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 JUNE 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  o No  o
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer o
              Accelerated
      filer oNon-accelerated
      filer o
              Smaller
      reporting company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  o No x
  APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
 DURING
THE PRECEDING FIVE YEARS
  Indicate
by check mark whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes  ̈  No  ̈
  APPLICABLE
ONLY TO CORPORATE ISSUERS
  State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of August 14, 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
                  
                  47Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  
                  47Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  47Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  
                  47Item
      5.
                  Other
      Information
                  
                  47Item
      6.
                  Exhibits
                  
                  47SIGNATURES
                  
                  48
 
 EXPLANATORY
NOTE:
 
 The
Registrant is hereby filing this Form 10-Q/A for the period ended June 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 ACCOUNTANTS7th
      Floor, Nan Dao Commercial Building359-361
      Queen’s Road CentralHong
      KongTel
      : 2851 7954Fax:
      2545 40861ALBERT
      WONGB.Soc.,
      Sc., LL.B., P.C.LL., Barrister-at-law, C.P.A.(Practising).
 
 To:
              The
      board of directors and stockholders
of
 Sunway
Global Inc.
 
 Report of Independent
Registered Public Accounting Firm
  We have
reviewed the accompanying interim consolidated balance sheets, related
consolidated statements of income, stockholders’ equity and cash flows statement
of Sunway Global Inc. and consolidated subsidiaries as of June 30, 2009, and for
the three-month and six-month periods then ended. These interim financial
information statements are the responsibility of the company's
management.
  We
conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
  Based on
our review, we are not aware of any material modifications that should be made
to the accompanying interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
 
 Since our
previous report dated August 14, 2009, it was determined that the consolidated
financial statements needed restatement to make corrections as described in note
19.
 
 Hong
      Kong
                Albert
      Wong & Co.August
      14, 2009
                Certified
      Public AccountantsExcept
      for note 19 which is dated May 13, 2010
  4
 
 SUNWAY
GLOBAL INC.
 
 CONSOLIDATED
BALANCE SHEETS
 AS
AT JUNE 30, 2009 AND DECEMBER 31, 2008
 (Stated
in US Dollars)
 
 Notes
                                      
                                      
                                      June 30, 2009
                                      
                                      
                                      December 31, 2008(Unaudited)
                                      
                                      
                                      (Audited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                      
                                      2(k)
                                      
                                      
                                      $
                                      7,584,827
                                      
                                      
                                      $
                                      15,189,941Trade
      receivables, net
                                      
                                      5
                                      
                                      
                                      
                                      3,072,723
                                      
                                      
                                      
                                      2,953,919Inventories
                                      
                                      8
                                      
                                      
                                      
                                      837,463
                                      
                                      
                                      
                                      590,738Advances
      to suppliers
                                      
                                      
                                      
                                      
                                      
                                      1,222,794
                                      
                                      
                                      
                                      547,952Prepayments
                                      
                                      
                                      
                                      
                                      
                                      61,644
                                      
                                      
                                      
                                      -Tender
      deposits
                                      
                                      
                                      
                                      
                                      
                                      27,030
                                      
                                      
                                      
                                      112,735Travel
      advances to directors
                                      
                                      6
                                      
                                      
                                      
                                      67,567
                                      
                                      
                                      
                                      38,733Advances
      to employees
                                      
                                      7
                                      
                                      
                                      
                                      294,010
                                      
                                      
                                      
                                      429,804Other
      receivables
                                      
                                      
                                      
                                      
                                      
                                      404,409
                                      
                                      
                                      
                                      -Total
      current assets
                                      
                                      
                                      
                                      
                                      $
                                      13,572,467
                                      
                                      
                                      $
                                      19,863,822Amount
      due from a related company
                                      
                                      4
                                      
                                      
                                      
                                      830
                                      
                                      
                                      
                                      830Restricted
      cash
                                      
                                      
                                      
                                      
                                      
                                      321,032
                                      
                                      
                                      
                                      378,366Property,
      plant and equipment, net
                                      
                                      9
                                      
                                      
                                      
                                      5,743,048
                                      
                                      
                                      
                                      5,069,871Intangible
      assets, net
                                      
                                      10
                                      
                                      
                                      
                                      9,483,878
                                      
                                      
                                      
                                      6,576,769Deposit
      for acquisition of computer software
                                      
                                      
                                      
                                      
                                      
                                      6,886,542
                                      
                                      
                                      
                                      1,750,751Deposit
      for the acquisition of subsidiary
                                      
                                      
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      7,725,445Deposit
      for property, plant and equipment
                                      
                                      
                                      
                                      
                                      
                                      1,906,159
                                      
                                      
                                      
                                      -TOTAL
      ASSETS
                                      
                                      
                                      
                                      
                                      $
                                      37,913,956
                                      
                                      
                                      $
                                      41,365,854LIABILITIES
      AND STOCKHOLDERS’
      EQUITYCurrent
      liabilitiesAccounts
      payable
                                      
                                      
                                      
                                      
                                      $
                                      96,081
                                      
                                      
                                      $
                                      59,912Income
      tax payable
                                      
                                      
                                      
                                      
                                      
                                      128,929
                                      
                                      
                                      
                                      632,893Turnover
      and other taxes
                                      
                                      
                                      
                                      
                                      
                                      107,649
                                      
                                      
                                      
                                      406,839Expected
      warranty liabilities
                                      
                                      11
                                      
                                      
                                      
                                      50,466
                                      
                                      
                                      
                                      50,396Customers
      deposits
                                      
                                      
                                      
                                      
                                      
                                      247,522
                                      
                                      
                                      
                                      -Accrued
      liabilities
                                      
                                      
                                      
                                      
                                      
                                      293,558
                                      
                                      
                                      
                                      301,461Other
      payables
                                      
                                      
                                      
                                      
                                      
                                      253,520
                                      
                                      
                                      
                                      15,168Total
      current liabilities
                                      
                                      
                                      
                                      
                                      $
                                      1,177,725
                                      
                                      
                                      $
                                      1,466,669Warrants
      liabilities
                                      
                                      
                                      
                                      
                                      
                                      58,967,314
                                      
                                      
                                      
                                      -TOTAL
      LIABILITIES
                                      
                                      
                                      
                                      
                                      $
                                      60,145,039
                                      
                                      
                                      $
                                      1,466,669
 
 See
accompanying notes to consolidated financial statements
  5
  
 SUNWAY
GLOBAL INC.
 
 CONSOLIDATED
BALANCE SHEETS (Continued)
 AS
AT JUNE 30, 2009 AND DECEMBER 31, 2008
 (Stated
in US Dollars)
 
 Notes
                                      
                                      
                                      June
      30, 2009
                                      
                                      
                                      December31,
      2008(Unaudited)
                                      
                                      
                                      (Audited)STOCKHOLDERS’
      EQUITYSeries
      B Convertible PreferredStock
      $0.0000001 par value; 400,000shares
      authorized; 160,494 shares issuedand
      outstanding at June 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 June 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
                                      
                                      
                                      
                                      
                                      
                                      (46,828,465
                                      )
                                      
                                      
                                      12,247,049Accumulated
      other comprehensive income
                                      
                                      
                                      
                                      
                                      
                                      2,874,501
                                      
                                      
                                      
                                      2,844,190$
                                      (22,231,083
                                      )
                                      
                                      $
                                      39,899,185TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                                      
                                      
                                      
                                      
                                      $
                                      37,913,956
                                      
                                      
                                      $
                                      41,365,854
 
 See
accompanying notes to consolidated financial statements
  6
  
 SUNWAY
GLOBAL INC.
 
 CONSOLIDATED
STATEMENTS OF INCOME
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 Six months ended June 30,2009
                                                      
                                                      
                                                      2008NotesNet
      revenues
                                                      
                                                      
                                                      17
                                                      
                                                      
                                                      $
                                                      5,668,342
                                                      
                                                      
                                                      $
                                                      8,090,863Cost
      of net revenues
                                                      
                                                      
                                                      17
                                                      
                                                      
                                                      
                                                      (1,981,286
                                                      )
                                                      
                                                      
                                                      (2,376,675
                                                      )Gross
      profit
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      3,687,056
                                                      
                                                      
                                                      $
                                                      5,714,188Selling
      expenses
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (361,302
                                                      )
                                                      
                                                      
                                                      (98,075
                                                      )General
      and administrative expenses
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (1,394,473
                                                      )
                                                      
                                                      
                                                      (1,429,399
                                                      )Income
      from operation
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      1,931,281
                                                      
                                                      
                                                      $
                                                      4,186,714Interest
      expenses
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (1,727
                                                      )
                                                      
                                                      
                                                      -Interest
      income
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      42,240
                                                      
                                                      
                                                      
                                                      36,869Impairment
      on investment
                                                      
                                                      
                                                      18
                                                      
                                                      
                                                      
                                                      (4,831,386
                                                      )
                                                      
                                                      
                                                      -Change
      in fair value of warrants
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      10,934,559
                                                      
                                                      
                                                      
                                                      -Income
      before income taxes
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      8,074,967
                                                      
                                                      
                                                      $
                                                      4,223,583Income
      taxes
                                                      
                                                      
                                                      14
                                                      
                                                      
                                                      
                                                      (333,673
                                                      )
                                                      
                                                      
                                                      (672,462
                                                      )Net
      income
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      7,741,294
                                                      
                                                      
                                                      $
                                                      3,551,121Net
      income per share:-Basic
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      0.42
                                                      
                                                      
                                                      $
                                                      0.30-Diluted
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      $
                                                      0.25
                                                      
                                                      
                                                      $
                                                      0.12Weighted
      average number of common stock-Basic
                                                      
                                                      
                                                      13
                                                      
                                                      
                                                      
                                                      18,499,736
                                                      
                                                      
                                                      
                                                      11,757,733-Diluted
                                                      
                                                      
                                                      13
                                                      
                                                      
                                                      
                                                      30,969,100
                                                      
                                                      
                                                      
                                                      29,064,297
 
 See
accompanying notes to consolidated financial statements
  7
  
 SUNWAY
GLOBAL INC.
 
