UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM
10-Q/A


Amendment
No. 1




(Mark
One)




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




FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009




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


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filero
            Accelerated
      fileroNon-accelerated
      filero
            Smaller
      reporting companyx




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




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  Noo




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 November 13, 2009, there were
18,499,736 outstanding shares of the Registrant's Common Stock, $0.0000001 par
value.











TABLE
OF CONTENTS





PagePART
      IItem
      1.
              Financial
      Statements
              
              3Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
              
              39Item
      3.
              Quantitative
      and Qualitative Disclosures About Market Risk
              
              46Item
      4T
              Controls
      and Procedures
              
              46PART
      IIItem
      1.
              Legal
      Proceedings
              
              47Item
      1A.
              Risk
      Factors
              
              48Item
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              48Item
      3.
              Defaults
      Upon Senior Securities
              
              48Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              
              48Item
      5.
              Other
      Information
              
              48Item
      6.
              Exhibits
              
              48SIGNATURES
              
              49




EXPLANATORY
NOTE:





The
Registrant is hereby filing this Form 10-Q/A for the period ended September 30,
2009 to correct and restate its financial statements, notes, and related
disclosure as relates to changes in the classification of the fair value of
warrants in accordance with to paragraph 815-40.15 of the FASB Accounting
Standards Codification (EITF 07-05) as adopted on January 1, 2009 and the
classification of the Company’s acquisition of Qingdao Liheng Textiles Co., Ltd
as an impairment on investment.


2




PART
I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS


SUNWAY
GLOBAL INC.




CONTENTS
              
              PAGESREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              
              4CONSOLIDATED
      BALANCE SHEETS
              
              5 -
      6CONSOLIDATED
      STATEMENTS OF INCOME
              
              7 -
      8CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY
              
              9CONSOLIDATED
      STATEMENTS OF CASH FLOWS
              
              10 -
      11NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
              
              12 –
      38




3


ALBERT
WONG & CO.


CERTIFIED
PUBLIC ACCOUNTANTS


7th
Floor, Nan Dao Commercial Building


359-361
Queen’s Road Central


Hong
Kong


Tel :
2851 7954


Fax: 2545
4086




ALBERT
WONG


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


CPA(Practising)





To:
            The
      board of directors and stockholders
of


Sunway
Global Inc.





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 September 30, 2009 and
2008, and for the three-month and nine-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 Public
Company Accounting Oversight Board (United States). 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.




Since our
previous report dated November 12, 2009, it was determined that the consolidated
financial statements needed restatement to make corrections as described in note
19.





Hong
      Kong
            Albert
      Wong & Co.November
      12, 2009
            Certified
      Public AccountantsExcept
      for note 20 which is dated May 13, 2010


4





SUNWAY
GLOBAL INC.





CONSOLIDATED
BALANCE SHEETS


AS
AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008


(Stated
in US Dollars)





Notes
                                        
                                        September 30,
                                          2009
                                        
                                        
                                        December 31,2008(Unaudited)
                                        
                                        
                                        (Audited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                        2(k)
                                        
                                        $
                                        4,860,548
                                        
                                        
                                        $
                                        15,189,941Trade
      receivables, net
                                        5
                                        
                                        
                                        3,214,439
                                        
                                        
                                        
                                        2,953,919Inventories
                                        8
                                        
                                        
                                        649,024
                                        
                                        
                                        
                                        590,738Advances
      to suppliers
                                        
                                        
                                        
                                        1,047,955
                                        
                                        
                                        
                                        547,952Prepayments
                                        
                                        
                                        
                                        236,925
                                        
                                        
                                        
                                        -Tender
      deposits
                                        
                                        
                                        
                                        119,144
                                        
                                        
                                        
                                        112,735Travel
      advances to directors
                                        6
                                        
                                        
                                        92,402
                                        
                                        
                                        
                                        38,733Advances
      to employees
                                        7
                                        
                                        
                                        297,250
                                        
                                        
                                        
                                        429,804Other
      receivables
                                        
                                        
                                        
                                        199,434
                                        
                                        
                                        
                                        -Total
      current assets
                                        
                                        
                                        $
                                        10,717,121
                                        
                                        
                                        $
                                        19,863,822Amount
      due from a related company
                                        4
                                        
                                        
                                        830
                                        
                                        
                                        
                                        830Restricted
      cash
                                        
                                        
                                        
                                        311,916
                                        
                                        
                                        
                                        378,366Property,
      plant and equipment, net
                                        9
                                        
                                        
                                        8,117,438
                                        
                                        
                                        
                                        5,069,871Intangible
      assets, net
                                        10
                                        
                                        
                                        13,904,188
                                        
                                        
                                        
                                        6,576,769Deposit
      for acquisition of computer software
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,750,751Deposit
      for the acquisition of subsidiary
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        7,725,445Deposit
      for technology-based designs
                                        
                                        
                                        
                                        4,405,786
                                        
                                        
                                        
                                        -Deposit
      for property, plant and equipment
                                        
                                        
                                        
                                        1,411,606
                                        
                                        
                                        
                                        -TOTAL
      ASSETS
                                        
                                        
                                        $
                                        38,868,885
                                        
                                        
                                        $
                                        41,365,854LIABILITIES
      ANDSTOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                        
                                        
                                        $
                                        109,007
                                        
                                        
                                        $
                                        59,912Income
      tax payable
                                        
                                        
                                        
                                        172,452
                                        
                                        
                                        
                                        632,893Turnover
      and other taxes
                                        
                                        
                                        
                                        21,386
                                        
                                        
                                        
                                        406,839Expected
      warranty liabilities
                                        11
                                        
                                        
                                        50,519
                                        
                                        
                                        
                                        50,396Customers
      deposits
                                        
                                        
                                        
                                        300,428
                                        
                                        
                                        
                                        -Accrued
      liabilities
                                        
                                        
                                        
                                        565,497
                                        
                                        
                                        
                                        301,461Other
      payables
                                        
                                        
                                        
                                        8,705
                                        
                                        
                                        
                                        15,168Total
      current liabilities
                                        
                                        
                                        $
                                        1,227,994
                                        
                                        
                                        $
                                        1,466,669Warrant
      liabilities
                                        
                                        
                                        
                                        56,537,920
                                        
                                        
                                        
                                        -TOTAL
      LIABILITIES
                                        
                                        
                                        $
                                        57,765,914
                                        
                                        
                                        $
                                        1,466,669




See
accompanying notes to consolidated financial statements


5





SUNWAY
GLOBAL INC.





CONSOLIDATED
BALANCE SHEETS (Continued)


AS
AT SEPTEMBER 30, 2009 AND DECEMBER 31, 2008


(Stated
in US Dollars)





Notes
                                                  
                                                  
                                                  September 30, 2009
                                                  
                                                  
                                                  December 31, 2008(Unaudited)
                                                  
                                                  
                                                  (Audited)STOCKHOLDERS’
      EQUITYSeries
      B Convertible PreferredStock
      $0.0000001 par value; 400,000shares
      authorized; 160,494 shares issuedand
      outstanding at September 30, 2009and
      December 31, 2008 respectively
                                                  
                                                  
                                                  12
                                                  
                                                  
                                                  $
                                                  1
                                                  
                                                  
                                                  $
                                                  1Common
      stock at $0.0000001 parvalue;
      100,000,000 shares authorized;18,499,736
      shares issued andoutstanding
      at September 30, 2009and
      December 31, 2008 respectively
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  2
                                                  
                                                  
                                                  
                                                  2Additional
      paid-in capital
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  18,689,023
                                                  
                                                  
                                                  
                                                  22,679,965Statutory
      reserves
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  3,033,855
                                                  
                                                  
                                                  
                                                  2,127,978(Accumulated
      deficit)/retained earnings
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  (43,533,037
                                                  )
                                                  
                                                  
                                                  12,247,049Accumulated
      other comprehensive income
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  2,913,127
                                                  
                                                  
                                                  
                                                  2,844,190$
                                                  (18,897,029
                                                  )
                                                  
                                                  $
                                                  39,899,185TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  38,868,885
                                                  
                                                  
                                                  $
                                                  41,365,854




See
accompanying notes to consolidated financial statements




6





SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Nine months ended September 30,2009
                                      
                                      
                                      2008NotesNet
      revenues
                                      17
                                      
                                      $
                                      8,819,247
                                      
                                      
                                      $
                                      14,074,768Cost
      of net revenues
                                      17
                                      
                                      
                                      (3,068,381
                                      )
                                      
                                      
                                      (4,154,866
                                      )Gross
      profit
                                      
                                      
                                      $
                                      5,750,866
                                      
                                      
                                      $
                                      9,919,902Selling
      expenses
                                      
                                      
                                      
                                      (697,057
                                      )
                                      
                                      
                                      (279,167
                                      )General
      and administrative expenses
                                      
                                      
                                      
                                      (2,097,560
                                      )
                                      
                                      
                                      (2,135,759
                                      )Income
      from operation
                                      
                                      
                                      $
                                      2,956,249
                                      
                                      
                                      $
                                      7,504,976Interest
      expenses
                                      
                                      
                                      
                                      (1,727
                                      )
                                      
                                      
                                      -Interest
      income
                                      
                                      
                                      
                                      52,284
                                      
                                      
                                      
                                      44,698Impairment
      on investment
                                      18
                                      
                                      
                                      (4,831,386
                                      )
                                      
                                      
                                      -Change
      in fair value of warrants
                                      
                                      
                                      
                                      13,363,953
                                      
                                      
                                      
                                      -Income
      before income taxes
                                      
                                      
                                      $
                                      11,539,373
                                      
                                      
                                      $
                                      7,549,674Income
      taxes
                                      14
                                      
                                      
                                      (502,651
                                      )
                                      
                                      
                                      (1,132,451
                                      )Net
      income
                                      
                                      
                                      $
                                      11,036,722
                                      
                                      
                                      $
                                      6,417,223Net
      income per share:-Basic
                                      
                                      
                                      $
                                      0.60
                                      
                                      
                                      $
                                      0.46-Diluted
                                      
                                      
                                      $
                                      0.36
                                      
                                      
                                      $
                                      0.22Weighted
      average number of common stock-Basic
                                      13
                                      
                                      
                                      18,499,736
                                      
                                      
                                      
                                      14,003,444-Diluted
                                      13
                                      
                                      
                                      30,763,019
                                      
                                      
                                      
                                      28,690,904





See
accompanying notes to consolidated financial statements




7





SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Three months ended September 30,2009
                                    
                                    
                                    2008NotesNet
      revenues
                                    17
                                    
                                    $
                                    3,150,969
                                    
                                    
                                    $
                                    6,025,075Cost
      of net revenues
                                    17
                                    
                                    
                                    (1,087,115
                                    )
                                    
                                    
                                    (1,790,475
                                    )Gross
      profit
                                    
                                    
                                    $
                                    2,063,854
                                    
                                    
                                    $
                                    4,234,600Selling
      expenses
                                    
                                    
                                    
                                    (335,787
                                    )
                                    
                                    
                                    (187,978
                                    )General
      and administrative expenses
                                    
                                    
                                    
                                    (697,782
                                    )
                                    
