UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM
10-Q/A




(Mark
One)




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




FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008.




OR




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





FOR
THE TRANSITION FROM _______ TO ________.




COMMISSION
FILE NUMBER 000-27159




SUNWAY GLOBAL
INC.


(Exact
Name of Registrant as Specified in its Charter)




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





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


(Address
of principal executive offices) (Zip Code)





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




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes  x No  o





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




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




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




APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS


DURING
THE PRECEDING FIVE YEARS




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




APPLICABLE
ONLY TO CORPORATE ISSUERS




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of March 2, 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
                  
                  2Item
      2.
                  Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                  
                  31Item
      3.
                  Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  37Item
      4T
                  Controls
      and Procedures
                  
                  37PART
      IIItem
      1.
                  Legal
      Proceedings
                  
                  37Item
      1A.
                  Risk
      Factors
                  
                  37Item
      2.
                  Unregistered
      Sales of Equity Securities and Use of Proceeds
                  
                  37Item
      3.
                  Defaults
      Upon Senior Securities
                  
                  38Item
      4.
                  Submission
      of Matters to a Vote of Security Holders
                  
                  38Item
      5.
                  Other
      Information
                  
                  38Item
      6.
                  Exhibits
                  
                  38SIGNATURES
                  
                  39





EXPLANATORY
NOTE:




The
Registrant is hereby filing this Form 10-Q/A for the period ended September 30,
2008 to (i) restate consolidated income statements for the nine months ended
September 30, 2008 and accompanying notes and text as a result of the incorrect
par value of the Series A and B Convertible Preferred Stock and common stock
recorded; and (ii) restate consolidated income statements for the three months
ended September 30, 2008 as a result of the exclusion of the financial figures
of the expenses incurred in the acquisition of Beijing Sunway New-force Medical
Treatment Tech Co., Ltd., a wholly-owned subsidiary, and (iii) clarify its
principles of consolidation, accounting policies of impairment of long-lived
assets, inventories, trade receivables, revenue recognition and expected
warranty liabilities and the notes of organization and principal activities,
amount due from a director and Series B Convertible Preferred stock and
associated warrants.


1




PART
I


FINANCIAL INFORMATION





ITEM
1. FINANCIAL STATEMENTS





SUNWAY
GLOBAL INC.





FINANCIAL
STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US dollars)(Unaudited)


2




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
      - 30


3




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





To: The
board of directors and shareholders 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 of Sunway
Global Inc. and consolidated subsidiaries as of September 30, 2008, and for the
three-month and nine-month periods then ended. These interim financial
information statements are the responsibility of the company's
management.




We
conducted our review in accordance with standards established by the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.




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




/s/
      Albert Wong & Co.Hong
      Kong, China
            
            Albert Wong & Co.November
      14, 2008
            
            Certified Public Accountants


4





SUNWAY
      GLOBAL INC.CONSOLIDATED
      BALANCE SHEETSAS
      AT SEPTEMBER 30, 2008 AND DECEMBER 31, 2007(Stated
      in US Dollars)





Notes
                                                                
                                                                
                                                                September 30,
                                                                  2008
                                                                
                                                                
                                                                December 31,
                                                                  2007ASSETS
                                                                
                                                                
                                                                
                                                                
                                                                (Unaudited)
                                                                
                                                                
                                                                (Audited)Current
      assetsCash
      and cash equivalents
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                16,289,476
                                                                
                                                                
                                                                $
                                                                5,820,100Trade
      receivables, net
                                                                
                                                                
                                                                6
                                                                
                                                                
                                                                
                                                                3,040,200
                                                                
                                                                
                                                                
                                                                1,525,201Advances
      to suppliers
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                2,201,333
                                                                
                                                                
                                                                
                                                                1,331,159Prepayments
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                40,000
                                                                
                                                                
                                                                
                                                                125,333Tender
      deposits
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                203,858
                                                                
                                                                
                                                                
                                                                131,013Inventories
                                                                
                                                                
                                                                9
                                                                
                                                                
                                                                
                                                                964,073
                                                                
                                                                
                                                                
                                                                766,933Travel
      advances to shareholders
                                                                
                                                                
                                                                7
                                                                
                                                                
                                                                
                                                                64,891
                                                                
                                                                
                                                                
                                                                30,824Advances
      to employees
                                                                
                                                                
                                                                8
                                                                
                                                                
                                                                
                                                                461,553
                                                                
                                                                
                                                                
                                                                548,364Total
      current assets
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                23,265,384
                                                                
                                                                
                                                                $
                                                                10,278,927Amount
      due from a related company
                                                                
                                                                
                                                                4
                                                                
                                                                
                                                                
                                                                830
                                                                
                                                                
                                                                
                                                                585,678Amount
      due from a director
                                                                
                                                                
                                                                5
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                1,028,474Restricted
      cash
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                392,030
                                                                
                                                                
                                                                
                                                                491,049Deposit
      for acquisition of property, plant and equipment
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                2,917,536
                                                                
                                                                
                                                                
                                                                -Property,
      plant and equipment, net
                                                                
                                                                
                                                                10
                                                                
                                                                
                                                                
                                                                5,274,020
                                                                
                                                                
                                                                
                                                                4,449,619Intangible
      assets, net
                                                                
                                                                
                                                                11
                                                                
                                                                
                                                                
                                                                6,781,364
                                                                
                                                                
                                                                
                                                                6,933,491TOTAL
      ASSETS
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                38,631,164
                                                                
                                                                
                                                                $
                                                                23,767,238LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesTrade
      payables
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                61,574
                                                                
                                                                
                                                                $
                                                                245,917Income
      tax payable
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                465,779
                                                                
                                                                
                                                                