 CONSOLIDATED
STATEMENTS OF INCOME
 FOR
THE THREE MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 Three months ended June 30,2009
                                        
                                        
                                        2008NotesNet
      revenues
                                        
                                        17
                                        
                                        
                                        $
                                        2,734,631
                                        
                                        
                                        $
                                        4,499,670Cost
      of net revenues
                                        
                                        17
                                        
                                        
                                        
                                        (1,087,385
                                        )
                                        
                                        
                                        (1,236,310
                                        )Gross
      profit
                                        
                                        
                                        
                                        
                                        $
                                        1,647,246
                                        
                                        
                                        $
                                        3,263,360Selling
      expenses
                                        
                                        
                                        
                                        
                                        
                                        (180,950
                                        )
                                        
                                        
                                        (73,542
                                        )General
      and administrative expenses
                                        
                                        
                                        
                                        
                                        
                                        (760,473
                                        )
                                        
                                        
                                        (640,909
                                        )Income
      from operation
                                        
                                        
                                        
                                        
                                        $
                                        705,823
                                        
                                        
                                        $
                                        2,548,909Interest
      expenses
                                        
                                        
                                        
                                        
                                        
                                        (1,728
                                        )
                                        
                                        
                                        -Interest
      income
                                        
                                        
                                        
                                        
                                        
                                        18,735
                                        
                                        
                                        
                                        37,152Change
      in fair value of warrants
                                        
                                        
                                        
                                        
                                        
                                        31,415,835
                                        
                                        
                                        
                                        -Income
      before income taxes
                                        
                                        
                                        
                                        
                                        $
                                        32,138,665
                                        
                                        
                                        $
                                        2,586,061Income
      taxes
                                        
                                        14
                                        
                                        
                                        
                                        (125,635
                                        )
                                        
                                        
                                        (400,774
                                        )Net
      income
                                        
                                        
                                        
                                        
                                        $
                                        32,013,030
                                        
                                        
                                        $
                                        2,185,287Net
      income per share:-Basic
      and diluted
                                        
                                        
                                        
                                        
                                        $
                                        1.73
                                        
                                        
                                        $
                                        0.14-Diluted
                                        
                                        
                                        
                                        
                                        $
                                        1.06
                                        
                                        
                                        $
                                        0.08Weighted
      average number of common stock-Basic
                                        
                                        
                                        
                                        
                                        
                                        18,499,736
                                        
                                        
                                        
                                        15,155,118-Diluted
                                        
                                        
                                        
                                        
                                        
                                        30,243,833
                                        
                                        
                                        
                                        28,619,524
 
 See
accompanying notes to consolidated financial statements
  8
  
 SUNWAY
GLOBAL INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
 FOR
THE YEAR ENDED DECEMBER 31, 2008 AND SIX MONTHS ENDED JUNE 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 SeriesA
      into Common Stock
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          13,711,831
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          1
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Conversion
      of Preferred SeriesB
      into 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
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          7,741,294
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          7,741,294Appropriations
      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
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          30,311
                                                          
                                                          
                                                          
                                                          30,311Balance,
      June  30, 2009
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          1
                                                          
                                                          
                                                          
                                                          18,499,736
                                                          
                                                          
                                                          $
                                                          2
                                                          
                                                          
                                                          $
                                                          18,689,023
                                                          
                                                          
                                                          $
                                                          3,033,855
                                                          
                                                          
                                                          $
                                                          (46,828,465
                                                          )
                                                          
                                                          $
                                                          2,874,501
                                                          
                                                          
                                                          $
                                                          (22,231,083
                                                          )
 
 See
accompanying notes to consolidated financial statements
  9
 
 SUNWAY
GLOBAL INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 Six months ended June 30,2009
                                
                                
                                2008Cash
      flows from operating activitiesNet
      income
                                
                                $
                                7,741,294
                                
                                
                                $
                                3,551,121Depreciation
                                
                                
                                474,148
                                
                                
                                
                                375,389Amortization
                                
                                
                                407,773
                                
                                
                                
                                420,972Loss
      on disposal of fixed assets
                                
                                
                                9,552
                                
                                
                                
                                -Change
      in fair value of warrants
                                
                                
                                (10,934,559
                                )
                                
                                
                                -Impairment
      on investment
                                
                                
                                4,831,386
                                
                                
                                
                                -Adjustments
      to reconcile net incometo
      net cash provided by operating activities:Trade
      receivables, net
                                
                                
                                (114,774
                                )
                                
                                
                                (851,682
                                )Inventories
                                
                                
                                (245,971
                                )
                                
                                
                                (34,545
                                )Advances
      to suppliers
                                
                                
                                (496,537
                                )
                                
                                
                                (623,758
                                )Prepayments
                                
                                
                                (61,658
                                )
                                
                                
                                114,059Tender
      deposits
                                
                                
                                85,880
                                
                                
                                
                                1,233Travel
      advances to shareholders
                                
                                
                                (28,788
                                )
                                
                                
                                (25,122
                                )Advances
      to employees
                                
                                
                                136,417
                                
                                
                                
                                107,267Other
      receivables
                                
                                
                                240,716
                                
                                
                                
                                -Accounts
      payable
                                
                                
                                36,096
                                
                                
                                
                                (252,954
                                )Income
      tax payable
                                
                                
                                (504,951
                                )
                                
                                
                                234,942Turnover
      and other taxes
                                
                                
                                (271,363
                                )
                                
                                
                                103,875Customers
      deposits
                                
                                
                                247,580
                                
                                
                                
                                (215,385
                                )Accrued
      liabilities
                                
                                
                                (8,285
                                )
                                
                                
                                27,375Other
      payables
                                
                                
                                238,387
                                
                                
                                
                                (25,438
                                )Net
      cash provided by operating activities
                                
                                $
                                1,782,343
                                
                                
                                $
                                2,907,349Cash
      flows from investing activitiesPurchase
      of plant and equipment
                                
                                $
                                (253,601
                                )
                                
                                $
                                (914,693
                                )Purchase
      of intangibles assets
                                
                                
                                (2,284,177
                                )
                                
                                
                                -Sales
      of short term investment
                                
                                
                                -
                                
                                
                                
                                (434,674
                                )Restricted
      cash
                                
                                
                                57,334
                                
                                
                                
                                61,215Advances
      to a related company
                                
                                
                                -
                                
                                
                                
                                584,415Advances
      to a director
                                
                                
                                -
                                
                                
                                
                                (624,299
                                )Deposit
      for technology-based designs
                                
                                
                                (5,134,586
                                )
                                
                                
                                -Deposit
      for property, plant and equipment
                                
                                
                                (1,906,605
                                )
                                
                                
                                -Net
      cash used in investing activities
                                
                                $
                                (9,521,635
                                )
                                
                                $
                                (1,328,036
                                )Cash
      flows from financing activities
                                
                                $
                                
                                
                                
                                $Proceeds
      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 SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 Six months ended June 30,2009
                          
                          
                          2008Net
      in cash and cash equivalents (used)/sourced
                          
                          $
                          (7,739,292
                          )
                          
                          $
                          8,109,313Effect
      of foreign currency translation oncash
      and cash equivalents
                          
                          
                          134,178
                          
                          
                          
                          1,530,795Cash
      and cash equivalents–beginning of period
                          
                          
                          15,189,941
                          
                          
                          
                          5,820,100Cash
      and cash equivalents–end of period
                          
                          $
                          7,584,827
                          
                          
                          $
                          15,460,208Supplementary
      cash flow information:Interest
      received
                          
                          $
                          42,240
                          
                          
                          $
                          36,869Interest
      paid
                          
                          
                          1,727
                          
                          
                          
                          -Tax
      paid
                          
                          
                          838,625
                          
                          
                          
                          672,462
 
 SUPPLEMENTAL
NON-CASH DISCLOSURES:
 
 1.
              During
      the six months ended June 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 six months ended June 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”.
 
 See
accompanying notes to consolidated financial statements
  11
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 1.
              ORGANIZATION
      AND PRINCIPAL ACTIVITIES(CONTINUED)
 
 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 SIX MONTHS ENDED JUNE 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 June 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 SIX MONTHS ENDED JUNE 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 SIX MONTHS ENDED JUNE 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 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 SIX MONTHS ENDED JUNE 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 six 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.
 
 June
      30, 2009
                        
                        
                        December
      31, 2008Bank
      of Communications, Branch of DaqingCity
      Economic Zone
                        
                        $
                        7,320,882
                        
                        
                        $
                        9,606,188Daqing
      City Commercial Bank
                        
                        
                        -
                        
                        
                        
                        4,536,667Agricultural
      Bank of China
                        
                        
                        52,729
                        
                        
                        
                        930,332China
      Construction Bank, Bejing Branch
                        
                        
                        160,295
                        
                        
                        
                        -HSBC
                        
                        
                        35,157
                        
                        
                        
                        109,151Cash
      on hand
                        
                        
                        15,764
                        
                        
                        
                        7,603$
                        7,584,827
                        
                        
                        $
                        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 SIX MONTHS ENDED JUNE 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 $37,719 and
$23,851, cost of sales were $9,864 and nil, selling expenses were $2,362 and nil
for the six months ended June 30, 2009 and 2008 respectively.
 