                                    
                                    (700,544
                                    )Income
      from operation
                                    
                                    
                                    $
                                    1,030,285
                                    
                                    
                                    $
                                    3,346,078Interest
      income
                                    
                                    
                                    
                                    10,041
                                    
                                    
                                    
                                    8,267Change
      in fair value of warrants
                                    
                                    
                                    
                                    2,429,394
                                    
                                    
                                    
                                    -Income
      before income taxes
                                    
                                    
                                    $
                                    3,469,720
                                    
                                    
                                    $
                                    3,354,345Income
      taxes
                                    14
                                    
                                    
                                    (168,978
                                    )
                                    
                                    
                                    (484,486
                                    )Net
      income
                                    
                                    
                                    $
                                    3,300,742
                                    
                                    
                                    $
                                    2,869,859Net
      income per share:-Basic
      and diluted
                                    
                                    
                                    $
                                    0.18
                                    
                                    
                                    $
                                    0.16-Diluted
                                    
                                    
                                    $
                                    0.11
                                    
                                    
                                    $
                                    0.10Weighted
      average number of common stock-Basic
                                    
                                    
                                    
                                    18,499,736
                                    
                                    
                                    
                                    18,446,045-Diluted
                                    
                                    
                                    
                                    30,323,548
                                    
                                    
                                    
                                    27,587,392





See
accompanying notes to consolidated financial statements




8





SUNWAY
GLOBAL INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR
THE YEAR ENDED DECEMBER 31, 2008 AND


NINE
MONTHS ENDED SEPTEMBER 30, 2009


(Stated
in US Dollars)(Unaudited)





Additional
                                                
                                                
                                                
                                                
                                                
                                                Retained
                                                
                                                
                                                AccumulatedPreferred
                                                
                                                
                                                Preferred
                                                
                                                
                                                No.
                                                
                                                
                                                
                                                
                                                
                                                paid
                                                
                                                
                                                
                                                
                                                
                                                earnings/
                                                
                                                
                                                otherSeries
                                                
                                                
                                                Series
                                                
                                                
                                                shares
                                                
                                                
                                                Common
                                                
                                                
                                                in
                                                
                                                
                                                Statutory
                                                
                                                
                                                (accumulated
                                                
                                                
                                                comprehensiveA
                                                
                                                
                                                B
                                                
                                                
                                                outstanding
                                                
                                                
                                                stock
                                                
                                                
                                                capital
                                                
                                                
                                                reserves
                                                
                                                
                                                deficit)
                                                
                                                
                                                income
                                                
                                                
                                                TotalBalance,
      January 1, 2008
                                                
                                                $
                                                1
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                
                                                223,658
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                $
                                                16,099,965
                                                
                                                
                                                $
                                                2,127,978
                                                
                                                
                                                $
                                                3,188,280
                                                
                                                
                                                $
                                                1,180,288
                                                
                                                
                                                $
                                                22,596,514Conversion
      of Preferred Series Ainto
      Common Stock
                                                
                                                
                                                (1
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                13,711,831
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Conversion
      of Preferred Series Binto
      Common Stock
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                148,140
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Conversion
      of Warrant Series Jinto
      Common Stock
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                4,416,107
                                                
                                                
                                                
                                                1
                                                
                                                
                                                
                                                6,579,999
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                6,580,000Net
      income
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                9,058,769
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                9,058,769Foreign
      currency translationadjustment
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,663,902
                                                
                                                
                                                
                                                1,663,902Balance,
      December 31, 2008
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                
                                                18,499,736
                                                
                                                
                                                $
                                                2
                                                
                                                
                                                $
                                                22,679,965
                                                
                                                
                                                $
                                                2,127,978
                                                
                                                
                                                $
                                                12,247,049
                                                
                                                
                                                $
                                                2,844,190
                                                
                                                
                                                $
                                                39,899,185Balance,
      January 1, 2009
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                
                                                18,499,736
                                                
                                                
                                                $
                                                2
                                                
                                                
                                                $
                                                22,679,965
                                                
                                                
                                                $
                                                2,127,978
                                                
                                                
                                                $
                                                12,247,049
                                                
                                                
                                                $
                                                2,844,190
                                                
                                                
                                                $
                                                39,899,185Net
      income
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                11,036,722
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                11,036,722Appropriations
      to statutoryreserves
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                905,877
                                                
                                                
                                                
                                                (905,877
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Reclassification
      of warrants from equity to derivative liabilities
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (3,990,942
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (65,910,931
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (69,901,873
                                                )Foreign
      currency translationAdjustment
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                68,937
                                                
                                                
                                                
                                                68,937Balance,
      September 30, 2009
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                1
                                                
                                                
                                                
                                                18,499,736
                                                
                                                
                                                $
                                                2
                                                
                                                
                                                $
                                                18,689,023
                                                
                                                
                                                $
                                                3,033,855
                                                
                                                
                                                $
                                                (43,533,037
                                                )
                                                
                                                $
                                                2,913,127
                                                
                                                
                                                $
                                                (18,897,029
                                                )





See
accompanying notes to consolidated financial statements




9





SUNWAY
GLOBAL INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Nine months ended September 30,2009
                                  
                                  
                                  2008Cash
      flows from operating activitiesNet
      income
                                  
                                  $
                                  11,036,722
                                  
                                  
                                  $
                                  6,417,223Depreciation
                                  
                                  
                                  730,606
                                  
                                  
                                  
                                  588,069Amortization
                                  
                                  
                                  743,651
                                  
                                  
                                  
                                  638,114Loss
      on disposal of fixed assets
                                  
                                  
                                  9,553
                                  
                                  
                                  
                                  -Change
      in fair value of warrants
                                  
                                  
                                  (13,363,953
                                  )
                                  
                                  
                                  -Impairment
      on investment
                                  
                                  
                                  4,831,386
                                  
                                  
                                  
                                  -Adjustments
      to reconcile net incometo
      net cash provided by operating activities:Trade
      receivables, net
                                  
                                  
                                  (253,167
                                  )
                                  
                                  
                                  (1,383,854
                                  )Inventories
                                  
                                  
                                  (56,811
                                  )
                                  
                                  
                                  (142,793
                                  )Advances
      to suppliers
                                  
                                  
                                  (320,629
                                  )
                                  
                                  
                                  (747,483
                                  )Prepayments
                                  
                                  
                                  (236,756
                                  )
                                  
                                  
                                  90,978Tender
      deposits
                                  
                                  
                                  (6,131
                                  )
                                  
                                  
                                  (62,756
                                  )Travel
      advances to shareholders
                                  
                                  
                                  (53,536
                                  )
                                  
                                  
                                  (31,345
                                  )Advances
      to employees
                                  
                                  
                                  133,501
                                  
                                  
                                  
                                  120,991Other
      receivables
                                  
                                  
                                  445,950
                                  
                                  
                                  
                                  -Accounts
      payable
                                  
                                  
                                  48,915
                                  
                                  
                                  
                                  (194,875
                                  )Income
      tax payable
                                  
                                  
                                  (461,647
                                  )
                                  
                                  
                                  291,223Turnover
      and other taxes
                                  
                                  
                                  (357,705
                                  )
                                  
                                  
                                  315,610Customers
      deposits
                                  
                                  
                                  300,213
                                  
                                  
                                  
                                  (217,655
                                  )Accrued
      liabilities
                                  
                                  
                                  1,154
                                  
                                  
                                  
                                  (5,512
                                  )Other
      Payables
                                  
                                  
                                  255,501
                                  
                                  
                                  
                                  -Net
      cash provided by operating activities
                                  
                                  $
                                  3,426,817
                                  
                                  
                                  $
                                  5,675,935Cash
      flows from investing activitiesPurchase
      of plant and equipment
                                  
                                  $
                                  (4,287,278
                                  )
                                  
                                  $
                                  (1,103,720
                                  )Purchase
      of intangible assets
                                  
                                  
                                  (7,027,411
                                  )
                                  
                                  
                                  -Amount
      due from a director
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,074,798Restricted
      cash
                                  
                                  
                                  66,450
                                  
                                  
                                  
                                  99,019Advances
      to a related company
                                  
                                  
                                  -
                                  
                                  
                                  
                                  611,191Deposit
      for technology-based designs
                                  
                                  
                                  (2,648,886
                                  )
                                  
                                  
                                  -Deposit
      for property, plant and equipment
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (2,917,536
                                  )Net
      cash used in investing activities
                                  
                                  $
                                  (13,897,125
                                  )
                                  
                                  $
                                  (2,236,248
                                  )Cash
      flows from financing activitiesProceeds
      from exercise of Series J Convertible
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  6,530,000Net
      cash provided by financing activities
                                  
                                  $
                                  -
                                  
                                  
                                  $
                                  6,530,000




10




SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Nine months ended September 30,2009
                      
                      
                      2008Net
      in cash and cash equivalents (used)/sourced
                      
                      $
                      (10,470,308
                      )
                      
                      $
                      9,969,687Effect
      of foreign currency translation oncash
      and cash equivalents
                      
                      
                      140,915
                      
                      
                      
                      499,689Cash
      and cash equivalents–beginning of period
                      
                      
                      15,189,941
                      
                      
                      
                      5,820,100Cash
      and cash equivalents–end of period
                      
                      $
                      4,860,548
                      
                      
                      $
                      16,289,476




SUPPLEMENTAL
NON-CASH DISCLOSURES:





1.
            During
      the nine months ended September 30, 2009 and 2008, an amount of $1,752,695
      and nil were transferred from “deposit for the acquisition of computer
      software” to “property, plant and equipment”,
  respectively.





2.
            During
      the nine months ended September 30, 2009 and 2008, an amount of $7,725,445
      and nil were transferred from “deposit for the acquisition of subsidiary”
      to “acquisition of subsidiary, net of cash
  acquisition”.





Supplementary
      cash flow information:Interest
      received
                    
                    $
                    52,284
                    
                    
                    $
                    44,698Interest
      paid
                    
                    
                    1,727
                    
                    
                    
                    -Tax
      paid
                    
                    
                    964,297
                    
                    
                    
                    1,101,281




See
accompanying notes to consolidated financial statements




11


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





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





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





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





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





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





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Method
      of Accounting





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


12





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING
POLICIES(CONTINUED)





(a)
            Method
      of Accounting (Continued)





The
interim results of operations are not necessarily indicative of the results to
be expected for the fiscal period ending September 30, 2009. The Company’s
consolidation balance sheet as of December 31, 2008 has been taken from the
Company’s consolidation 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
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 Hong Kong, 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 five subsidiaries since its reverse-merger on June 6, 2007. The
detailed identities of the consolidating subsidiaries would have been as
follows:





Name of subsidiaries
                
                Place of incorporation
                
                Attributable
                  interestWorld
      Through Ltd
                
                British
      Virgin Islands
                
                
                100
                %Sunway
      World Through Technology (Daqing) Co Ltd
                
                PRC
                
                
                100
                %*Daqing
      Sunway Technology Co Ltd
                
                PRC
                
                
                100
                %Beijing
      Sunway New-force Medical Treatment Tech Co.,
      Ltd
                
                PRC
                
                
                100
                %Qingdao
      Liheng Textiles Co, Ltd
                
                PRC
                
                
                100
                %




*Note:
Deemed variable interest entity


13


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(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
                Over
      lease termsTechnology-based
      design
                10
      years




14


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(f)
              Property,
      plant and equipment





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





Buildings
              20
      yearsMachinery
      and equipment
              6
      yearsMolding
              10
      yearsComputer
      software
              3 -
      10 yearsOffice
      equipment and motor vehicles
              5 -
      10 years





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





(g)
            Maintenance
      and repairs





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





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





The Group
periodically evaluates the carrying value of long-lived assets to be held and
used, including intangible assets subject to amortization, when events and
circumstances warrant such a review, pursuant to the guidelines established in
FASB ASC No. 360. The carrying value of a long-lived asset is considered
impaired when the anticipated undiscounted cash flow from such asset is
separately identifiable and is less than its carrying value. In that event, a
loss is recognised based on the amount by which the carrying value exceeds the
fair market value of the long-lived asset. Fair market value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair market values are reduced for
the cost to dispose.





