stock. We received $4,976,335
      in
      net proceeds after deducting placement agent discounts and commissions and
      payment of professional and other related expenses.





On
      June
      5, 2008, we had received $6.53 million for the warrant J exercised.





**** As
      is
      customary in our industry, we provide payment terms to most of our customers
      that exceed terms that we receive from our suppliers. Therefore, the Company’s
      liquidity needs have generally consisted of working capital necessary to finance
      receivables and raw material inventory. Capital expenditures have historically
      been necessary to expand the production capacity of the Company’s manufacturing
      operations.





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




Six
                Months Ended June 30,2008
            
            2007
            
            ChangeNet
                cash provided by (used in) operating activities
            
            $
            3,111,974
            
            $
            1,575,727
            
            $
            1,536,247Net
                cash provided by (used in) investing activities
            
            $
            -1,328,036
            
            $
            -1,442,943
            
            $
            114,907Net
                cash provided by (used in) financing activities
            
            $
            6,530,000
            
            $
            5,756,335
            
            $
            773,665Effect
                of foreign currency translation on cash and cash
                equivalents
            
            $
            867,374
            
            $
            229,813
            
            $
            637,561Cash
                and cash equivalents at beginning of year
            
            $
            5,820,100
            
            $
            1,749,048
            
            $
            4,071,052Cash
                and cash equivalents-end of year
            
            $
            15,001,412
            
            $
            7,867,980
            
            $
            7,133,432





35




**Operating
      Activities**





For
      the
      six months ended June 30, 2008, net cash provided by operating activities was
      $3,111,974. This was primarily attributable to our net income of $3,755,746,
      adjusted by an add-back of non-cash expenses mainly consisting of depreciation
      and amortization of $796,361 offset by a $1,440,133 decrease in working capital.
      Specifically, the working capital decrease was primarily due to i) a $851,682
      accounts receivable increase driven by revenue growth; ii) a $34,545 inventories
      increase in principally finished goods to support planned expansion and sales
      growth; iii) a $623,758 increase in advance to suppliers to buy raw materials;
      and iv) a $197,437 decrease in prepayments , travel advances to directors,
      and
      advances to employees, consisting primarily of prepayments for raw materials
      supplies in advance of shipment and working capital of direct sales office;
      partially offset by a $127,585 increase in accounts payable, tax payable, loans
      from unrelated parties, amount due from a director, accrued liabilities, other
      payables, and accrued liabilities.





**Investing
      Activities**





For
      the
      six months ended June 30, 2008, net cash used in investing activities was
      $1,328,036. This was primarily attributable to
      i) a
      $914,693 capital expenditure for purchase of new plant and equipment; (ii)
      a
      $61,215 decrease in restricted cash; (iii) a $434,674 increase in sales of
      short
      term investment; and (iv) a $39,884 increase in advances to a related company
      and a director.





**Financing
      activities**





For
      the
      six months ended June 30, 2008, net cash used in financing activities was
      $6,530,000. This was primarily attributable to the warrant J
      exercised.





In
      future
      periods, we believe that our existing cash, cash equivalents and cash flows
      from
      operations, combined with availability under our revolving credit facility,
      will
      be sufficient to meet our presently anticipated future cash needs for at least
      the next 6 months. We may, however, require additional cash resources due to
      changed business conditions or other future developments, including any
      investments or acquisitions we may decide to pursue.





**Critical
      Accounting Policies**





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





*Impairment
      of long-lived assets* .
      We
      account for impairment of property, plant and equipment and amortizable
      intangible assets in accordance with SFAS No. 121, *Accounting
      for Impairment of Long-Lived Assets to be Disposed Of* ,
      which
      requires us to evaluate a long-lived asset for recoverability when there is
      event or circumstance that indicate the carrying value of the asset may not
      be
      recoverable. If such assets are considered to be impaired, the impairment to
      be
      recognized is measured by the amount by which the carrying amount of the assets
      exceeds the fair value of the assets. Assets to be disposed of are reported
      at
      the lower of the carrying amount or fair value less costs to sell. During the
      reporting years, there was no impairment loss incurred. Competitive pricing
      pressure and changes in interest rates, could materially and adversely affect
      our estimates of future net cash flows to be generated by our long-lived assets.





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




36





*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. We 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, we have not charged off any balances as it has yet to exhaust
      all means of collection. Unexpected economic downturn is a factor that could
      materially affect the adequacy of the write down and the provision.





*Revenue
      recognition* .
      Net
      revenue is recognized when customer takes delivery and acceptance of products,
      the price is fixed or determinable as stated on sales contract, and the
      collectability is reasonably assured. Customers do not have a general right
      of
      return on products delivered, and management has not made allowance for
      estimated sales returns. Contract
      revenues are recognized when the manufacturing and installation of the medical
      equipments is completed. Generally, we receive total contract sum from clients
      in 3 installments. Deposit of 30% is received from client when the contract
      is
      signed. Second payment of 30% is received when the project commenced. The final
      sum of the remaining portion is received after the construction is completed
      within 4 months. Unexpected economic downturn is a factor that could materially
      affect the collectability of our accounts receivable and hence the recognition
      of our revenue.





We
      have
      no off-balance sheet arrangements and have not entered into any transactions
      involving unconsolidated, limited purpose entities.




**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK.**




N/A.




**ITEM
      4T. 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 six months ended June 30, 2008. Based upon that evaluation, the
      Company’s CEO and CFO concluded that the Company’s disclosure controls and
      procedures are effective to ensure that information required to be disclosed
      by
      the Company in the reports that the Company files or submits under the Exchange
      Act, is recorded, processed, summarized and reported, within the time periods
      specified in the SEC’s rules and forms, and that such information is accumulated
      and communicated to the Company’s management, including the Company’s CEO and
      CFO, as appropriate, to allow timely decisions regarding required
      disclosure.




**Changes
      in internal controls**




Our
      management, with the participation our Chief Executive Officer and Chief
      Financial Officer, performed an evaluation as to whether any change in our
      internal controls over financial reporting  occurred during the 2008
      Quarter ended June 30, 2008.  Based on that evaluation, our Chief Executive
      Officer and our Chief Financial Officer concluded that no change occurred in
      the
      Company's internal controls over financial reporting during the 2008 Quarter
      ended June 30, 2008 that has materially affected, or is reasonably likely to
      materially affect, the Company's internal controls over financial
      reporting.




37




**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**




N/A




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




None.




**ITEM
      3 - DEFAULTS UPON SENIOR SECURITIES**




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




**ITEM
      4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS**




**ITEM
      5 - OTHER INFORMATION**




There
      were no matters required to be disclosed on Form 8-K during the six months
      ended
      June 30, 2008 which were not disclosed on such form.




**ITEM
      6 - EXHIBITS.**





**Exhibit
                No.**
            
            **Description
                of Exhibit**31.1
            
            Certification
                by Chief Executive Officer pursuant to Sarbanes Oxley Act of 2002
                Section
                302.31.2
            
            Certification
                by Chief Financial Officer pursuant to Sarbanes Oxley Act of 2002
                Section
                302.32.1
            
            Certification
                by Chief Executive Officer pursuant to Sarbanes-Oxley Act of 2002
                Section
                906.32.2
            
            Certification
                by Chief Financial Officer pursuant to Sarbanes-Oxley Act of 2002
                Section
                906.





38




**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:
                  August 14, 2008
            By:
            /s/
                Liu BoLiu
                BoChief
                Executive Officer





Dated:
                  August 14, 2008
            By:
            /s/
                Samuel ShengSamuel
                ShengChief
                Financial Officer




39