 (q)
              Advertising
 
 The Group
expensed all advertising costs as incurred.  Advertising expenses
included in selling expenses were $585 and $10,115 for the six months ended June
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 $15,797 and $10,389 for the six months ended June 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 $51,141
and nil for the six months ended June 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 $58,617 and $17,964 for the six months ended
June 30, 2009 and 2008 respectively.
  17
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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:
 
 June
      30, 2009
                    
                    
                    December
      31, 2008
                    
                    
                    June
      30, 2008Twelve
      months endedRMB
      : USD exchange rate
                    
                    
                    -
                    
                    
                    
                    6.8542
                    
                    
                    
                    -Six
      months endedRMB
      : USD exchange rate
                    
                    
                    6.8448
                    
                    
                    
                    -
                    
                    
                    
                    7.0726Average
      three months endedRMB
      : USD exchange rate
                    
                    
                    6.8399
                    
                    
                    
                    -
                    
                    
                    
                    6.9696Average
      six months endedRMB
      : USD exchange rate
                    
                    
                    6.8432
                    
                    
                    
                    -
                    
                    
                    
                    -
  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 SIX MONTHS ENDED JUNE 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 and the unrealised gain on
investment held for resale.
 
 (y)
              Recent
      accounting pronouncements
 
 In March
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 161 “Disclosures about Derivative Instruments
and Hedging Activities”. SFAS 161 is intended to improve financial reporting
about derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity’s financial position, financial performance, and cash flows. It is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. The
Company is currently evaluating the impact of SFAS 161 on its consolidated
financial statements but does not expect it to have a material
effect.
 
 In April
2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the
Useful Life of Intangible Assets, which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets. This Staff Position is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited.
Application of this FSP is not currently applicable to the Company as the
Company’s intangible assets consist of land used rights which has a fixed useful
life of 47 years.
  19
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 2.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
 
 (y)
              Recent
      accounting
pronouncements(continued)
 
 In May
2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance
Contracts, an interpretation of FASB Statement No. 60 (SFAS
163).  This statement clarifies accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises.  SFAS 163 is
effective for fiscal years and interim periods within those years, beginning
after December 15, 2008.  Because the Company does not issue financial
guarantee insurance contracts, it does not expect the adoption of this standard
to have an effect on its financial position or results of
operations.
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events.”  This
Statement sets forth: 1) the period after the balance sheet date during which
management of a reporting entity should evaluate events or transactions that may
occur for potential recognition or disclosure in the financial statements; 2)
the circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and 3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This Statement is effective for interim
and annual periods ending after June 15, 2009. The company adopted this
Statement in the quarter ended June 30, 2009. This Statement is not expected to
have a material impact on the Company’s consolidated financial
results.
 
 In June
2009, the FASB issued SFAS No. 166 amends SFAS No. 140 by removing the exemption
from consolidation for Qualifying Special Purpose Entities (QSPEs). This
Statement also limits the circumstances in which a financial asset, or portion
of a financial asset, should be derecognized when the transferor has not
transferred the entire original financial asset to an entity that is not
consolidated with the transferor in the financial statements being presented
and/or when the transferor has continuing involvement with the transferred
financial asset. The adoption of these standards is not expected to have any
material impact on the Company’s Consolidated Financial Statements
 
 In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.
46(R),” SFAS No. 167 amends FASB Interpretation 46(R) to eliminate the
quantitative approach previously required for determining the primary
beneficiary of a variable interest entity and requires ongoing qualitative
reassessments of whether an enterprise is the primary beneficiary of a variable
interest entity. The adoption of these standards is not expected to have any
material impact on the Company’s Consolidated Financial Statements.
 
 In June
2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 168, “The FASB Accounting Standards
Codification TM and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (the Codification). The Codification,
which was launched on July 1, 2009, became the single source of authoritative
nongovernmental U.S. GAAP, superseding existing FASB, American Institute of
Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and
related literature. The Codification eliminates the GAAP hierarchy contained in
SFAS No. 162 and establishes one level of authoritative GAAP. All other
literature is considered non-authoritative. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009.  The implementation of this Statement is not
expected to have change to the company’s Consolidated Financial
Statements.
  20
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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 June 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
June 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
six months ended June 30, 2009 and 2008, except Daqing Sunway’ sales were one
SADP from 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 six months ended June 30,2009
                    
                    
                    2008Customer
      A
                    
                    $
                    -
                    
                    
                    $
                    989,731Customer
      B
                    
                    
                    659,506
                    
                    
                    
                    870,963Customer
      C
                    
                    
                    547,131
                    
                    
                    
                    -Customer
      D
                    
                    
                    368,163
                    
                    
                    
                    -Customer
      E
                    
                    
                    705,645
                    
                    
                    
                    821,477Customer
      I
                    
                    
                    331,776
                    
                    
                    
                    781,887
 
 Details
of customers accounting for 10% or more of the Group’s trade receivables are as
follows:
 
 June
      30, 2009
                    
                    
                    December
      31, 2008Customer
      A
                    
                    $
                    181,872
                    
                    
                    $
                    499,583Customer
      B
                    
                    
                    360,856
                    
                    
                    
                    -Customer
      C
                    
                    
                    347,592
                    
                    
                    
                    387,263Customer
      D
                    
                    
                    239,950
                    
                    
                    
                    -Customer
      E
                    
                    
                    390,413
                    
                    
                    
                    396,822Customer
      F
                    
                    
                    283,198
                    
                    
                    
                    371,218Customer
      G
                    
                    
                    212,900
                    
                    
                    
                    325,129Customer
      H
                    
                    
                    200,957
                    
                    
                    
                    -
  21
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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
  June
      30, 2009
                        
                        
                        December
      31, 2008Trade
      receivables, gross
                        
                        $
                        3,081,148
                        
                        
                        $
                        2,962,333Provision
      for doubtful debts
                        
                        
                        (8,425
                        )
                        
                        
                        (8,414
                        )$
                        3,072,723
                        
                        
                        $
                        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 six months ended June
30, 2009 and December 31, 2008 is as follows:
 June
      30, 2009
                        
                        
                        December
      31, 2008Balance
      at beginning of period/year
                        
                        $
                        8,414
                        
                        
                        $
                        7,884Foreign
      exchange adjustment
                        
                        
                        11
                        
                        
                        
                        530Balance
      at end of period/year
                        
                        $
                        8,425
                        
                        
                        $
                        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.
 
 June
      30, 2009
                        
                        
                        December
      31, 2008Bo
      Liu
                        
                        $
                        39,598
                        
                        
                        $
                        23,495Deli
      Liang
                        
                        
                        27,969
                        
                        
                        
                        15,238$
                        67,567
                        
                        
                        $
                        38,733
  22
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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:
 
 June
      30, 2009
                      
                      
                      December
      31, 2008Beginning
      balance, January 1
                      
                      $
                      429,804
                      
                      
                      $
                      548,364Add:
      Advanced during the period/year
                      
                      
                      279,405
                      
                      
                      
                      659,177Less:
      Transferred to income statement
                      
                      
                      (138,392
                      )
                      
                      
                      (406,262
                      )Recollected from employees
                      
                      
                      (276,807
                      )
                      
                      
                      (371,475
                      )Ending
      balance
                      
                      $
                      294,010
                      
                      
                      $
                      429,804
 
 8.
              INVENTORIES
 
 Inventories
comprise the followings:
 June
      30, 2009
                        
                        
                        December
      31, 2008Finished
      goods
                        
                        $
                        271,622
                        
                        
                        $
                        218,448Work
      in progress
                        
                        
                        16,235
                        
                        
                        
                        188,855Raw
      materials
                        
                        
                        549,606
                        
                        
                        
                        183,435$
                        837,463
                        
                        
                        $
                        590,738
  23
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 9.
              PROPERTY,
      PLANT AND EQUIPMENT, NET
 
 Property,
plant and equipment, net comprise the followings:
 June
      30, 2009
                            
                            
                            December
      31, 2008At
      costBuilding
                            
                            $
                            1,846,023
                            
                            
                            $
                            1,447,402Machinery
      and equipment
                            
                            
                            679,586
                            
                            
                            
                            1,116,941Moldings
                            
                            
                            4,161,305
                            
                            
                            
                            4,155,598Computer
      software
                            
                            
                            2,098,505
                            
                            
                            
                            2,073,181Office
      equipment and motor vehicles
                            
                            
                            385,166
                            
                            
                            
                            288,736$
                            9,170,585
                            
                            
                            $
                            9,081,858Less:
      accumulated depreciation
                            
                            
                            (4,043,401
                            )
                            
                            
                            (4,011,987
                            )$
                            5,127,184
                            
                            
                            $
                            5,069,871Construction
      in progress
                            
                            
                            615,864
                            
                            
                            
                            -$
                            5,743,048
                            
                            
                            $
                            5,069,871
 
 Construction
in progress represents direct costs of construction incurred for factory
infrastructure. Capitalization of these costs ceases and the construction in
progress is transferred to property, plant and equipment when substantially all
the activities necessary to prepare the assets for their intended use are
completed. No depreciation is provided until it is completed and ready for
intended use.
 
 Depreciation
is included in the statement of income and as follows:
 
 For
      the six months ended June 30,2009
                        
                        
                        2008Cost
      of net revenues
                        
                        $
                        438,129
                        
                        
                        $
                        368,794General
      and administrative expenses
                        
                        
                        15,195
                        
                        
                        
                        6,595Selling
      expenses
                        
                        
                        20,824
                        
                        
                        
                        -$
                        474,148
                        
                        
                        $
                        375,389
  24
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 10.
              INTANGIBLE
      ASSETS, NET
 
 Intangible
assets, net are as follows:
 June
      30, 2009
                          
                          
                          December
      31, 2008Land
      use rights, at cost
                          
                          $
                          2,485,002
                          
                          
                          $
                          1,354,308Technology-based
      design, at cost
                          
                          
                          8,520,702
                          
                          
                          
                          6,320,577$
                          11,005,704
                          
                          
                          $
                          7,674,885Less:
      accumulated amortization
                          
                          
                          (1,521,826
                          )
                          
                          
                          (1,098,116
                          )$
                          9,483,878
                          
                          
                          $
                          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.
 