During
the reporting period, there was no impairment loss.





(i)
              Inventories





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




15


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(j)
              Trade
      receivables





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





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





(k)
            Cash
      and cash equivalents





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





September 30, 2009
                      
                      
                      December 31, 2008Bank
      of Communications, Branch ofDaqing
      city economic zone
                      
                      $
                      4,691,983
                      
                      
                      $
                      9,606,188Commercial
      Bank, Daqing City
                      
                      
                      -
                      
                      
                      
                      4,536,667Agricultural
      Bank of China
                      
                      
                      63,064
                      
                      
                      
                      930,332China
      Construction Bank, Beijing Branch
                      
                      
                      46,787
                      
                      
                      
                      -Qingdao
      bank
                      
                      
                      17,540
                      
                      
                      
                      -Only
      HSBC in Hong Kong
                      
                      
                      35,174
                      
                      
                      
                      109,151Cash
      on hand
                      
                      
                      6,000
                      
                      
                      
                      7,603$
                      4,860,548
                      
                      
                      $
                      15,189,941





(l)
              Restricted
      cash





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





(m)
            Revenue
      recognition





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


-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


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


-
Collection is reasonably assured.


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


16


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(n)
            Expected
      warranty liabilities





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





(o)
            Cost
      of net revenues





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





(p)
            Leases





The Group
did not have lease which met the criteria of capital lease. Leases which do not
qualify as capital lease are classified as operating lease. Operating lease
rental payment included in general and administrative expenses were $56,807 and
$154,839, cost of sales were $9,865 and nil, selling expenses were $5,805 and
nil for the nine months ended September 30, 2009 and 2008
respectively.





(q)
            Advertising





The Group
expensed all advertising costs as incurred.  Advertising expenses
included in selling expenses were $585 and $46,779 for the nine months ended
September 30, 2009 and 2008 respectively.





(r)
            Shipping
      and handling





All
shipping and handling are expensed as incurred.  Shipping and handling
expenses included in selling expenses, general and administrative expenses, and
cost of net revenues were $23,091 and $16,477 for the nine months ended
September 30, 2009 and 2008 respectively.





(s)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $86,191
and $18,197 for the nine months ended September 30, 2009 and 2008
respectively.





(t)
              Retirement
      benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit expenses included in general and administrative
expenses and selling expenses were $93,579 and $18,387 for the nine months ended
September 30, 2009 and 2008 respectively.


17


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(u)
            Income
      taxes





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





(v)
            Foreign
      currency translation





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





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





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





September 30,
                              2009
                            
                            
                            December 31, 2008
                            
                            
                            September 30,
                              2008Twelve
      months endedRMB
      : USD exchange rate
                            
                            
                            -
                            
                            
                            
                            6.8542
                            
                            
                            
                            -Nine
      months endedRMB
      : USD exchange rate
                            
                            
                            6.8376
                            
                            
                            
                            -
                            
                            
                            
                            6.8551Average
      three months endedRMB
      : USD exchange rate
                            
                            
                            6.8411
                            
                            
                            
                            -
                            
                            
                            
                            6.8529Average
      nine months endedRMB
      : USD exchange rate
                            
                            
                            6.8425
                            
                            
                            
                            -
                            
                            
                            
                            6.9989




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.


18


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(w)
            Statutory
      reserves





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





(x)
            Comprehensive
      income





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





(y)
            Recent
      accounting pronouncements





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


19


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(y)
            Recent
      accounting pronouncements
(continued)





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





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





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




20


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)





(y)
            Recent
      accounting pronouncements
(continued)





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





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


21


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





3.
            CONCENTRATIONS
      OF CREDIT RISK AND MAJOR CUSTOMERS





Financial
instruments which potentially expose the Group to concentrations of credit risk,
consists of cash and trade receivables as of September 30, 2009 and December 31,
2008. The Group performs ongoing evaluations of its cash position and credit
evaluations to ensure collections and minimize losses.





As of
September 30, 2009 and December 31, 2008, 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
nine months ended September 30, 2009 and 2008, except for one sale of SADP in
Europe, all of the Group’s sales were generated from 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 nine months ended September 30,2009
                    
                    
                    2008Customer
      A
                    
                    $
                    906,389
                    
                    
                    $
                    1,550,244Customer
      D
                    
                    
                    -
                    
                    
                    
                    1,500,236





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





September 30, 2009
                  
                  
                  December 31, 2008Customer
      A
                  
                  $
                  325,799
                  
                  
                  $
                  499,583Customer
      B
                  
                  
                  480,658
                  
                  
                  
                  396,822Customer
      C
                  
                  
                  -
                  
                  
                  
                  387,263Customer
      D
                  
                  
                  -
                  
                  
                  
                  371,218Customer
      E
                  
                  
                  -
                  
                  
                  
                  325,129Customer
      F
                  
                  
                  317,636
                  
                  
                  
                  315,570Customer
      H
                  
                  
                  286,686
                  
                  
                  
                  -Customer
      I
                  
                  
                  277,874
                  
                  
                  
                  -


22


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





4.
            AMOUNT
      DUE FROM A RELATED COMPANY





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





5.
            TRADE
      RECEIVABLES, NET


September 30, 2009
                      
                      
                      December 31, 2008Trade
      receivables, gross
                      
                      $
                      3,222,873
                      
                      
                      $
                      2,962,333Provision
      for doubtful debts
                      
                      
                      (8,434
                      )
                      
                      
                      (8,414
                      )$
                      3,214,439
                      
                      
                      $
                      2,953,919


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





An
analysis of the allowance for doubtful accounts for the nine months ended
September 30, 2009 and December 31, 2008 is as follows:


September 30, 2009
                        
                        
                        December 31, 2008Balance
      at beginning of period/year
                        
                        $
                        8,414
                        
                        
                        $
                        7,884Foreign
      exchange adjustment
                        
                        
                        20
                        
                        
                        
                        530Balance
      at end of period/year
                        
                        $
                        8,434
                        
                        
                        $
                        8,414





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





6.
            TRAVEL
      ADVANCES TO DIRECTORS





Travel
advances were made to directors. These directors are also engaging in 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.  They are unsecured, interest free and repayable on
demand.





September 30, 2009
                      
                      
                      December 31, 2008Bo
      Liu
                      
                      $
                      39,890
                      
                      
                      $
                      23,495Deli
      Liang
                      
                      
                      52,512
                      
                      
                      
                      15,238$
                      92,402
                      
                      
                      $
                      38,733




23


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





7.
            ADVANCES
      TO EMPLOYEES





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





September 30, 2009
                      
                      
                      December 31, 2008Beginning
      balance, January 1
                      
                      $
                      429,804
                      
                      
                      $
                      548,364Add:
      Advanced during the period/year
                      
                      
                      435,997
                      
                      
                      
                      659,177Less: 
      Transferred to income statement
                      
                      
                      (185,390
                      )
                      
                      
                      (406,262
                      )Recollected
      from employees
                      
                      
                      (383,161
                      )
                      
                      
                      (371,475
                      )Ending
      balance
                      
                      $
                      297,250
                      
                      
                      $
                      429,804





8.
            INVENTORIES





Inventories
comprise the followings:


September 30, 2009
                      
                      
                      December 31, 2008Finished
      goods
                      
                      $
                      138,783
                      
                      
                      $
                      218,448Work
      in progress
                      
                      
                      23,197
                      
                      
                      
                      188,855Raw
      materials
                      
                      
                      487,044
                      
                      
                      
                      183,435$
                      649,024
                      
                      
                      $
                      590,738





9.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net comprise the followings:


September 30, 2009
                          
                          
                          December 31, 2008At
      costBuilding
                          
                          $
                          1,847,967
                          
                          
                          $
                          1,447,402Machinery
      and equipment
                          
                          
                          680,302
                          
                          
                          
                          1,116,941Moldings
                          
                          
                          6,506,045
                          
                          
                          
                          4,155,598Computer
      software
                          
                          
                          2,100,715
                          
                          
                          
                          2,073,181Office
      equipment and motor vehicles
                          
                          
                          410,438
                          
                          
                          
                          288,736$
                          11,545,467
                          
                          
                          $
                          9,081,858Less:
      accumulated depreciation
                          
                          
                          (4,298,298
                          )
                          
                          
                          (4,011,987
                          )$
                          7,247,169
                          
                          
                          $
                          5,069,871Construction
      in progress
                          
                          
                          870,269
                          
                          
                          
                          -$
                          8,117,438
                          
                          
                          $
                          5,069,871




24


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





9.
PROPERTY, PLANT AND EQUIPMENT, NET (CONTINUED)





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





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





For the nine months ended September 30,2009
                      
                      
                      2008Cost
      of net revenues
                      
                      $
                      619,907
                      
                      
                      $
                      577,959General
      and administrative expenses
                      
                      
                      78,897
                      
                      
                      
                      10,110Selling
      expenses
                      
                      
                      31,802
                      
                      
                      
                      -$
                      730,606
                      
                      
                      $
                      588,069





10.
            INTANGIBLE
      ASSETS, NET





Intangible
assets, net are as follows:


September 30, 2009
                        
                        
                        December 31, 2008Land
      use rights, at cost
                        
                        $
                        2,494,931
                        
                        
                        $
                        1,354,308Technology-based
      design, at cost
                        
                        
                        13,254,223
                        
                        
                        
                        6,320,577$
                        15,749,154
                        
                        
                        $
                        7,674,885Less:
      accumulated amortization
                        
                        
                        (1,844,966
                        )
                        
                        
                        (1,098,116
                        )$
                        13,904,188
                        
                        
                        $
                        6,576,769





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 (RMB9,282,700), 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.





The Group
acquired the rights to use a parcel of land totaling 9,082 square meters, for a
consideration of $89,552 (RMB613,035), located at Qingdao Hi-Tech Industry
Development Zone, Qingdao, Shandong in the People’s Republic of China for a term
of 48 years from November 3, 2006 to July 24, 2053. The land has been used to
build the Lingheng’s facility.





The
issuance of land certificate is in progress, we have already paid in cash. It is
totaling 10,841 square meters, for a consideration of $106,709 (RMB730,485),
located at Qingdao Hi-Tech Industry Development Zone, Qingdao, Shandong in the
People’s Republic of China. The land has been used to build the Lingheng’s
facility.


25


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





10.
            INTANGIBLE
      ASSETS, NET (CONTINUED)





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





Amortization
expense included in the general and administrative expenses for the nine months
ended 2009 and 2008 were $743,651 and $638,114 respectively.





11.
            EXPECTED
      WARRANTY LIABILITIES





An
analysis of the expected warranty liabilities as at September 30, 2009 and
December 31, 2008 is as follows:





September 30, 2009
                      
                      
                      December 31, 2008Balance
      at beginning of period/year
                      
                      $
                      50,396
                      
                      
                      $
                      55,351Warranty
      expense for the period/year
                      
                      
                      -
                      
                      
                      
                      (8,533
                      )Foreign
      currency difference
                      
                      
                      123
                      
                      
                      
                      3,578Balance
      at end of period/year
                      
                      $
                      50,519
                      
                      
                      $
                      50,396





12.
            SERIES
      B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED
  WARRANTS




On June
5, 2007, the Company entered into a purchase agreement, whereby the company
agreed to sell 165,432 shares of the Company’s Series B Preferred shares and
various stock purchases 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 are summary in the following
table:


Investment
                            Amount
                          
                          Preferred
                            B
                          
                          A
                            Warrant
                          
                          B
                            Warrant
                          
                          J
                            Warrant
                          
                          C
                            Warrant
                          
                          D
                            WarrantVision
      Opportunity Master Fund, Ltd.
                          
                          
                          6,500,000
                          
                          160,494
                          
                          
                          4,814,815
                          
                          2,407,407
                          
                          
                          4,362,416
                          
                          4,362,416
                          
                          
                          2,181,208Columbia
      China Capital Group, Inc.
                          
                          
                          200,000
                          
                          4,938
                          
                          
                          148,148
                          
                          74,074
                          
                          
                          134,228
                          
                          134,228
                          
                          
                          67,114





Series of Warrant
                            
                            Number of shares
                            
                            
                            Exercise Price
                            
                            Expiry DateSeries
      A
                            
                            
                            4,962,963
                            
                            
                            $
                            1.76
                            
                            6
      /5 /2012Series
      B
                            
                            
                            2,481,481
                            
                            
                            
                            2.30
                            
                            6
      /5 /2012Series
      J
                            
                            
                            4,496,644
                            
                            
                            
                            1.49
                            
                            6
      /5 /2008Series
      C
                            
                            
                            4,496,644
                            
                            
                            
                            1.94
                            
                            6
      /5 /2012Series
      D
                            
                            
                            2,248,322
                            
                            
                            
                            2.53
                            
                            6
      /5
/2012




26


SUNWAY
GLOBAL INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





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




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





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





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





The
agreement, also provided that if a Registration Statement is not effective
within a certain period of time or the common shares are not listed on the
NASDAQ or American exchange by December 31, 2008, the Company will pay the
holders of the shares a penalty that can range from $67,000 to $670,000 and
certain principal shareholders would issue up to 1,000,000 additional shares to
the purchasers of the Preferred Series B shares.  The company is
accounting for these penalties in accordance with ASC 450 - Contingencies,
whereby the penalty will not be recorded as a liability until and if it is
probable the penalty will be incurred. No penalty has been recorded in the
accompanying financial statements for this contingency.





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





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





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





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


27




SUNWAY
GLOBAL INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





13.
            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 nine months ended September 30,2009
                                                
                                                
                                                2008Earnings:Earnings
      for the purpose of basic earnings per share
                                                
                                                $
                                                11,036,722
                                                
                                                
                                                $
                                                6,417,223Effect
      of dilutive potential common stock
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Earnings
      for the purpose of dilutive earnings per share
                                                
                                                $
                                                11,036,722
                                                
                                                
                                                $
                                                6,417,223Number
      of shares:Weighted
      average number of common stock for the purpose of basicearnings
      per share
                                                
                                                
                                                18,499,736
                                                
                                                
                                                
                                                14,003,444Effect
      of dilutive potential common stock-conversion
      of Series Aconvertible
      preferred stock
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,851,598-conversion
      of Series Bconvertible
      preferred stock
                                                
                                                
                                                4,814,820
                                                
                                                
                                                
                                                4,906,191-conversion
      of Warrant Series A
                                                
                                                
                                                2,940,791
                                                
                                                
                                                
                                                2,311,283-conversion
      of Warrant Series B
                                                
                                                
                                                1,160,176
                                                
                                                
                                                
                                                748,849-conversion
      of Warrant Series J
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,848,402-conversion
      of Warrant Series C
                                                
                                                
                                                2,432,728
                                                
                                                
                                                
                                                521,504-conversion
      of Warrant Series D
                                                
                                                
                                                914,768
                                                
                                                
                                                
                                                2,499,633Weighted
      average number of common stock for the purpose of dilutive earnings per
      share
                                                
                                                
                                                30,763,019
                                                
                                                
                                                
                                                28,690,904


28


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





14.
            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, Sunway and Liheng.
(see note 1).





SWT,
Sunway and Liheng, being registered in the PRC, are subject to PRC’s Enterprise
Income Tax. Pursuant to the PRC Income Tax Laws, Enterprise Income Taxes (“EIT”)
is generally imposed at a statutory rate of 25%.





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:





Nine months ended September 30,2009
                      
                      
                      2008U.S.
      statutory rate
                      
                      
                      34
                      %
                      
                      
                      34
                      %Foreign
      income not recognized in the U.S.
                      
                      
                      (34
                      )%
                      
                      
                      (34
                      )%PRC
      Enterprise Income Tax
                      
                      
                      25
                      %
                      
                      
                      25
                      %Tax
      holiday
                      
                      
                      (10
                      )%
                      
                      
                      (10
                      )%Provision
      for income tax
                      
                      
                      15
                      %
                      
                      
                      15
                      %





The
provision for income taxes consists of the following:





Nine months ended September 30,2009
                      
                      
                      2008Current
      tax – PRC EIT
                      
                      $
                      502,651
                      
                      
                      $
                      1,132,451Deferred
      tax provision
                      
                      
                      -
                      
                      
                      
                      -Income
      tax expenses
                      
                      $
                      502,651
                      
                      
                      $
                      1,132,451





15.
            FAIR
      VALUE OF FINANCIAL INSTRUMENTS





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


29


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





16.
            COMMITMENTS
      AND CONTINGENCIES





The Group
has entered into a tenancy agreement for factory expiring through 2010. Total
rental expenses for the nine months ended September 30, 2009 and for the year
ended December 31, 2008 amounted to $72,477 and $154,839
respectively.





As at
September 30, 2009, the Group’s commitments for minimum lease payments under
these leases for the next one year and thereafter are as follows:


September
      30,2010
                                  
                                  $
                                  70,009$
                                  70,009





As of
September 30, 2009, the Group had outstanding commitments with respect to the
construction in progress, amounted to $8,180.





17.
            SEGMENT
      INFORMATION





The Group
currently is engaged in the manufacturing and selling of logistic transport
systems. 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 Nine
                                              Months ended
                                              September 30,
                                              2009
                                            
                                            Workstation
                                            
                                            
                                            Workstation
                                            
                                            
                                            WorkstationType A
                                            
                                            
                                            Type B
                                            
                                            
                                            Type C
                                            
                                            
                                            SADP
                                            
                                            
                                            Other
                                            
                                            
                                            ConsolidatedNet
      revenues
                                            
                                            $
                                            3,157,837
                                            
                                            
                                            $
                                            1,177,786
                                            
                                            
                                            $
                                            3,727,970
                                            
                                            
                                            $
                                            672,276
                                            
                                            
                                            $
                                            83,378
                                            
                                            
                                            $
                                            8,819,247Cost
      of net revenues
                                            
                                            
                                            (999,727
                                            )
                                            
                                            
                                            (364,953
                                            )
                                            
                                            
                                            (1,271,340
                                            )
                                            
                                            
                                            (361,927
                                            )
                                            
                                            
                                            (70,434
                                            )
                                            
                                            
                                            (3,068,381
                                            )$
                                            2,158,110
                                            
                                            
                                            $
                                            812,833
                                            
                                            
                                            $
                                            2,456,630
                                            
                                            
                                            $
                                            310,349
                                            
                                            
                                            $
                                            12,944
                                            
                                            
                                            $
                                            5,750,866





For the Nine
                                                  Months ended
                                                  September 30,
                                                  2008
                                                
                                                Workstation
                                                
                                                
                                                Workstation
                                                
                                                
                                                WorkstationType A
                                                
                                                
                                                Type B
                                                
                                                
                                                Type C
                                                
                                                
                                                SADP
                                                
                                                
                                                Other
                                                
                                                
                                                ConsolidatedNet
      revenues
                                                
                                                $
                                                2,880,802
                                                
                                                
                                                $
                                                5,435,885
                                                
                                                
                                                $
                                                4,400,717
                                                
                                                
                                                $
                                                1,357,364
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                14,074,768Cost
      of net revenues
                                                
                                                
                                                (751,548
                                                )
                                                
                                                
                                                (1,555,025
                                                )
                                                
                                                
                                                (1,211,795
                                                )
                                                
                                                
                                                (636,498
                                                )
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (4,154,866
                                                )$
                                                2,129,254
                                                
                                                
                                                $
                                                3,880,860
                                                
                                                
                                                $
                                                3,188,922
                                                
                                                
                                                $
                                                720,866
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                9,919,902


30





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





17.
            SEGMENT
      INFORMATION (Continued)





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.





18.
            ACQUISITIONS





In order
to expand, on August 31, 2008, the Group entered an agreement with a third
party, Qingdao Liheng Textiles Co, Ltd, to acquire its 100% interest of it, for
a cash consideration of approximately $7.29 million (RMB$50,000,000). The whole
amount of $7,725,445 was paid and classified as “Deposit for the acquisition of
subsidiary” as at December 31, 2008. The transaction was planned to be finished
at December 1, 2008, but due to the PRC authority processing delay, was
completed on January 16, 2009.





Details
of net assets acquired and impairment are as follows:




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




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




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




31


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





19.
            RESTATEMENTS





On June
5, 2007 and as discussed in Note 12 above, the Company issued a number of series
of warrants to certain investors.  Each warrant is convertible into 1
share of common stock or a total of 14,068,605 shares of common stock. The
warrants have a three year life and the Series A warrants are exercisable at an
equivalent price of $1.76 per share, the Series B are exercisable at an
equivalent price of $2.30 per share, the Series C are exercisable at an
equivalent price of $1.94 per share and the Series D are exercisable at an
equivalent price of $2.53 per share.