 Amortization
expense included in the general and administrative expenses for the six months
ended 2009 and 2008 were $407,773 and $420,972 respectively.
  25
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 11.
                EXPECTED
      WARRANTY LIABILITIES
 
 An
analysis of the expected warranty liabilities as at June 30, 2009 and December
31, 2008 is as follows:
 
 June
      30, 2009
                              
                              
                              December
      31, 2008Balance
      at beginning of period/year
                              
                              $
                              50,396
                              
                              
                              $
                              55,351Warranty
      expense for the period/year
                              
                              
                              -
                              
                              
                              
                              (8,533
                              )Foreign
      currency difference
                              
                              
                              70
                              
                              
                              
                              3,578Balance
      at end of period/year
                              
                              $
                              50,466
                              
                              
                              $
                              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
  The
Series B preferred stock has liquidation rights senior to common stock and
Series A preferred stock.  In the event of a liquidation of the
Company, holders of Series B preferred stock are entitled to receive a
distribution equal to $40.50 per share of Series B preferred stock prior to any
distribution to the holders of common stock and Series A preferred
stock.  The Series B preferred stock is entitled to non-cumulative
dividends only upon declaration of dividends by the Company.  To date,
no dividends have been declared or accrued.  The Series B preferred
stock will participate based on their respective as-if conversion rates if the
Company declares any dividends.  After the Amendment were filed effect
the Reverse Split, each share of Series B  preferred stock would be
convertible into 30 shares of Common Stock for $1.35 each, which both may be
adjusted from time to time pursuant to the conversion rate.  The
holders of Series B preferred stock shall be entitled to voting rights by
applicable law and the right to vote together with the holders of Common and
Series A Preferred Stock.
  26
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 30, 2009 AND 2008
 (Stated
in US Dollars)(Unaudited)
 
 12. 
SERIES B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED WARRANTS
(CONTINUED)
  The gross
proceeds of the transaction were $6.7 million. The proceeds from the transaction
were allocated to the Series B preferred stock, warrants and beneficial
conversion feature based on the relative fair value of the
securities.  The value of the Preferred Series B was determined by
reference to the market price of the common shares into which it converts, and
the gross value of the warrants was calculated using the Black –Scholes model
with the following assumptions:  expected life of 1 year, volatility
of 117% and an interest rate of 4.99%.
  The
Company recognized a beneficial conversion feature discount on the Series B
preferred stock at its intrinsic value, which was the fair value of the common
stock at the commitment date for the Series B preferred stock investment, less
the effective conversion price but limited to the $6.7 million of proceeds
received from the sale. The Company recognized the $6.7 million beneficial
conversion feature as an increase in paid in capital in the accompanying
consolidated balance sheets on the date of issuance of the Series B preferred
shares since the Series B preferred shares were convertible at the issuance
date.
  The
agreement, also provided that if a Registration Statement is not effective
within a certain period of time or the common shares are not listed on the
NASDAQ or American exchange by December 31, 2008, the Company will pay the
holders of the shares a penalty that can range from $67,000 to $670,000 and
certain principal shareholders would issue up to 1,000,000 additional shares to
the purchasers of the Preferred Series B shares.  The company is
accounting for these penalties in accordance with FAS 5 - Accounting for
Contingencies, whereby the penalty will not be recorded as a liability until and
if it is probable the penalty will be incurred. No penalty has been recorded in
the accompanying financial statements for this contingency.
  Under the
agreement, Warrant J was expired on June 5, 2008. On that day, Vision
Opportunity Master Fund Ltd. converted all the Warrant J, totally 4,362,416
shares into 4,362,416 of common stock.
  On
February 7, 2008, 12 shareholders of Preferred Series A converted 228,530 shares
into 13,711,831 shares of common stock, in which Rise Elite International
Limited, Vision Opportunity Master Fund, Ltd and Kuhns Brothers, Inc converted
210,886, 7,990 and 2,647 shares of Preferred Series A into 12,653,160, 479,400
and 158,820 shares of common stock respectively._
  On June
18, 2008, Columbia China Capital Group, Inc. converted 4,938 shares of Preferred
Series B into 148,140 shares of common stock.
  On
November 10, 2008, Columbia China Capital Group, Inc. converted the Warrant J,
totally 53,691 shares into 53,691 of common stock.
  27


SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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 six months ended June 30,2009
                          
                          
                          2008Earnings:Earnings
      for the purpose of basic earnings per share
                          
                          $
                          7,741,294
                          
                          
                          $
                          3,551,121Effect
      of dilutive potential common stock
                          
                          
                          -
                          
                          
                          
                          -Earnings
      for the purpose of dilutiveearnings per
share
                          
                          $
                          7,741,294
                          
                          
                          $
                          3,551,121Number
      of shares:Weighted
      average number of common stock for the purpose of basic earnings per
      share
                          
                          
                          18,499,736
                          
                          
                          
                          11,757,733Effect
      of dilutive potential common stock-conversion
      of Series Aconvertible preferred stock
                          
                          
                          -
                          
                          
                          
                          2,787,570-conversion
      of Series Bconvertible preferred stock
                          
                          
                          4,814,820
                          
                          
                          
                          4,952,379-conversion
      of Warrant Series A
                          
                          
                          3,003,740
                          
                          
                          
                          2,424,318-conversion
      of Warrant Series B
                          
                          
                          1,201,307
                          
                          
                          
                          822,708-conversion
      of Warrant Series J
                          
                          
                          -
                          
                          
                          
                          3,763,183-conversion
      of Warrant Series C
                          
                          
                          2,494,470
                          
                          
                          
                          1,961,291-conversion
      of Warrant Series D
                          
                          
                          955,027
                          
                          
                          
                          595,115Weighted
      average number of common stock for the purpose of dilutive earnings per
      share
                          
                          
                          30,969,100
                          
                          
                          
                          29,064,297
  28
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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:
 
 Six months ended June 30,2009
                    
                    
                    2008U.S.
      statutory rate
                    
                    
                    34
                    %
                    
                    
                    34
                    %Foreign
      income not recognized in the U.S.
                    
                    
                    (34
                    )%
                    
                    
                    (34
                    )%PRC
      Enterprise Income Tax
                    
                    
                    25
                    %
                    
                    
                    33
                    %Tax
      holiday
                    
                    
                    (10
                    )%
                    
                    
                    (18
                    )%Provision
      for income tax
                    
                    
                    15
                    %
                    
                    
                    15
                    %
 
 The
provision for income taxes consists of the following:
 
 Six months ended June 30,2009
                      
                      
                      2008Current
      tax – PRC EIT
                      
                      $
                      333,673
                      
                      
                      $
                      672,462Deferred
      tax provision
                      
                      
                      -
                      
                      
                      
                      -Income
      tax expenses
                      
                      $
                      333,673
                      
                      
                      $
                      672,462
 
 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 SIX MONTHS ENDED JUNE 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 six months ended June 30, 2009 and for the year ended
December 31, 2008 amounted to $49,945 and $70,922 respectively.
 
 As at
June 30, 2009, the Group’s commitments for minimum lease payments under these
leases for the next one year and thereafter are as follows:
 
 June
      30, 2010
                              
                              $
                              70,009$
                              70,009
 
 As of
June 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 sixmonths endedJune 30, 2009
                      
                      Workstation
                      
                      
                      Workstation
                      
                      
                      WorkstationType A
                      
                      
                      Type B
                      
                      
                      Type C
                      
                      
                      SADP
                      
                      
                      Other
                      
                      
                      ConsolidatedNet
      revenues
                      
                      $
                      2,044,292
                      
                      
                      $
                      601,327
                      
                      
                      $
                      2,504,453
                      
                      
                      $
                      434,901
                      
                      
                      $
                      83,369
                      
                      
                      $
                      5,668,342Cost
      of net revenues
                      
                      
                      (627,672
                      )
                      
                      
                      (174,297
                      )
                      
                      
                      (854,162
                      )
                      
                      
                      (254,402
                      )
                      
                      
                      (70,753
                      )
                      
                      
                      (1,981,286
                      )$
                      1,416,620
                      
                      
                      $
                      427,030
                      
                      
                      $
                      1,650,291
                      
                      
                      $
                      180,499
                      
                      
                      $
                      12,616
                      
                      
                      $
                      3,687,056
 
 For the sixmonths endedJune 30,
                        2008
                      
                      Workstation
                      
                      
                      Workstation
                      
                      
                      WorkstationType A
                      
                      
                      Type B
                      
                      
                      Type C
                      
                      
                      SADP
                      
                      
                      Other
                      
                      
                      ConsolidatedNet
      revenues
                      
                      $
                      1,654,785
                      
                      
                      $
                      3,503,647
                      
                      
                      $
                      2,395,149
                      
                      
                      $
                      537,282
                      
                      
                      $
                      -
                      
                      
                      $
                      8,090,863Cost
      of net revenues
                      
                      
                      (428,782
                      )
                      
                      
                      (1,042,584
                      )
                      
                      
                      (700,954
                      )
                      
                      
                      (204,355
                      )
                      
                      
                      -
                      
                      
                      
                      (2,376,675
                      )$
                      1,226,003
                      
                      
                      $
                      2,461,063
                      
                      
                      $
                      1,694,195
                      
                      
                      $
                      332,927
                      
                      
                      $
                      -
                      
                      
                      $
                      5,714,188
  30
  SUNWAY
GLOBAL INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE SIX MONTHS ENDED JUNE 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 SIX MONTHS ENDED JUNE 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
                                        
                                        
                                        RestatedJune 30, 2009(Unaudited)
                                        
                                        
                                        (Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                        
                                        $
                                        7,584,827
                                        
                                        
                                        $
                                        7,584,827Trade
      receivables, net
                                        
                                        
                                        3,072,723
                                        
                                        
                                        
                                        3,072,723Inventories
                                        
                                        
                                        837,463
                                        
                                        
                                        
                                        837,463Advances
      to suppliers
                                        
                                        
                                        1,222,794
                                        
                                        
                                        
                                        1,222,794Prepayments
                                        
                                        
                                        61,644
                                        
                                        
                                        
                                        61,644Tender
      deposits
                                        
                                        
                                        27,030
                                        
                                        
                                        
                                        27,030Travel
      advances to directors
                                        
                                        
                                        67,567
                                        
                                        
                                        
                                        67,567Advances
      to employees
                                        
                                        
                                        294,010
                                        
                                        
                                        
                                        294,010Other
      receivables
                                        
                                        
                                        404,409
                                        
                                        
                                        
                                        404,409Total
      current assets
                                        
                                        $
                                        13,572,467
                                        
                                        
                                        $
                                        13,572,467Amount
      due from a related company
                                        
                                        
                                        830
                                        
                                        
                                        
                                        830Restricted
      cash
                                        
                                        
                                        321,032
                                        
                                        
                                        
                                        321,032Property,
      plant and equipment, net
                                        
                                        
                                        5,743,048
                                        
                                        
                                        
                                        5,743,048Intangible
      assets, net
                                        
                                        
                                        9,483,878
                                        
                                        
                                        
                                        9,483,878Deposit
      for acquisition of computer software
                                        
                                        
                                        6,886,542
                                        
                                        
                                        
                                        6,886,542Deposit
      for property, plant and equipment
                                        
                                        
                                        1,906,159
                                        
                                        
                                        
                                        1,906,159Goodwill
                                        
                                        
                                        4,831,386
                                        
                                        
                                        
                                        -TOTAL
      ASSETS
                                        
                                        $
                                        42,745,342
                                        
                                        
                                        $
                                        37,913,956LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                                        
                                        $
                                        96,081
                                        
                                        
                                        $
                                        96,081Income
      tax payable
                                        
                                        
                                        128,929
                                        
                                        
                                        
                                        128,929Turnover
      and other taxes
                                        
                                        
                                        107,649
                                        
                                        
                                        
                                        107,649Expected
      warranty liabilities
                                        
                                        
                                        50,466
                                        
                                        
                                        
                                        50,466Customers
      deposits
                                        
                                        
                                        247,522
                                        
                                        
                                        
                                        247,522Accrued
      liabilities
                                        
                                        
                                        293,558
                                        
                                        
                                        
                                        293,558Other
      payables
                                        
                                        
                                        253,520
                                        
                                        
                                        
                                        253,520Total
      current liabilities
                                        
                                        $
                                        1,177,725
                                        
                                        
                                        $
                                        1,177,725Warrants
      liabilities
                                        
                                        
                                        -
                                        
                                        
                                        
                                        58,967,314TOTAL
      LIABILITIES
                                        
                                        $
                                        1,177,725
                                        
                                        
                                        $
                                        60,145,039
  33
  SUNWAY
GLOBAL INC.
 
 BALANCE
SHEETS (Continued)
  Original
                                    
                                    RestatedJune 30, 2009(Unaudited)
                                    
                                    
                                    (Unaudited)STOCKHOLDERS’
      EQUITYSeries
      B Convertible PreferredStock $0.0000001 par value; 400,000shares
      authorized; 160,494 shares issued and outstanding at June 30,
      2009
                                    
                                    $
                                    1
                                    
                                    
                                    $
                                    1Common
      stock at $0.0000001 parvalue; 100,000,000 shares
      authorized;18,499,736 shares issued and outstanding at June 30,
      2009
                                    
                                    
                                    2
                                    
                                    
                                    
                                    2Additional
      paid-in capital
                                    
                                    
                                    22,679,965
                                    
                                    
                                    
                                    18,689,023Statutory
      reserves
                                    
                                    
                                    3,033,855
                                    
                                    
                                    
                                    3,033,855Retained
      earnings/(accumulated deficit)
                                    
                                    
                                    12,979,070
                                    
                                    
                                    
                                    (46,828,465
                                    )Accumulated
      other comprehensive income
                                    
                                    
                                    2,874,724
                                    
                                    
                                    
                                    2,874,501$
                                    41,567,617
                                    
                                    
                                    $
                                    (22,231,083
                                    )TOTAL
      LIABILITIES ANDSTOCKHOLDERS’
      EQUITY
                                    
                                    $
                                    42,745,342
                                    
                                    
                                    $
                                    37,913,956
  34
  SUNWAY
GLOBAL INC.
 
 STATEMENT
OF INCOME
 Original
                          
                          
                          RestatedSix
      months ended June 30,2009(Unaudited)
                          
                          
                          (Unaudited)Net
      revenues
                          
                          $
                          5,668,342
                          
                          
                          $
                          5,668,342Cost
      of net revenues
                          
                          
                          (1,981,286
                          )
                          
                          
                          (1,981,286
                          )Gross
      profit
                          
                          $
                          3,687,056
                          
                          
                          $
                          3,687,056Selling
      expenses
                          
                          
                          (361,302
                          )
                          
                          
                          (361,302
                          )General
      and administrative expenses
                          
                          
                          (1,384,831
                          )
                          
                          
                          (1,394,473
                          )Income
      from operation
                          
                          $
                          1,940,923
                          
                          
                          $
                          1,931,281Interest
      expenses
                          
                          
                          (1,727
                          )
                          
                          
                          (1,727
                          )Interest
      income
                          
                          
                          41,927
                          
                          
                          
                          42,240Impairment
      on investment
                          
                          
                          -
                          
                          
                          
                          (4,831,386
                          )Loss
      on disposal of fixed assets
                          
                          
                          (9,552
                          )
                          
                          
                          -Change
      in fair value of warrants
                          
                          
                          -
                          
                          
                          
                          10,934,559Income
      before income taxes
                          
                          $
                          1,971,571
                          
                          
                          $
                          8,074,967Income
      taxes
                          
                          
                          (333,673
                          )
                          
                          
                          (333,673
                          )Net
      income
                          
                          $
                          1,637,898
                          
                          
                          
                          7,741,294Net
      income per share:-Basic
                          
                          $
                          0.09
                          
                          
                          
                          0.42-Diluted
                          
                          $
                          0.05
                          
                          
                          
                          0.25Weighted
      average number of common stock-Basic
                          
                          
                          18,499,736
                          
                          
                          
                          18,499,736-Diluted
                          
                          
                          30,969,100
                          
                          
                          
                          30,969,100
  35
  SUNWAY
GLOBAL INC.
 
 STATEMENT
OF INCOME
 Original
                              
                              
                              RestatedThree months ended June 30,2009(Unaudited)
                              
                              
                              (Unaudited)Net
      revenues
                              
                              $
                              2,734,631
                              
                              
                              $
                              2,734,631Cost
      of net revenues
                              
                              
                              (1,087,385
                              )
                              
                              
                              (1,087,385
                              )Gross
      profit
                              
                              $
                              1,647,246
                              
                              
                              $
                              1,647,246Selling
      expenses
                              
                              
                              (180,950
                              )
                              
                              
                              (180,950
                              )General
      and administrative expenses
                              
                              
                              (750,917
                              )
                              
                              
                              (760,473
                              )Income
      from operation
                              
                              $
                              715,379
                              
                              
                              $
                              705,823Interest
      expenses
                              
                              
                              (1,728
                              )
                              
                              
                              (1,728
                              )Interest
      income
                              
                              
                              18,735
                              
                              
                              
                              18,735Change
      in fair value of warrants
                              
                              
                              -
                              
                              
                              
                              31,415,835Loss
      on disposal of fixed assets
                              
                              
                              (9,556
                              )
                              
                              
                              -Income
      before income taxes
                              
                              $
                              722,830
                              
                              
                              $
                              32,138,665Income
      taxes
                              
                              
                              (125,635
                              )
                              
                              
                              (125,635
                              )Net
      income
                              
                              $
                              597,195
                              
                              
                              $
                              32,013,030Net
      income per share:-Basic
      and diluted
                              
                              $
                              0.03
                              
                              
                              $
                              1.73-Diluted
                              
                              $
                              0.02
                              
                              
                              $
                              1.06Weighted
      average number of common stock-Basic
                              
                              
                              18,499,736
                              
                              
                              
                              18,499,736-Diluted
                              
                              
                              30,243,833
                              
                              
                              
                              30,243,833
  36
  SUNWAY
GLOBAL INC.
 