During
the year-end audit of December 31, 2009 financial statements, the Company had
discovered that the warrants prescribed above were not appropriately accounted
in accordance with the provisions of FASB ASC Topic 815, “Derivatives and
Hedging” (“ASC 815”) (previously EITF 07-5, Determining Whether an Instrument
(or an Embedded Feature) is Indexed to an Entity’s Own Stock”) which was
effective January1, 2009. For quarterly reporting periods during 2009 or
effective January 1, 2009, the Company incorrectly recorded these warrants under
equity treatment. These warrants contained down-round protection (full-ratchet
down round protection) and were not considered indexed to the Company’s own
stock, and as such, all future changes in the fair value of these warrants
should have been recognized in earnings for all reporting periods effective
January 1, 2009 until such time as the warrants are exercised or
expire.





As a
result of this, the Company restated its financial statements by appropriately
adopting ASC 815 whereby recording these warrants from equity to liability
measured at fair value with changes in fair value recognized in earnings for
each reporting periods and recording a cumulative-effect adjustment to the
opening balance of retained earnings.


32


SUNWAY
GLOBAL INC.





BALANCE
SHEETS


Original
                                                                  
                                                                  
                                                                  RestatedSeptember
      30, 2009(Unaudited)
                                                                  
                                                                  
                                                                  (Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                                                  
                                                                  $
                                                                  4,860,548
                                                                  
                                                                  
                                                                  $
                                                                  4,860,548Trade
      receivables, net
                                                                  
                                                                  
                                                                  3,214,439
                                                                  
                                                                  
                                                                  
                                                                  3,214,439Inventories
                                                                  
                                                                  
                                                                  649,024
                                                                  
                                                                  
                                                                  
                                                                  649,024Advances
      to suppliers
                                                                  
                                                                  
                                                                  1,047,955
                                                                  
                                                                  
                                                                  
                                                                  1,047,955Prepayments
                                                                  
                                                                  
                                                                  236,925
                                                                  
                                                                  
                                                                  
                                                                  236,925Tender
      deposits
                                                                  
                                                                  
                                                                  119,144
                                                                  
                                                                  
                                                                  
                                                                  119,144Travel
      advances to directors
                                                                  
                                                                  
                                                                  92,402
                                                                  
                                                                  
                                                                  
                                                                  92,402Advances
      to employees
                                                                  
                                                                  
                                                                  297,250
                                                                  
                                                                  
                                                                  
                                                                  297,250Other
      receivables
                                                                  
                                                                  
                                                                  199,434
                                                                  
                                                                  
                                                                  
                                                                  199,434Total
      current assets
                                                                  
                                                                  $
                                                                  10,717,121
                                                                  
                                                                  
                                                                  $
                                                                  10,717,121Amount
      due from a related company
                                                                  
                                                                  
                                                                  830
                                                                  
                                                                  
                                                                  
                                                                  830Restricted
      cash
                                                                  
                                                                  
                                                                  311,916
                                                                  
                                                                  
                                                                  
                                                                  311,916Property,
      plant and equipment, net
                                                                  
                                                                  
                                                                  8,117,438
                                                                  
                                                                  
                                                                  
                                                                  8,117,438Intangible
      assets, net
                                                                  
                                                                  
                                                                  13,904,188
                                                                  
                                                                  
                                                                  
                                                                  13,904,188Deposit
      for the acquisition of subsidiary
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Deposit
      for technology-based designs
                                                                  
                                                                  
                                                                  4,405,786
                                                                  
                                                                  
                                                                  
                                                                  4,405,786Deposit
      for property, plant and equipment
                                                                  
                                                                  
                                                                  1,411,606
                                                                  
                                                                  
                                                                  
                                                                  1,411,606Goodwill
                                                                  
                                                                  
                                                                  4,831,386
                                                                  
                                                                  
                                                                  
                                                                  -TOTAL
      ASSETS
                                                                  
                                                                  $
                                                                  43,700,271
                                                                  
                                                                  
                                                                  $
                                                                  38,868,885LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                                                                  
                                                                  $
                                                                  109,007
                                                                  
                                                                  
                                                                  $
                                                                  109,007Income
      tax payable
                                                                  
                                                                  
                                                                  172,452
                                                                  
                                                                  
                                                                  
                                                                  172,452Turnover
      and other taxes
                                                                  
                                                                  
                                                                  21,386
                                                                  
                                                                  
                                                                  
                                                                  21,386Expected
      warranty liabilities
                                                                  
                                                                  
                                                                  50,519
                                                                  
                                                                  
                                                                  
                                                                  50,519Customers
      deposits
                                                                  
                                                                  
                                                                  300,428
                                                                  
                                                                  
                                                                  
                                                                  300,428Accrued
      liabilities
                                                                  
                                                                  
                                                                  565,497
                                                                  
                                                                  
                                                                  
                                                                  565,497Other
      payables
                                                                  
                                                                  
                                                                  8,705
                                                                  
                                                                  
                                                                  
                                                                  8,705Total
      current liabilities
                                                                  
                                                                  $
                                                                  1,227,994
                                                                  
                                                                  
                                                                  $
                                                                  1,227,994Warrant
      liabilities
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  56,537,920TOTAL
      LIABILITIES
                                                                  
                                                                  $
                                                                  1,227,994
                                                                  
                                                                  
                                                                  $
                                                                  57,765,914


33





SUNWAY
GLOBAL INC.





BALANCE
SHEETS (Continued)




Original
                                                      
                                                      
                                                      RestatedSeptember
      30, 2009(Unaudited)
                                                      
                                                      
                                                      (Unaudited)STOCKHOLDERS’
      EQUITYSeries
      B Convertible Preferred Stock $0.0000001 par value;
      400,000 shares authorized; 160,494 shares issued  and
      outstanding at September 30, 2009
                                                      
                                                      $
                                                      1
                                                      
                                                      
                                                      
                                                      1Common
      stock at $0.0000001 par  value; 100,000,000 shares
      authorized; 18,499,736 shares issued and outstanding at
      September 30, 2009
                                                      
                                                      
                                                      2
                                                      
                                                      
                                                      
                                                      2Additional
      paid-in capital
                                                      
                                                      
                                                      22,679,965
                                                      
                                                      
                                                      
                                                      18,689,023Statutory
      reserves
                                                      
                                                      
                                                      3,033,855
                                                      
                                                      
                                                      
                                                      3,033,855Retained
      earnings/(accumulated deficit)
                                                      
                                                      
                                                      13,845,104
                                                      
                                                      
                                                      
                                                      (43,533,037
                                                      )Accumulated
      other comprehensive income
                                                      
                                                      
                                                      2,913,350
                                                      
                                                      
                                                      
                                                      2,913,127$
                                                      42,472,277
                                                      
                                                      
                                                      $
                                                      (18,897,029
                                                      )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                      
                                                      $
                                                      43,700,271
                                                      
                                                      
                                                      $
                                                      38,868,885


34





SUNWAY
GLOBAL INC.





STATEMENT
OF INCOME (Continued)





Original
                                                                            
                                                                            
                                                                            RestatedNine
      months ended September 30, 2009(Unaudited)
                                                                            
                                                                            
                                                                            (Unaudited)Net
      revenues
                                                                            
                                                                            $
                                                                            8,819,247
                                                                            
                                                                            
                                                                            $
                                                                            8,819,247Cost
      of net revenues
                                                                            
                                                                            
                                                                            (3,068,381
                                                                            )
                                                                            
                                                                            
                                                                            (3,068,381
                                                                            )Gross
      profit
                                                                            
                                                                            $
                                                                            5,750,866
                                                                            
                                                                            
                                                                            $
                                                                            5,750,866Selling
      expenses
                                                                            
                                                                            
                                                                            (697,057
                                                                            )
                                                                            
                                                                            
                                                                            (697,057
                                                                            )Loss
      on disposal of fixed assets
                                                                            
                                                                            
                                                                            (9,553
                                                                            )
                                                                            
                                                                            
                                                                            -General
      and administrative expenses
                                                                            
                                                                            
                                                                            (2,087,917
                                                                            )
                                                                            
                                                                            
                                                                            (2,097,560
                                                                            )Income
      from operation
                                                                            
                                                                            $
                                                                            2,956,339
                                                                            
                                                                            
                                                                            $
                                                                            2,956,249Interest
      expenses
                                                                            
                                                                            
                                                                            (1,727
                                                                            )
                                                                            
                                                                            
                                                                            (1,727
                                                                            )Interest
      income
                                                                            
                                                                            
                                                                            51,971
                                                                            
                                                                            
                                                                            
                                                                            52,284Impairment
      on investment
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            (4,831,386
                                                                            )Change
      in fair value of warrants
                                                                            
                                                                            
                                                                            -
                                                                            
                                                                            
                                                                            
                                                                            13,363,953Income
      before income taxes
                                                                            
                                                                            $
                                                                            3,006,583
                                                                            
                                                                            
                                                                            $
                                                                            11,539,373Income
      taxes
                                                                            
                                                                            
                                                                            (502,651
                                                                            )
                                                                            
                                                                            
                                                                            (502,651
                                                                            )Net
      income
                                                                            
                                                                            $
                                                                            2,503,932
                                                                            
                                                                            
                                                                            $
                                                                            11,036,722Net
      income per share:-Basic
                                                                            
                                                                            $
                                                                            0.14
                                                                            
                                                                            
                                                                            $
                                                                            0.60-Diluted
                                                                            
                                                                            $
                                                                            0.08
                                                                            
                                                                            
                                                                            $
                                                                            0.36Weighted
      average number of common stock-Basic
                                                                            
                                                                            
                                                                            18,499,736
                                                                            
                                                                            
                                                                            
                                                                            18,499,736-Diluted
                                                                            
                                                                            
                                                                            30,763,019
                                                                            
                                                                            
                                                                            
                                                                            30,763,019


35





SUNWAY
GLOBAL INC.





STATEMENTS
OF INCOME





Original
                                      
                                      
                                      RestatedThree
      months ended September 30,2009(Unaudited)
                                      
                                      
                                      (Unaudited)Net
      revenues
                                      
                                      $
                                      3,150,969
                                      
                                      
                                      $
                                      3,150,969Cost
      of net revenues
                                      
                                      
                                      (1,087,115
                                      )
                                      
                                      
                                      (1,087,115
                                      )Gross
      profit
                                      
                                      $
                                      2,063,854
                                      
                                      
                                      $
                                      2,063,854Selling
      expenses
                                      
                                      
                                      (335,787
                                      )
                                      
                                      
                                      (335,787
                                      )General
      and administrative expenses
                                      
                                      
                                      (697,782
                                      )
                                      
                                      
                                      (697,782
                                      )Income
      from operation
                                      
                                      $
                                      1,030,285
                                      
                                      
                                      $
                                      1,030,285Change
      in fair value of warrants
                                      
                                      
                                      -
                                      
                                      
                                      
                                      2,429,394Interest
      income
                                      
                                      
                                      10,041
                                      
                                      
                                      
                                      10,041Income
      before income taxes
                                      
                                      $
                                      1,040,326
                                      
                                      
                                      $
                                      3,469,720Income
      taxes
                                      
                                      
                                      (168,978
                                      )
                                      
                                      
                                      (168,978
                                      )Net
      income
                                      
                                      $
                                      871,348
                                      
                                      
                                      $
                                      3,300,742Net
      income per share:-Basic
      and diluted
                                      
                                      $
                                      0.05
                                      
                                      
                                      $
                                      0.18-Diluted
                                      
                                      $
                                      0.03
                                      
                                      
                                      $
                                      0.11Weighted
      average number of common stock-Basic
                                      
                                      
                                      18,499,736
                                      
                                      
                                      
                                      18,499,736-Diluted
                                      
                                      
                                      30,323,548
                                      
                                      
                                      
                                      30,323,548


36





SUNWAY
GLOBAL INC.


STATEMENTS
OF CASH FLOWS





Original
                                    
                                    
                                    RestatedNine
      months ended September 30,2009(Unaudited)
                                    
                                    
                                    (Unaudited)Cash
      flows from operating activitiesNet
      income
                                    
                                    $
                                    2,503,932
                                    
                                    
                                    $
                                    11,036,722Depreciation
                                    
                                    
                                    730,606
                                    
                                    
                                    
                                    730,606Amortization
                                    
                                    
                                    743,651
                                    
                                    
                                    
                                    743,651Loss
      on disposal of fixed assets
                                    
                                    
                                    9,553
                                    
                                    
                                    
                                    9,553Change
      in fair value of warrants
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (13,363,953
                                    )Impairment
      on investment
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4,831,386Adjustments
      to reconcile net income to net cash provided by operating
      activities:Trade
      receivables, net
                                    
                                    
                                    (253,167
                                    )
                                    
                                    
                                    (253,167
                                    )Inventories
                                    
                                    
                                    (56,811
                                    )
                                    
                                    
                                    (56,811
                                    )Advances
      to suppliers
                                    
                                    
                                    (498,413
                                    )
                                    
                                    
                                    (320,629
                                    )Prepayments
                                    
                                    
                                    862,716
                                    
                                    
                                    
                                    (236,756
                                    )Tender
      deposits
                                    
                                    
                                    (6,131
                                    )
                                    
                                    
                                    (6,131
                                    )Travel
      advances to shareholders
                                    
                                    
                                    (53,536
                                    )
                                    
                                    
                                    (53,536
                                    )Advances
      to employees
                                    
                                    
                                    133,501
                                    
                                    
                                    
                                    133,501Other
      receivables
                                    
                                    
                                    (199,292
                                    )
                                    
                                    
                                    445,950Accounts
      payable
                                    
                                    
                                    48,915
                                    
                                    
                                    
                                    48,915Income
      tax payable
                                    
                                    
                                    (461,647
                                    )
                                    
                                    
                                    (461,647
                                    )Turnover
      and other taxes
                                    
                                    
                                    (386,164
                                    )
                                    
                                    
                                    (357,705
                                    )Customers
      deposits
                                    
                                    
                                    300,213
                                    
                                    
                                    
                                    300,213Accrued
      liabilities
                                    
                                    
                                    1,154
                                    
                                    
                                    
                                    1,154Other
      Payables
                                    
                                    
                                    (168,590
                                    )
                                    
                                    
                                    255,501Net
      cash provided by operating activities
                                    
                                    $
                                    3,250,490
                                    
                                    
                                    $
                                    3,426,817Cash
      flows from investing activitiesPurchase
      of plant and equipment
                                    
                                    $
                                    (2,808,483
                                    )
                                    
                                    $
                                    (4,287,278
                                    )Purchase
      of intangible assets
                                    
                                    
                                    (6,916,545
                                    )
                                    
                                    
                                    (7,027,411
                                    )Amount
      due from a director
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Restricted
      cash
                                    
                                    
                                    66,450
                                    
                                    
                                    
                                    66,450Deposit
      for moulding
                                    
                                    
                                    (1,410,596
                                    )
                                    
                                    
                                    -Deposit
      for technology-based designs
                                    
                                    
                                    (2,648,886
                                    )
                                    
                                    
                                    (2,648,886
                                    )Reversal
      of deposit for acquisition of subsidiary
                                    
                                    
                                    7,725,445
                                    
                                    
                                    
                                    -Acquisition
      of subsidiary, net of cash acquired
                                    
                                    
                                    (7,652,252
                                    )
                                    
                                    
                                    -Net
      cash used in investing activities
                                    
                                    $
                                    (13,644,867
                                    )
                                    
                                    $
                                    (13,897,125
                                    )Cash
      flows from financing activities
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -Net
      cash provided by financing activities
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -


37





SUNWAY
GLOBAL INC.





STATEMENTS
OF CASH FLOWS (Continued)





Original
                                
                                
                                RestatedNine
      months ended September 30,2009(Unaudited)
                                
                                
                                (Unaudited)Net
      in cash and cash equivalents used
                                
                                $
                                (10,394,377
                                )
                                
                                $
                                (10,470,308
                                )Effect
      of foreign currency translation on cash and cash
    equivalents
                                
                                
                                64,984
                                
                                
                                
                                140,915Cash
      and cash equivalents–beginning of period
                                
                                
                                15,189,941
                                
                                
                                
                                15,189,941Cash
      and cash equivalents–end of period
                                
                                $
                                4,860,548
                                
                                
                                $
                                4,860,548Supplementary
      cash flow information:Interest
      received
                                
                                $
                                51,971
                                
                                
                                $
                                52,284Interest
      paid
                                
                                
                                1,727
                                
                                
                                
                                1,727Tax
      paid
                                
                                
                                964,297
                                
                                
                                
                                964,297


38


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





Forward-Looking
Statements





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





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




Overview




Since
June 27, 2007, the Company has operated as a holding company for entities that,
through contractual relationships, control the business of Daqing Sunway
Technology Co., Ltd. (“Daqing Sunway”), a company organized under the laws of
the PRC that designs, manufactures and sells logistic transport systems and
medicine dispensing systems and equipment that are principally used by hospitals
and other medical facilities in the PRC. Currently our Company is the only
producer of two products in the PRC. We have served approximately 300 customers
in the PRC from our facilities in Daqing and Qingdao. We generate our revenue
from sales in two product categories: pneumatic transport systems (“PTS”) and
medicine dispensing systems (“SADP”). We forecast that our company’s third
product, and advanced automatic dispensing system, will be introduced to the
market in the first quarter of 2010.




Our sales
were negatively affected by the global financial crisis and uncertainty in the
market caused by recent government reforms to medical institutions in the PRC in
nine months ended September 30, 2009. We believe the global liquidity crisis has
affected all businesses. However, unlike other businesses, our strong balance
sheet and liquidity position should enable us to not only weather the current
economic environment but potentially benefit and continue to execute growth
strategies and pursue opportunities as they arise.





This
discussion and analysis focuses on the business results of Daqing Sunway,
comparing its results in the three and nine month periods ended September 30,
2009 to the three and nine month periods ended September 30, 2008.





Three-month
period ended September 30, 2009 and September 30, 2008





Results
of Operations





In the
three months ended September 30, 2009, the Company’s net revenues, gross profit
and operation income decreased quickly as compared with the same period of 2008,
but operating expenses increased during the same periods. These decreases are
primarily attributable to the departure of one of our sales managers, who left
to set up his own company in the fourth quarter of 2008. However, in the third
quarter of 2009, we hired a new vice-president of sales and have been to perfect
our sales system. We believe that an improved sales network and the pending
introduction of a new product- —an advanced automatic dispensing system —to the
market will increase our sales in 2010. Our new product is currently undergoing
testing and is expected to be introduced to the market in the first quarter of
2010.




The
following table summarizes the results of our operations during the three months
ended September 30, 2009 and 2008, respectively, and provides information
regarding the dollar and percentage increase or (decrease) from the three months
ended September 30, 2009 and 2008.




Three Months Ended September 30,2009
                
                
                2008
                
                
                Change
                
                
                Change rateNet
      Revenue
                
                $
                3,150,969
                
                
                $
                6,025,075
                
                
                $
                (2,874,106
                )
                
                
                (47.70
                )%Cost
      of net revenue
                
                $
                1,087,115
                
                
                $
                1,790,475
                
                
                $
                (703,360
                )
                
                
                (39.28
                )%Gross
      Profit
                
                $
                2,063,854
                
                
                $
                4,234,600
                
                
                $
                (2,170,746
                )
                
                
                (51.26
                )%Gross
      Margin
                
                
                65.50
                %
                
                
                70.28
                %
                
                
                -
                
                
                
                (4.78
                )%Operating
      Income
                
                $
                1,030,285
                
                
                $
                3,346,078
                
                
                $
                (2,315,793
                )
                
                
                (69.21
                )%Change
      in fair value of warrants
                
                $
                2,429,394
                
                
                $
                -
                
                
                $
                2,429,394
                
                
                
                
                -Net
      Income
                
                $
                3,300,742
                
                
                $
                2,869,859
                
                
                $
                430,883
                
                
                
                15.10
                %Net
      profit margin
                
                
                104.75
                %
                
                
                47.63
                %
                
                
                -
                
                
                
                57.12
                %


39





Net
Revenue




Net
revenue for the three months ended September 30, 2009, which resulted entirely
from sales, was $3,150,969, a decrease of 47.70% as compared with net revenue of
$6,025,075 for the three months ended September 30, 2008. In the three months
ended September 30, 2009, we sold 542 workstations, a decrease of 46.60% as
compared with 1,015 workstations sold in the three months ended September 30,
2008. During the same period ended September 30, 2009, we also sold two units of
SADP, a decrease of 33.33% as compared with three units of SADP in the three
months ended September 30, 2008. The decrease was due primarily to (i) a decline
in hospital-related investment due to governmental reforms requiring pharmacies
to be operated outside of and separate from hospitals in the PRC; (ii) the
departure of one of our sales managers, who left to set up his own company; and
(iii) our inability to boost morale in our management personnel, who have been
constrained in their efforts to attract new investors by the large number of
investor warrants outstanding.




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




Three Months Ended September 30,2009
                
                
                2008sales
                
                
                % of total sales
                
                
                Sales
                
                
                % of total salesPTS
                
                $
                2,913,590
                
                
                
                92.47
                %
                
                $
                5,193,310
                
                
                
                86.19
                %SADP
                
                $
                237,379
                
                
                
                7.53
                %
                
                $
                831,765
                
                
                
                13.81
                %Total
      net revenue
                
                $
                3,150,969
                
                
                
                100.00
                %
                
                $
                6,025,075
                
                
                
                100.00
                %





Gross
Profit





Gross
profit decreased 51.26% to $2,063,854 for the three months ended September 30,
2009, as compared to $4,234,600 for the three months ended September 30, 2008.
Our gross profit margin dropped 4.78% from70.28% as of the three months ended
September 30, 2008 to 65.50% as of the same period of 2009, mainly due to a
decrease in product volume caused the rise of average fixed cost per
unit.





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




Three Months Ended September 30,2009
                
                
                2008US$
                
                
                Gross profit
                  margin
                
                
                US$
                
                
                Gross profit
                  marginGross
      Profit
                
                $
                2,063,854
                
                
                
                65.50
                %
                
                $
                4,234,600
                
                
                
                70.28
                %





Income
from Operations





Operating
income decreased 69.21% to $1,030,285 for the three months ended September 30,
2009, as compared to $3,346,078 for the three months ended September 30, 2008.
The decrease was primarily attributable to a decrease in sales and increase in
operating expenses.