 STATEMENT
OF CASH FLOWS
  Original
                            
                            
                            RestatedSix
      months ended June 30,2009(Unaudited)
                            
                            
                            (Unaudited)Cash
      flows from operating activitiesNet
      income
                            
                            $
                            1,637,898
                            
                            
                            $
                            7,741,294Depreciation
                            
                            
                            474,148
                            
                            
                            
                            474,148Amortization
                            
                            
                            407,773
                            
                            
                            
                            407,773Loss
      on disposal of fixed assets
                            
                            
                            9,552
                            
                            
                            
                            9,552Change
      in fair value of warrants
                            
                            
                            -
                            
                            
                            
                            (10,934,559
                            )Impairment
      on investment
                            
                            
                            -
                            
                            
                            
                            4,831,386Adjustments
      to reconcile net income to net cash provided by operating
      activities:Trade
      receivables, net
                            
                            
                            (114,774
                            )
                            
                            
                            (114,774
                            )Inventories
                            
                            
                            (245,971
                            )
                            
                            
                            (245,971
                            )Advances
      to suppliers
                            
                            
                            (674,302
                            )
                            
                            
                            (496,537
                            )Prepayments
                            
                            
                            1,037,814
                            
                            
                            
                            (61,658
                            )Tender
      deposits
                            
                            
                            85,880
                            
                            
                            
                            85,880Travel
      advances to shareholders
                            
                            
                            (28,788
                            )
                            
                            
                            (28,788
                            )Advances
      to employees
                            
                            
                            136,417
                            
                            
                            
                            136,417Other
      receivables
                            
                            
                            (404,504
                            )
                            
                            
                            240,716Accounts
      payable
                            
                            
                            36,096
                            
                            
                            
                            36,096Income
      tax payable
                            
                            
                            (504,951
                            )
                            
                            
                            (504,951
                            )Turnover
      and other taxes
                            
                            
                            (299,819
                            )
                            
                            
                            (271,363
                            )Customers
      deposits
                            
                            
                            247,580
                            
                            
                            
                            247,580Accrued
      liabilities
                            
                            
                            (8,285
                            )
                            
                            
                            (8,285
                            )Other
      Payables
                            
                            
                            (185,704
                            )
                            
                            
                            238,387Net
      cash provided by operating activities
                            
                            $
                            1,606,060
                            
                            
                            $
                            1,782,343Cash
      flows from investing activitiesPurchase
      of plant and equipment
                            
                            $
                            (185,311
                            )
                            
                            $
                            (253,601
                            )Purchase
      of intangible assets
                            
                            
                            (2,173,206
                            )
                            
                            
                            (2,284,177
                            )Sales
      of short term investment
                            
                            
                            -
                            
                            
                            
                            -Restricted
      cash
                            
                            
                            57,334
                            
                            
                            
                            57,334Advances
      to a related company
                            
                            
                            -
                            
                            
                            
                            -Advances
      to a director
                            
                            
                            -
                            
                            
                            
                            -Deposit
      for technology-based designs
                            
                            
                            (5,134,586
                            )
                            
                            
                            (5,134,586
                            )Deposit
      for property, plant and equipment
                            
                            
                            (1,906,605
                            )
                            
                            
                            (1,906,605
                            )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
                            
                            $
                            (9,269,181
                            )
                            
                            $
                            (9,521,635
                            )Cash
      flows from financing activities
                            
                            $
                            -
                            
                            
                            $
                            -Net
      cash provided by financing activities
                            
                            $
                            -
                            
                            
                            $
                            -
  37
  SUNWAY
GLOBAL INC.
 
 STATEMENTS
OF CASH FLOWS (Continued)
 
 Original
                                
                                
                                RestatedSix
      months ended June 30,2009(Unaudited)
                                
                                
                                (Unaudited)Net
      in cash and cash equivalents used
                                
                                $
                                (7,663,121
                                )
                                
                                $
                                (7,739,292
                                )Effect
      of foreign currency translation oncash and cash
      equivalents
                                
                                
                                58,007
                                
                                
                                
                                134,178Cash
      and cash equivalents–beginning of period
                                
                                
                                15,189,941
                                
                                
                                
                                15,189,941Cash
      and cash equivalents–end of period
                                
                                $
                                7,584,827
                                
                                
                                $
                                7,584,827Supplementary
      cash flow information:Interest
      received
                                
                                $
                                41,927
                                
                                
                                $
                                42,240Interest
      paid
                                
                                
                                1,727
                                
                                
                                
                                1,727Tax
      paid
                                
                                
                                838,625
                                
                                
                                
                                838,625
  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.We generate our revenue from sales in
two product categories: pneumatic transport systems (“PTS”) and medicine
dispensing systems (“SADP”).
  Affected
by the financial crisis and affected by equivocal reform of the medical
institutions in the PRC, bring about hospital’s investment declines, the company
sales declined in the second quarter of 2009, but we believe the global
liquidity crisis will affect all businesses. However, our strong balance sheet
and liquidity position should allow us to not only weather the current economic
environment but potentially benefit and continue to execute growth strategies
and pursue the numerous opportunities.
 
 This
discussion and analysis focuses on the business results of company, comparing
its results in the three and six month periods ended June 30, 2009 to the three
and six month periods ended June 30, 2008.
 
 Three-month
period ended June 30, 2009 and June 30, 2008
 
 Results
of Operations
 
 In the
three months ended June 30, 2009, the company’s net revenues, gross profit and
operation income decreased significantly as compared with the same period of
2008, but operating expenses increased during these periods. These decreases
were primarily attributable 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 summarizes the results of our operations during the three months
ended June 30, 2009 and 2008, respectively, and provides information regarding
the dollar and percentage increase or (decrease) from the three months ended
June 30, 2009 and 2008.
  39
 Three
      Months Ended June 30,2009
                  
                  
                  2008
                  
                  
                  Change
                  
                  
                  Change
      rateNet
      Revenues
                  
                  $
                  2,734,631
                  
                  
                  $
                  4,499,670
                  
                  
                  $
                  (1,765,039
                  )
                  
                  
                  (39.23
                  )%Cost
      of net revenues
                  
                  $
                  1,087,385
                  
                  
                  $
                  1,236,310
                  
                  
                  $
                  (148,925
                  )
                  
                  
                  (12.05
                  )%Gross
      Profit
                  
                  $
                  1,647,246
                  
                  
                  $
                  3,263,360
                  
                  
                  $
                  (1,616,114
                  )
                  
                  
                  (49.52
                  )%Gross
      Margin
                  
                  
                  60.24
                  %
                  
                  
                  72.52
                  %
                  
                  
                  
                  
                  
                  
                  (12.28
                  )%Operating
      Income
                  
                  $
                  705,823
                  
                  
                  $
                  2,548,909
                  
                  
                  $
                  (1,843,086
                  )
                  
                  
                  (72.31
                  )%Changes
      in fair value of warrants
                  
                  $
                  31,415,835
                  
                  
                  $
                  -
                  
                  
                  $
                  31,415,835
                  
                  
                  
                  -Net
      Income
                  
                  $
                  32,013,030
                  
                  
                  $
                  2,185,287
                  
                  
                  $
                  29,827,743
                  
                  
                  
                  1364.93
                  %Net
      profit margin
                  
                  
                  1170.65
                  %
                  
                  
                  48.57
                  %
                  
                  
                  
                  
                  
                  
                  1122.09
                  %
  Net
Revenue
  Net
revenue for the three months ended June 30, 2009, which resulted entirely from
sales, was $2,734,631, a decrease of 39.23% as compared with net revenue of
$4,499,670 for the three months ended June 30, 2008. In the three months ended
June 30, 2009, we sold 416 workstations, a decrease of 52.99% as compared with
885 workstations sold in the three months ended June 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 application categories as percentage of total net
revenue.
  ThreeMonthsEndedJune30,2009
                            
                            2008sales
                            
                            
                            % of total sales
                            
                            sales
                            
                            
                            % of total salesPTS
                            
                            $
                            2,216,111
                            
                            
                            
                            81.04
                            %
                            
                            $
                            4,499,670
                            
                            
                            
                            100.00
                            %SADP
                            
                            $
                            435,111
                            
                            
                            
                            15.91
                            %
                            
                            $
                            -
                            
                            
                            
                            -
                            %OTHER
                            
                            $
                            83,409
                            
                            
                            
                            3.05
                            %
                            
                            
                            -
                            
                            
                            
                            -
                            %Total
      net revenue
                            
                            $
                            2,734,631
                            
                            
                            
                            100.00
                            %
                            
                            $
                            4,499,670
                            
                            
                            
                            100.00
                            %
 
 Gross
Profit
 
 Gross
profit decreased 49.52% to $1,647,246 for the three months ended June 30, 2009,
as compared to $3,263,360 for the three months ended June 30, 2008. Our gross
profit margin dropped 12.28% from 72.52% as of the three months ended June 30,
2008 to 60.24% as of the same period of 2009, mainly due to a decrease in
product volume, which caused an increase in average fixed cost per
unit.
 
 The table
below presents information about our gross profit for the periods indicated:
  ThreeMonthsEndedJune30,2009
                                  
                                  
                                  2008US$
                                  
                                  
                                  Grossprofit
                                    margin
                                  
                                  
                                  US$
                                  
                                  Grossprofit
                                    marginGross
      Profit
                                  
                                  $
                                  1,647,246
                                  
                                  
                                  
                                  60.24
                                  %
                                  
                                  $
                                  3,263,360
                                  
                                  
                                  
                                  72.52
                                  %
 
 Income
from Operations
 
 Operating
income decreased 72.31% to $705,823 for the three months ended June 30, 2009, as
compared to $2,548,909 for the three months ended June 30, 2008. The decrease
was primarily attributable to fewer sales and increase operation
expenses.
 