Cost
of Net Revenue





Cost of
net revenue decreased to $1,087,115 for the three months ended September 30,
2009, representing a 39.28% decrease as compared with $1,790,475 for the same
period of 2008. The decrease is primarily due to a decrease in sales and
decrease in product volume caused by the rise of average fixed cost per
unit.




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





Three Months Ended September 30,2009
                
                
                2008
                
                ChangeCost
      of net revenue
                
                $
                1,087,115
                
                
                $
                1,790,475
                
                
                
                (39.28
                )%





Operating
Expenses





Operating
expenses were $1,033,569 for the three months ended September 30, 2009, an
increase as compared with $888,522 for the same period of 2008. The increase was
primarily attributable to (1) selling expenses increased $147,809 or 78.63% to
$335,787 in the three months ended September 30, 2009 from $187,978 for the same
period of 2008; and (2) general and administrative expenses decreased $697,782
or 0.39% in the three months ended September 2009 from $700,544 for the same
period of 2008. In the three months ended September 2009, we have added 31
employees to our sales force and direct sales offices, which caused a sharp
increase in selling expenses.


40





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





Three Months Ended September 30,2009
                
                
                2008
                
                
                ChangeSelling expenses
                
                $
                335,787
                
                
                $
                187,978
                
                
                
                78.63
                %General
      & Administrative expenses
                
                $
                697,782
                
                
                $
                700,544
                
                
                
                (0.39
                )%Total
      operating expenses
                
                $
                1,033,569
                
                
                $
                888,522
                
                
                
                16.32
                %





Changes
in fair value of warrants





Changes
in fair value of warrants were $2,429,394 for the three months ended September
30, 2009. This is recorded as a non-cash income, which resulted from the change
in fair value of warrants issued to investors in conjunction with the Company’s
issuance of warrants in June of 2007 pursuant to provisions of FASB ASC Topic
815, “Derivative and Hedging” (ASC 815). The accounting treatment of the
warrants resulted from a provision providing anti-dilution protection to the
warrant holders. On March 18, 2010, the Company entered into a Security Exchange
Agreement intending to exchange all warrants into common stock. As a result of
this agreement, on the closing date of the agreement, the Company will issue
2,000,000 shares of common stock in exchange for the retirement of all of the
outstanding warrants owned by Vision Opportunity Master Fund Ltd. and its
affiliates. The closing of the agreement is conditioned upon a closing of a
financing with minimum proceeds of $10 million to the Company.





Net
Income





Net
income was $3,300,742 for the three months ended September 30, 2009, a 15.01%
increase as compared with $2,869,859 for the same period of 2008. In the three
months ended June 30, 2009, our net income was impacted by a non-cash income of
$2,429,394 unrelated to the Company’s operations. Excluding this $2,429,394
non-cash income of change in fair value of warrants, the Company’s net income
from operations for the three months ended September 30, 2009 would have been
$871,348, representing the third quarter of 2008 to the same period of 2009 net
income fall of 69.64%.





Earnings
Per Share





Basic and
diluted earnings per share for the three months ended September 30, 2009 were
$0.18 and $0.11 compared to $0.16 and $0.10 for the same period of 2008. The
weighted average number of shares outstanding to calculate basic EPS was
18,499,736 and 18,446,045 for the three months ended September 30, 2009 and
September 30, 2008, respectively. The weighted average number of shares
outstanding to calculate diluted EPS was 30,323,548 and 27,587,392 for the three
months ended September 30, 2009 and September 30, 2008,
respectively.




Nine-month
period ended September 30, 2009 and September 30, 2008





Results
of Operations





In the
nine months ended September 30, 2009, our company’s net revenue, gross profit
and operation income decreased as compared with the same period of 2008, but
operating expenses increased quickly during the same periods. The decreases are
primarily attributable to (i) negative effects of the global financial crisis;
(ii) a decline in hospital-related investment due to governmental reforms
requiring pharmacies to be operated outside of and separate from hospitals in
the PRC; (iii) the departure of one of our sales managers, who left to set up
his own company; and (iv) our inability to boost morale in our management
personnel, who have been constrained in their efforts to attract new investors
by the large number of investor warrants outstanding. We recently hired a new
vice-president of sales in the third quarter of 2009, and have started to
perfect our company’s sales system. We believe that an improved sales network
and the pending introduction of a new product- an advanced automatic dispensing
system - will increase our sales in 2010. Our new product is currently
undergoing testing and is expected to be introduced to the market in the first
quarter of 2010.





The
following table summarizes the results of our operations during the nine months
ended September 30, 2009 and 2008, respectively, and provides information
regarding the dollar and percentage increase or (decrease) from the nine months
ended September 30, 2009 and 2008.





Nine Months Ended September 30,2009
                    
                    
                    2008
                    
                    
                    Change
                    
                    Change rateNet
      Revenue
                    
                    $
                    8,819,247
                    
                    
                    $
                    14,074,768
                    
                    
                    $
                    (5,255,521)
                    
                    (37.34)
                    %Cost
      of net revenue
                    
                    $
                    3,068,381
                    
                    
                    $
                    4,154,866
                    
                    
                    $
                    (1,086,485)
                    
                    (26.15)
                    %Gross
      Profit
                    
                    $
                    5,750,866
                    
                    
                    $
                    9,919,902
                    
                    
                    $
                    (4,169,036)
                    
                    (42.03)
                    %Gross
      Margin
                    
                    
                    65.21
                    %
                    
                    
                    70.48
                    %
                    
                    
                    -
                    
                    (5.27)
                    %Operating
      Income
                    
                    $
                    2,956,249
                    
                    
                    $
                    7,504,976
                    
                    
                    $
                    (4,548,727)
                    
                    (60.61)
                    %Impairment
      on investment
                    
                    $
                    4,831,386
                    
                    
                    $
                    -
                    
                    
                    
                    4,831,386
                    
                    -
                    %Change
      in fair value of warrants
                    
                    $
                    13,363,953
                    
                    
                    $
                    -
                    
                    
                    $
                    13,363,953
                    
                    -
                    %Net
      Income
                    
                    $
                    11,036,722
                    
                    
                    $
                    6,417,223
                    
                    
                    $
                    (4,619,499)
                    
                    (71.99)
                    %Net
      profit margin
                    
                    
                    125.14
                    %
                    
                    
                    45.59
                    %
                    
                    
                    -
                    
                    79.55
                    %




41





Net
Revenue




Net
revenue for the nine months ended September 30, 2009, which resulted entirely
from sales, was $8,819,247, a decrease of 37.34% as compared with net revenue of
$14,074,768 for the nine months ended September 30, 2008. In the nine months
ended September 30, 2009, we sold 1,524 workstations, a decrease of 40.28%
as compared with 2,552 workstations sold in the nine months ended September 30,
2008. The decrease was due primarily to (i) negative effects of the global
financial crisis; (ii) a decline in hospital-related investment due to
governmental reforms requiring pharmacies to be operated outside of and separate
from hospitals in the PRC; (iii) the departure of one of our sales managers, who
left to set up his own company; and (iv) our inability to boost morale in our
management personnel, who have been constrained in their efforts to attract new
investors by the large number of investor warrants
outstanding.  Notwithstanding the decrease in workstation sales, we
sold six units of SADP in the nine months ended September 30, 2009, an increase
of 20.00% as compared with five units of SADP sold in the nine months ended
September 30, 2008.




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




Nine Months Ended September 30,2009
                    
                    
                    2008sales
                    
                    
                    % of total sales
                    
                    
                    sales
                    
                    
                    % of total salesPTS
                    
                    $
                    8,063,593
                    
                    
                    
                    91.43
                    %
                    
                    $
                    12,717,404
                    
                    
                    
                    90.36
                    %SADP
                    
                    $
                    672,276
                    
                    
                    
                    7.62
                    %
                    
                    $
                    1,357,364
                    
                    
                    
                    9.64
                    %Other
                    
                    $
                    83,378
                    
                    
                    
                    0.95
                    %
                    
                    
                    -
                    
                    
                    
                    -Total
      net revenue
                    
                    $
                    8,819,247
                    
                    
                    
                    100.00
                    %
                    
                    $
                    14,074,768
                    
                    
                    
                    100.00
                    %





Gross
Profit





Gross
profit decreased 42.03% to $5,750,866 for the nine months ended September 30,
2009, as compared to $9,919,902 for the nine months ended September 30, 2008.
Our gross profit margin dropped 5.27% from 70.48% as of the nine months ended
June 30, 2008 to 65.21% as of the same period of 2009, mainly due to a decrease
in product output caused by the rise of average fixed cost per unit and an
approximately 33% decrease in the pricing of SADP units as compared to SADP
pricing prior to January 1, 2009.





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




Nine Months Ended September 30,2009
                
                
                2008US$
                
                
                Gross profit
                  margin
                
                
                US$
                
                
                Gross profit
                  marginGross
      Profit
                
                $
                5,750,866
                
                
                
                65.21
                %
                
                $
                9,919,902
                
                
                
                70.48
                %





Income
from Operations





Operating
income decreased 60.61% to $2,956,249 for the nine months ended September 30,
2009, as compared to $7,504,976 for the nine months ended September 30, 2008.
The decrease was primarily attributable to a decrease in sales and increase in
operating expenses.





Cost
of Net Revenue





Cost of
net revenue decreased to $3,068,381 for the nine months ended September 30,
2009, representing a 26.15% decrease as compared with $4,154,866 for the same
period of 2008. The decrease is primarily due to a decrease in sales and a
decrease in product volume caused by the rise of average fixed cost per
unit.





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





Nine Months Ended September 30,2009
                
                
                2008
                
                ChangeCost
      of net revenue
                
                $
                3,068,381
                
                
                $
                4,154,866
                
                
                
                (26.15
                )%


42





Operating
Expenses





Operating
expenses were $2,794,617 for the nine months ended September 30, 2009, an
increase of 15.32% as compared with $2,414,926 for the same period of 2008. The
increase was primarily attributable to (1) an increase in selling expenses of
$417,890 or 149.69% to $697,057 in the nine months ended September 30, 2009 from
$279,167 for the same period of 2008; and (2) a decrease in general and
administrative expenses of $38,199 or 1.79% to 2,097,560 in the nine months
ended September 2009 from $2,135,759 for the same period of 2008. In the third
quarter of 2009, we added 31 employees to our sales force and set up direct
sales offices. The combination of these factors contributed to a sharp increase
in selling expenses.





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





Nine Months Ended September 30,2009
                
                
                2008
                
                ChangeSelling
      expenses
                
                $
                697,057
                
                
                $
                279,167
                
                
                
                149.69
                %General
      & Administrative expenses
                
                $
                2,097,560
                
                
                $
                2,135,759
                
                
                
                (1.79
                )%Total
      operating expenses
                
                $
                2,794,617
                
                
                $
                2,414,926
                
                
                
                15.72
                %





Change
in fair value of warrants





Changes
in fair value of warrants were $13,363,953 for the nine months ended September
30, 2009. This is recorded as a non-cash income, which resulted from the change
in fair value of warrants issued to investors in conjunction with the Company’s
issuance of warrants in June of 2007 pursuant to provisions of FASB ASC Topic
815, “Derivative and Hedging” (ASC 815). The accounting treatment of the
warrants resulted from a provision providing anti-dilution protection to the
warrant holders. On March 18, 2010, the Company entered into a Security Exchange
Agreement intending to exchange all warrants into common stock. As a result of
this agreement, on the closing date of the agreement, the Company will issue
2,000,000 shares of common stock in exchange for the retirement of all of the
outstanding warrants owned by Vision Opportunity Master Fund Ltd. and its
affiliates. The closing of the agreement is conditioned upon a closing of a
financing with minimum proceeds of $10 million to the Company.





Impairment
on investment





Impairment
on investment was $4,831,386 for the nine months ended September 30, 2009.
Originally, it was showed on goodwill representing the excess of the cost of an
acquisition over the fair value of the net acquired identifiable assets at the
date of acquisition. In the first quarter of 2010, after performing extended
analysis into the definition of a business as set forth in the paragraph
805-10-20 of the FASB Accounting Standards Codification, we recognized the
acquisitions based on the fair value of net assets obtained. For the amount over
the fair value of the net assets obtained, we wrote them off as expenses at the
time of acquisition.





Net
Income





Net
income was $11,036,722 for the nine months ended September 30, 2009, increases
of 71.99% from $6,417,223 for the same period of 2008. In the nine months ended
September 30, 2009, our net income was impacted by a non-cash income of
$8,532,567 unrelated to the Company’s operations, mainly consisting of change in
fair value of warrants and impairment on investment were $13,363,953 and
$4,831,386 respectively. Excluding this $8,532,567 non-cash income, the
Company’s net income from operations for the nine months ended September 30,
2009 would have been $2,504,155, representing a decrease in net income of 60.98%
between the nine months ended September 30, 2008 and the same period of 2009.
The decrease was primarily attributable to decrease in sales and an increase in
operating expenses.





Earnings
Per Share





Basic and
diluted earnings per share for the nine months ended September 30, 2009 were
$0.60 and $0.36, compared to $0.46 and $0.22 for the same period of 2008. The
weighted average number of shares outstanding to calculate basic EPS was
18,499,736 and 14,003,444 for the nine months ended September 30, 2009 and
September 30, 2008, respectively. The weighted average number of shares
outstanding to calculate diluted EPS was 30,763,019 and 28,690,904 for the nine
months ended September 30, 2009 and September 30, 2008,
respectively.




Trade
Receivables, net





Trade
receivables, net increased 8.82% to $3,214,439 as of September 30, 2009,
compared with $2,953,919 as of December 31, 2008. The increase in trade
receivables was primarily attributable to change in our sales
policy.   In the three months ended September 30, 2009, we
changed our trade receivables policy to require that the remaining 5
percent of the amount due under the purchase contract is received within one
year after the acceptance test completed. Previously, we required receipt of the
remaining 5 percent immediately after the acceptance test
completed.


43





Inventory





Inventory
consists of raw materials, finished goods and work in progress. As of September
30, 2009, the recorded value of our inventory increased 9.87% to $649,024 from
$590,738 as of December 31, 2008. The increase is mainly due to (1) increase in
raw material inventory from $183,435 as of December 31, 2008 to $487,044 as of
September 30, 2009, an increase of 165.51%; (2) a decrease in work in progress
inventory from $188,855 as of December 31, 2008 to $23,197 as of September 30,
2009, a decrease of 87.72%; and(3) a decrease in finished goods from $218,448 as
of December 31, 2008 to $138,783 as of September 30, 2009, a decrease of 36.47%.
The increase was primarily attributable to an expected increase in sales volume
based upon market research and several confirmed purchase agreements for our
products.





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





Item
                  
                  September 30, 2009
                  
                  
                  December 31, 2008
                  
                  
                  ChangeFinished
      goods
                  
                  $
                  138,783
                  
                  
                  $
                  218,448
                  
                  
                  
                  (36.47
                  )%Work
      in progress
                  
                  $
                  23,197
                  
                  
                  $
                  188,855
                  
                  
                  
                  (87.72
                  )%Raw
      material
                  
                  $
                  487,044
                  
                  
                  $
                  183,435
                  
                  
                  
                  165.51
                  %Total
                  
                  $
                  649,024
                  
                  
                  $
                  590,738
                  
                  
                  
                  9.87
                  %





Accounts
Payable





Accounts
payable amounted to $109,007 at September 30, 2009, an increase of 81.95% as
compared with $59,912 at December 31, 2008. The increase was primarily
attributable to the increased volume of raw material purchased.





Liquidity
and Capital Resources





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





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




Nine months ended September 30,2009
                    
                    
                    2008
                    
                    
                    ChangeNet
      cash provided by (used in) operating activities
                    
                    $
                    3,426,817
                    
                    
                    $
                    5,675,935
                    
                    
                    $
                    (2,249,118
                    )Net
      cash provided by (used in) investing activities
                    
                    $
                    (13,897,125
                    )
                    
                    $
                    (2,236,248
                    )
                    
                    $
                    (11,660,877
                    )Net
      cash provided by (used in) financing activities
                    
                    $
                    -
                    
                    
                    $
                    6,530,000
                    
                    
                    $
                    (6,530,000
                    )Effect
      of foreign currency translation on cash and
      cash equivalents
                    
                    $
                    140,915
                    
                    
                    $
                    499,689
                    
                    
                    $
                    (358,774
                    )Beginning
      cash and cash equivalent
                    
                    $
                    15,189,941
                    
                    
                    $
                    5,820,100
                    
                    
                    $
                    9,369,841Ending
      cash and cash equivalent
                    
                    $
                    4,860,548
                    
                    
                    $
                    16,289,476
                    
                    
                    $
                    (11,428,928
                    )




Operating
Activities





For the
nine months ended September 30, 2009, net cash provided by operating activities
was $3,426,817. This was primarily attributable to our net income of
$11,036,722, adjusted by an add-back of non-cash expenses mainly consisting of
depreciation, amortization, loss on disposal of fixed assets, impairment on
investment and change in fair value of warrants of $7,048,757 offset by a
$561,148 decrease in working capital. Specifically, the working capital increase
was primarily due to (i) a $253,167 trade receivables increase driven by change
in sales policy; (ii) a $56,811 inventories increase, comprised principally raw
material and work in progress, due to in-house market research and the
confirmation of several purchase agreements for our products; (iii) a $320,629
increase in advances to suppliers to buy raw materials; (iv) a
$283,028 decrease in prepayments , travel advances to shareholders, other
receivables, tender deposits and advances to employees, consisting primarily of
prepayments for raw materials supplies in advance of shipment, working capital
of sales employee and pay deposit for client; partially offset by a $213,569
decrease in accounts payable, tax payable, loans from unrelated parties, amount
due from a director, customers deposits, accrued liabilities and other
payables.





Investing
Activities





For the
nine months ended September 30, 2009, net cash used in investing activities was
$13,897,125. This was primarily attributable to (i) a $4,287,278 capital
expenditure to purchase new plant and equipment for our Qingdao factory and the
manufacture of our new product, an advanced  automatic dispensing
system; (ii) a $7,027,411 capital expenditure to purchase new intangible assets
for our new product and to improve our existing dispensary system; (iii) a
$2,648,886 capital expenditure to purchase technology-based designs; and
(iv) a $66,450 in restricted cash.


44





Cash
and Cash Equivalents





Our cash
and cash equivalents as at the beginning of December 31, 2008 were $15,189,941
and decreased to $4,860,548 at September 30, 2009.





In future
periods, we believe that our existing cash, cash equivalents and cash flows from
operations, combined with availability under any revolving credit facility, we
may establish, will be sufficient to meet our presently anticipated future cash
needs for at least the next six 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.





Trends





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





Inflation





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





Obligations
under Material Contracts





We do not
have any material contractual obligations as of September 30, 2009.





Critical
Accounting Policies





Management's
discussion and analysis of its financial condition and results of operations is
based upon the Company’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 the Company’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 ASC 350. The carrying value of
a long-lived asset is considered impaired when the anticipated undiscounted cash
flow from such asset is separately identifiable and is less than its carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived asset. Fair
market value is determined primarily using the anticipated cash flows discounted
at a rate commensurate with the risk involved. Losses on long-lived assets to be
disposed of are determined in a similar manner, except that fair market values
are reduced for the cost to dispose. During the reporting years, there was no
impairment loss incurred. Competitive pricing pressure and changes in interest
rates, could materially and adversely affect our estimates of future net cash
flows to be generated by our long-lived assets.




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





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





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





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


45




-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


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


-
Collection is reasonably assured.





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





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





Off-Balance
Sheet Arrangements




We have
no off-balance sheet arrangements as of September 30, 2009.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




N/A.




ITEM
4T. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





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





During
the course of internal evaluation of the Company’s disclosure controls and
procedures for the year ended December 31, 2009, our accounting staff found the
following misstatements in our previously reported financial statements for the
fiscal quarter ended September 30, 2009 that required correction, relating to
changes in fair value of warrants and impairment on investment:





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




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





Based
upon their evaluation as of the end of the period covered by this quarterly
report, the Company’s chief executive officer and chief financial officer
concluded that, in spite of the significant deficiencies in internal control
over financial reporting described below, the Company’s disclosure controls and
procedures are effective as of September 30, 2009.





Our
management identified that the misstatements identified above was due to not
having internal personnel with sufficient expertise and knowledge of the
requirements for disclosure of the information that have been collected and
reported, as required under the securities laws and disclosures required under
U.S. GAAP.


46





We plan
to take the following steps to remediate the deficiencies in disclosure controls
and procedures that are identified above:





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





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





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





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





Changes
in internal controls




Our
management, with the participation our CEO and CFO, performed an evaluation as
to whether any change in our internal controls over financial reporting 
occurred during the nine months ended September 30, 2009.  Based on that
evaluation, our CEO and CFO concluded that, other than as disclosed above, no
change occurred in the Company's internal controls over financial reporting
during the nine months ended September 30, 2009 that has materially affected, or
is reasonably likely to materially affect, the Company's internal controls over
financial reporting.





PART
II




OTHER
INFORMATION




ITEM
1 - LEGAL PROCEEDINGS




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


47




ITEM
1A. RISK FACTORS




Not
Applicable.




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





None.




ITEM
5 - OTHER INFORMATION




None.




ITEM
6 - EXHIBITS.





Exhibit No.
              
              Description of Exhibit31.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes Oxley Act of 2002 Section
      302.31.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes Oxley Act of 2002 Section
      302.32.1
              
              Certification
      by Chief Executive Officer pursuant to Sarbanes-Oxley Act of 2002 Section
      906.32.2
              
              Certification
      by Chief Financial Officer pursuant to Sarbanes-Oxley Act of 2002 Section
      906.


48




SIGNATURES




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




SUNWAY
      GLOBAL INC.Dated:
        May 13, 2010
              By:
              /s/ Liu BoName:
      Liu BoTitle:
      Chief Executive OfficerDated:
        May 13, 2010
              By:
              /s/ Samuel ShengName:
      Samuel ShengTitle:
      Chief Financial Officer


49