 Cost
of Net Revenue
 
 Cost of
net revenue decreased to $1,087,385 for the three months ended June 30, 2009,
representing a 12.05% decrease as compared with $1,236,310 for the same period
of 2008. The decrease is primarily due to fewer sales and a decrease in product
volume, which caused an increase in average fixed cost per
unit.
  40
  The table
below presents information about our cost of net revenue for the periods
indicated:
 
 ThreeMonths Ended June30,2009
                          
                          
                          2008
                          
                          
                          ChangeCost
      of net revenue
                          
                          $
                          1,087,385
                          
                          
                          $
                          1,236,310
                          
                          
                          
                          12.05
                          %
 
 Operating
Expenses
 
 Operating
expenses were $941,423 for the three months ended June 30, 2009, an increase of
31.77% as compared with $714,451 for the same period of 2008.The increase was primarily due to two factors: (1) selling expenses increased
$107,408 or 146.05% to $180,950 in the three months ended June 30, 2009 from
$73,542 for the same period of 2008; and (2) general and administrative expenses
increased $119,564 or 18.66% to $760,473 in the three months ended June 30, 2009
from $640,909 for the same period of 2008. In the three months ended June 30,
2009, we have added to our sales force and hired a general manager for our
wholly-owned subsidiary, Beijing Sunway, all of which has contributed to a sharp
increase in selling and general and administrative expenses.
 
 The table
below presents information about our operating expenses for the periods
indicated:
 
 Three Months Ended June
      30,2009
                            
                            
                            2008
                            
                            
                            ChangeSelling
      expenses
                            
                            $
                            180,950
                            
                            
                            $
                            73,542
                            
                            
                            
                            146.05
                            %General
      & Administrative expenses
                            
                            $
                            760,473
                            
                            
                            $
                            640,909
                            
                            
                            
                            18.66
                            %Total
      operating expenses
                            
                            $
                            941,423
                            
                            
                            $
                            714,451
                            
                            
                            
                            31.77
                            %
 
 Changes
in fair value of warrants
 
 Changes
in fair value of warrants were $31,415,835 for the three months ended June 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 $32,013,030 for the three months ended June 30, 2009, a 1,364.93.09%
increase as compared with $2,185,287 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
$31,415,835 unrelated to the Company’s operations, consisting of changes in fair
value of warrants of $31,415,835. Excluding this $31,415,835 non-cash income,
the Company’s net income from operations for the three months ended June 30,
2009 would have been $597,195, representing the second quarter of 2008 to the
second quarter of 2008 net income fall of 72.67%.
 
 Earnings
Per Share
 
 Basic and
diluted earnings per share for the three months ended June 30, 2009 were $1.73
and $1.06 compared to $0.14 and $0.08 for the same period of 2008. The weighted
average number of shares outstanding to calculate basic EPS was 18,499,736 and
15,155,108 for the three months ended June 30, 2009 and June 30, 2008,
respectively. The weighted average number of shares outstanding to calculate
diluted EPS was 30,243,833 and 28,619,524 for the three months ended June 30,
2009 and June 30, 2008.
  Six-month
period ended June 30, 2009 and June 30, 2008
 
 Results
of Operations
 
 In the
six months ended June 30, 2009, the company’s net revenues, gross profit and
operation income decreased quickly as compared with the same period in the same
period of 2008, but operating expenses increased slightly during these periods.
These decreases are primarily attributable 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.
  41
  The
following table summarizes the results of our operations during the six months
ended June 30, 2009 and 2008, respectively, and provides information regarding
the dollar and percentage increase or (decrease) from the six months ended June
30, 2009 and 2008.
  Six Months Ended June 30,2009
                                                                                              
                                                                                              
                                                                                              2008
                                                                                              
                                                                                              
                                                                                              Change
                                                                                              
                                                                                              
                                                                                              Change
      rateNet
      Revenue
                                                                                              
                                                                                              $
                                                                                              5,668,342
                                                                                              
                                                                                              
                                                                                              $
                                                                                              8,090,863
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (2,422,521
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (29.94
                                                                                              )%Cost
      of net revenue
                                                                                              
                                                                                              $
                                                                                              1,981,286
                                                                                              
                                                                                              
                                                                                              $
                                                                                              2,376,675
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (395,389
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (16.64
                                                                                              )%Gross
      Profit
                                                                                              
                                                                                              $
                                                                                              3,687,056
                                                                                              
                                                                                              
                                                                                              $
                                                                                              5,714,188
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (2,027,132
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (35.48
                                                                                              )%Gross
      Margin
                                                                                              
                                                                                              
                                                                                              65.05
                                                                                              %
                                                                                              
                                                                                              
                                                                                              70.63
                                                                                              %
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              (5.58
                                                                                              )%Operating
      Income
                                                                                              
                                                                                              $
                                                                                              1,931,281
                                                                                              
                                                                                              
                                                                                              $
                                                                                              4,186,714
                                                                                              
                                                                                              
                                                                                              $
                                                                                              (2,255,433
                                                                                              )
                                                                                              
                                                                                              
                                                                                              (53.87
                                                                                              )%Impairment
      on investment
                                                                                              
                                                                                              $
                                                                                              4,831,386
                                                                                              
                                                                                              
                                                                                              $
                                                                                              -
                                                                                              
                                                                                              
                                                                                              $
                                                                                              4,831,386
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Change
      in fair value of warrants
                                                                                              
                                                                                              $
                                                                                              10,934,559
                                                                                              
                                                                                              
                                                                                              $
                                                                                              -
                                                                                              
                                                                                              
                                                                                              $
                                                                                              10,934,559
                                                                                              
                                                                                              
                                                                                              
                                                                                              -Net
      Income
                                                                                              
                                                                                              $
                                                                                              7,741,294
                                                                                              
                                                                                              
                                                                                              $
                                                                                              3,551,121
                                                                                              
                                                                                              
                                                                                              $
                                                                                              4,190,173
                                                                                              
                                                                                              
                                                                                              
                                                                                              118.00
                                                                                              %Net
      profit margin
                                                                                              
                                                                                              
                                                                                              136.57
                                                                                              %
                                                                                              
                                                                                              
                                                                                              43.89
                                                                                              %
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              
                                                                                              92.68
                                                                                              %
  Net
Revenue
  Net
revenue for the six months ended June 30, 2009, which resulted entirely from
sales, was $5,668,342, a decrease of 29.94% as compared with net revenue of
$8,090,863 for the six months ended June 30, 2008. In the six months ended June
30, 2009, we sold 982 workstations, a decrease of 34.84% as compared with 1,507
workstations sold in the six months ended June 30, 2008. The decrease was due to
(i) a decline in hospital-related investment due to governmental reforms
requiring pharmacies to be operated outside of and separate from hospitals in
the PRC; (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. At the same time, we sold
4 SADP, an increase of 100% as compared with 2 SADP in the six months ended June
30, 2008. The increase was due primarily to our distinct price and service
advantages as compared with foreign brands.
  The
following table breaks down application categories as percentage of total net
revenue.
  SixMonthsEndedJune30,2009
                    
                    
                    2008sales
                    
                    
                    % of total sales
                    
                    
                    sales
                    
                    
                    % of total salesPTS
                    
                    $
                    5,150,072
                    
                    
                    
                    90.86
                    %
                    
                    $
                    7,553,581
                    
                    
                    
                    93.36
                    %SADP
                    
                    $
                    434,901
                    
                    
                    
                    7.67
                    %
                    
                    $
                    537,282
                    
                    
                    
                    6.64
                    %OTHER
                    
                    $
                    83,369
                    
                    
                    
                    1.47
                    %
                    
                    $
                    -
                    
                    
                    
                    -
                    %Total
      net revenue
                    
                    $
                    5,668,342
                    
                    
                    
                    100.00
                    %
                    
                    $
                    8,090,863
                    
                    
                    
                    100.00
                    %
 
 Gross
Profit
  Gross
profit decreased 35.48% to $3,687,056 for the six months ended June 30, 2009, as
compared to $5,714,188 for the six months ended June 30, 2008. Our gross profit
margin dropped 5.58% from 70.63% as of the six months ended June 30, 2008 to
65.05% as of the same period of 2009, mainly due to a decrease in product
volume, which raised our average fixed cost per unit, and an adjustment to our
pricing of SADP’s.
 
 The table
below presents information about our gross profit for the periods
indicated:
  Six
      Months Ended June 30,2009
                          
                          
                          2008US$
                          
                          Gross
      profit
                            margin
                          
                          
                          US$
                          
                          Gross
      profit
                            marginGross
      Profit
                          
                          $
                          3,687,056
                          
                          
                          
                          65.05
                          %
                          
                          $
                          5,714,188
                          
                          
                          
                          70.63
                          %
 
 Income
from Operations
 
 Operating
income decreased 53.87% to $1,931,281 for the six months ended June 30, 2009, as
compared to $4,186,714 for the six months ended June 30, 2008. The decrease was
primarily attributable to a drop in sales and increase in operation
expenses.
  42


Cost
of Net Revenue
 
 Cost of
net revenue decreased to $1,981,286 for the six months ended June 30, 2009,
representing a 16.64% decrease as compared with $2,376,675 for the same period
of 2008. The decrease was primarily due to fewer sales decreased product volume,
which caused an increase in average fixed cost per unit.
 
 The table
below presents information about our cost of net revenue for the periods
indicated:
 
 Six
      Months Ended June 30,2009
                      
                      
                      2008
                      
                      ChangeCost
      of net revenue
                      
                      $
                      1,981,286
                      
                      
                      $
                      2,376,675
                      
                      
                      
                      (16.64
                      )%
 
 Operating
Expenses
 
 Operating
expenses were $1,755,775 for the six months ended June 30, 2009, an increase
14.95% as compared with $1,527,474 for the same period of 2008. The increase was
composed by two reasons: (1) selling expenses increased $263,227 or 268.39% to
$361,302 in the six months ended June 30, 2009 from $98,075 for the same period
of 2008; and (2) general and administrative expenses decreased $34,926 or 2.44%
to $1,394,473 in the six months ended June 30, 2009 from $1,429,399 for the same
period of 2008. In the six months ended June 30, 2009, we have added our sales
force, which has led to a sharp rise in selling expenses.
 
 The table
below presents information about our operating expenses for the periods
indicated:
 
 Six Months Ended June
      30,2009
                    
                    
                    2008
                    
                    ChangeSelling
      expenses
                    
                    $
                    361,302
                    
                    
                    $
                    98,075
                    
                    
                    
                    268.39
                    %General
      & Administrative expenses
                    
                    $
                    1,394,473
                    
                    
                    $
                    1,429,399
                    
                    
                    
                    (2.44
                    )%Total
      operating expenses
                    
                    $
                    1,755,775
                    
                    
                    $
                    1,527,474
                    
                    
                    
                    14.95
                    %
 
 Changes
in fair value of warrants
 
 Changes
in fair value of warrants were $10,934,559 for the six months ended June 30,
2009.  This is recorded as 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 six months ended June 30, 2009. Originally,
it was showed on goodwill, it represents the excess of the cost of an
acquisition over the fair value of the net acquired identifiable assets at the
date of acquisition. In the first quarter of 2010, after performing extended
analysis into the definition of a business as set forth in the paragraph
805-10-20 of the FASB Accounting Standards Codification, we recognized the
acquisitions based on the fair value of net assets obtained. For the amount over
the fair value of the net assets obtained, we wrote them off as expenses at the
time of acquisition.
 
 Net
Income
 
 Net
income was $7,741,294 for the six months ended June 30, 2009, representing an
increase of 118% from $3,551,121 for the same period of 2008. In the six month
ended June 30, 2009 our net income was impacted by a non-cash income of
$6,103,173 unrelated to the Company’s operations, mainly consisting of change in
fair value of warrants and impairment on investment were $10,934,559 and
$4,831,386 respectively. Excluding this $6,103,173 non-cash income, the
Company’s net income from operations for the six months ended June 30, 2009
would have been $1,638,121, representing the six months ended June 30, 2008 to
the same period of 2009 net income fall of 53.87%.
 
 Earnings
Per Share
 
 Basic and
diluted earnings per share for the six months ended June 30, 2009 were $0.42 and
$0.25 compared to $0.30 and $0.12 for the same period of 2008. The weighted
average number of shares outstanding to calculate basic EPS was 18,499,736 and
11,757,733 for the six months ended June 30, 2009 and June 30, 2008,
respectively. The weighted average number of shares outstanding to calculate
diluted EPS was 30,969,100 and 29,064,297 for the six months ended June 30, 2009
and June 30, 2008, respectively.
  43
  Trade
Receivables, net
 
 Trade
receivables, net increased 13.70% to $3,072,723 as of June 30, 2009, compared
with $2,953,919 as of December 31, 2008. The increase in trade receivables was
primarily attributable to a change in our sales policy.
 
 Inventory
 
 Inventory
consists of raw materials, finished goods and work in progress. As of June 30,
2009, the recorded value of our inventory has increased 41.77% to $837,463 from
$590,738 as of December 31, 2008. The increase in inventory was primarily
attributable our over-estimations of market demands, and can be broken down into
an  increase in finished goods from $218,448 as of December 31, 2008
to $271,622 as of June 30, 2009, an increase of 24.34%. An increase in raw
material from $183,435 as of December 31, 2008 to $549,606 as of June 30, 2009,
an increase of 199.62%, and a decrease in work in progress from $188,855 as of
December 31, 2008 to $16,235 as of June 30, 2009, a decrease of
91.40%.
  The table
below presents information about our inventory for the periods
indicated:
 
 Item
                        
                        June30,
                          2009
                        
                        
                        December31,
                          2008
                        
                        
                        ChangeFinished
      goods
                        
                        $
                        271,622
                        
                        
                        $
                        218,447
                        
                        
                        
                        24.34
                        %Work
      in progress
                        
                        $
                        16,235
                        
                        
                        $
                        188,855
                        
                        
                        
                        (91.40
                        )%Raw
      material
                        
                        $
                        549,606
                        
                        
                        $
                        183,436
                        
                        
                        
                        199.62
                        %Total
                        
                        $
                        837,463
                        
                        
                        $
                        590,738
                        
                        
                        
                        41.77
                        %
 
 Accounts
Payable
 
 Accounts
payable amounted to $96,081 as of June 30, 2009, an increase of $36,169 as
compared with $59,912 as of December 31, 2008. The increase was primarily
attributable to much demand for raw material for SADP.
 
 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:
  SixmonthsendedJune30,2009
                  
                  
                  2008
                  
                  
                  ChangeNet
      cash provided by (used in) operating activities
                  
                  $
                  1,782,343
                  
                  
                  $
                  2,907,349
                  
                  
                  $
                  (1,125,006
                  )Net
      cash provided by (used in) investing activities
                  
                  $
                  (9,521,635
                  )
                  
                  $
                  (1,328,036
                  )
                  
                  $
                  (8,193,599
                  )Net
      cash provided by (used in) financing activities
                  
                  $
                  -
                  
                  
                  $
                  6,530,000
                  
                  
                  $
                  (6,530,000
                  )Effect
      of foreign currency translation on cash and cash
    equivalents
                  
                  $
                  134,178
                  
                  
                  $
                  1,530,795
                  
                  
                  $
                  (1,396,617
                  )Beginning
      cash and cash equivalent
                  
                  $
                  15,189,941
                  
                  
                  $
                  5,820,100
                  
                  
                  $
                  9,369,841Ending
      cash and cash equivalent
                  
                  $
                  7,584,827
                  
                  
                  $
                  15,460,208
                  
                  
                  $
                  (7,875,381
                  )
  Operating
Activities
 
 For the
six months ended June 30, 2009, net cash provided by operating activities was
$1,782,343. This was primarily attributable to our net income of $7,741,294,
adjusted by an add-back of non-cash expenses mainly consisting of depreciation,
amortization, loss on disposal of fixed assets, change in fair value of warrants
and impairment on investment of $5,211,700 offset by a $747,251 decrease in
working capital. Specifically, the working capital increase was primarily due to
(i) a $114,774 trade receivables increase driven by a change in sales policy;
(ii) a $245,971 inventories increase, principally in raw materials and work in
progress, because our manager overestimated demands of the market; (iii) a
$496,537 increase in advance to suppliers to buy raw materials of SADP; (iv) a
$372,567 increase 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 for sales staff and payment of client deposits; partially offset
by a $262,536 increase 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
six months ended June 30, 2009, net cash used in investing activities was
$9,521,635 and was primarily attributable to (i) a $253,601 capital expenditure
for purchase of new plant and equipment; (ii) a $2,284,177 capital expenditure
for purchase of new intangibles assets; (iii) a $5,134,586 capital expenditure
for the purchase of technology-based designs, (iv) a $57,334 in restricted cash;
and (vi) a $1,906,605 deposit for moldings.
  44
  Cash
and Cash Equivalents
 
 Our cash
and cash equivalents as at the end of June 30, 2009 were $7,584,827 and
decreased from $15,189,941 by the end of December 31, 2008.
 
 In future
periods, we believe that our existing cash, cash equivalents and cash flows from
operations, combined with availability under our revolving credit facility, will
be sufficient to meet our presently anticipated future cash needs for at least
the next 6 months. We may, however, require additional cash resources due to
changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue.
  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 June 30, 2009.
 
 Critical
Accounting Policies
 
 Management's
discussion and analysis of its financial condition and results of operations is
based upon Sunway’s consolidated financial statements, which have been prepared
in accordance with United States generally accepted accounting principles.
Sunway’s financial statements reflect the selection and application of
accounting policies which require management to make significant estimates and
judgments. Management bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. Sunway believes that the following reflect the more
critical accounting policies that currently affect Sunway’s financial condition
and results of operations.
 
 Impairment of long-lived
assets. We account for impairment of property, plant and equipment and
amortizable intangible assets in accordance with FASB ASC 360. The carrying
value of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately identifiable and is less
than its carrying value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair market value of the long-lived
asset. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Losses on
long-lived assets to be disposed of are determined in a similar manner, except
that fair market values are reduced for the cost to dispose. During the
reporting years, there was no impairment loss incurred. Competitive pricing
pressure and changes in interest rates, could materially and adversely affect
our estimates of future net cash flows to be generated by our long-lived
assets.
  Inventories. Inventories
consist of finished goods and raw materials, and stated at the lower of cost or
market value. Substantially all inventory costs are determined using the
weighted average basis. Finished goods are comprised of direct materials, direct
labor and an appropriate proportion of overhead. The management regularly
evaluates the composition of its inventory to identify slow-moving and obsolete
inventories to determine if additional write-downs are required.
 
 Trade receivable. Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An allowance for doubtful accounts is
maintained for all customers based on a variety of factors, including the length
of time the receivables are past due, significant one-time events and historical
experience.  Bad debts are written off as incurred.  During
the reporting years, there were no bad debts.
 
 Outstanding
accounts balances are reviewed individually for collectability. The Company do
not charge any interest income on trade receivables.  Accounts
balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote. To
date, the Company has not charged off any balances as it has yet to exhaust all
means of collection.
 
 Revenue recognition. Revenue
represents the invoiced value of goods sold recognized upon the delivery of
goods to customers. Revenue is recognized when all of the following criteria are
met:
  ·
              Persuasive
      evidence of an arrangement
exists;
  45
  ·
              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.
  Expectedwarranty liabilities. The
Company warrants its products against defects in design, materials, and
workmanship generally for one year. A provision for estimated future costs
relating to warranty expense are recorded when products are shipped, and the
provision is based upon our own historical claim experience.
 
 Off-Balance
Sheet Arrangements
  We have
no off-balance sheet arrangements as of June 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 June 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 June 30, 2009.
  46
  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.
 
 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 six months ended June 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 six months ended June 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.
  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.
 
 ExhibitNo.
                
                DescriptionofExhibit31.1
                
                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.
  47
  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
  48