                                                                157,877Turnover
      and other taxes
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                475,717
                                                                
                                                                
                                                                
                                                                143,857Expected
      warranty liabilities
                                                                
                                                                
                                                                12
                                                                
                                                                
                                                                
                                                                59,057
                                                                
                                                                
                                                                
                                                                55,351Customer
      deposits
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                208,274Accrued
      liabilities
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                362,962
                                                                
                                                                
                                                                
                                                                323,464Other
      payables
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                14,926
                                                                
                                                                
                                                                
                                                                35,984Total
      current liabilities
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                1,440,015
                                                                
                                                                
                                                                $
                                                                1,170,724TOTAL
      LIABILITIES
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                1,440,015
                                                                
                                                                
                                                                $
                                                                1,170,724





See
accompanying notes to consolidated financial statements


5




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





Notes
                                                    
                                                    
                                                    September 30,
                                                      2008
                                                    
                                                    
                                                    December 31,
                                                      2007(Unaudited)
                                                    
                                                    
                                                    (Audited)STOCKHOLDERS’
      EQUITYSeries
      A Convertible PreferredStock
      $0.0000001 par value; 400,000 sharesauthorized;
      Nil and 228,531 sharesissued
      and outstanding at September30,
      2008 and December 31, 2007 respectively
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    1Series
      B Convertible PreferredStock
      $0.0000001 par value; 400,000shares
      authorized; 160,494 and165,432
      shares issued andoutstanding
      at September 30, 2008and
      December 31, 2007 respectively
                                                    
                                                    
                                                    13
                                                    
                                                    
                                                    
                                                    1
                                                    
                                                    
                                                    
                                                    1Common
      stock at $0.0000001 par value;100,000,000
      shares authorized;18,446,045
      and 223,658 shares issuedand
      outstanding at September 30, 2008and
      December 31, 2007 respectively
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2
                                                    
                                                    
                                                    
                                                    1Additional
      paid-in capital
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    22,629,965
                                                    
                                                    
                                                    
                                                    16,099,965Statutory
      reserves
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2,127,978
                                                    
                                                    
                                                    
                                                    2,127,978Retained
      earnings
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    9,605,503
                                                    
                                                    
                                                    
                                                    3,188,280Accumulated
      other comprehensive income
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    2,827,700
                                                    
                                                    
                                                    
                                                    1,180,288$
                                                    37,191,149
                                                    
                                                    
                                                    $
                                                    22,596,514TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    38,631,164
                                                    
                                                    
                                                    $
                                                    23,767,238




See
accompanying notes to consolidated financial statements


6




SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF INCOMEFOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007(Stated
      in US Dollars)(Unaudited)





Nine months ended September 30,Notes
                                                                              
                                                                              
                                                                              2008
                                                                              
                                                                              
                                                                              2007Net
      revenues
                                                                              
                                                                              
                                                                              18
                                                                              
                                                                              
                                                                              $
                                                                              14,074,768
                                                                              
                                                                              
                                                                              $
                                                                              9,724,853Cost
      of net revenues
                                                                              
                                                                              
                                                                              18
                                                                              
                                                                              
                                                                              
                                                                              (4,154,866
                                                                              )
                                                                              
                                                                              
                                                                              (2,777,975
                                                                              )Gross
      profit
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              9,919,902
                                                                              
                                                                              
                                                                              $
                                                                              6,946,878Selling
      expenses
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              (279,167
                                                                              )
                                                                              
                                                                              
                                                                              (219,401
                                                                              )General
      and administrative expenses
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              (2,135,759
                                                                              )
                                                                              
                                                                              
                                                                              (1,268,852
                                                                              )Income
      from operation
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              7,504,976
                                                                              
                                                                              
                                                                              $
                                                                              5,458,625Gain
      on disposal of investments
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              1,306,841Interest
      expenses
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              (9,462
                                                                              )Interest
      income
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              44,698
                                                                              
                                                                              
                                                                              
                                                                              26,022Income
      before income taxes
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              7,549,674
                                                                              
                                                                              
                                                                              $
                                                                              6,782,026Income
      taxes
                                                                              
                                                                              
                                                                              15
                                                                              
                                                                              
                                                                              
                                                                              (1,132,451
                                                                              )
                                                                              
                                                                              
                                                                              (1,024,633
                                                                              )Net
      income
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              6,417,223
                                                                              
                                                                              
                                                                              $
                                                                              5,757,393Net
      income per share:-Basic
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              0.46
                                                                              
                                                                              
                                                                              $
                                                                              0.30-Diluted
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              $
                                                                              0.22
                                                                              
                                                                              
                                                                              $
                                                                              0.30Weighted
      average number of common stock-Basic
                                                                              
                                                                              
                                                                              14
                                                                              
                                                                              
                                                                              
                                                                              14,003,444
                                                                              
                                                                              
                                                                              
                                                                              19,207,455-Diluted
                                                                              
                                                                              
                                                                              14
                                                                              
                                                                              
                                                                              
                                                                              28,690,904
                                                                              
                                                                              
                                                                              
                                                                              19,207,455





See
accompanying notes to consolidated financial statements


7




SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF INCOMEFOR
      THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007(Stated
      in US Dollars)(Unaudited)





Three months ended September 30,2008
                                        
                                        
                                        2007Net
      revenues
                                        
                                        $
                                        6,025,075
                                        
                                        
                                        $
                                        4,065,642Cost
      of net revenues
                                        
                                        
                                        (1,790,475
                                        )
                                        
                                        
                                        (1,078,360
                                        )Gross
      profit
                                        
                                        $
                                        4,234,600
                                        
                                        
                                        $
                                        2,987,282Selling
      expenses
                                        
                                        
                                        (187,978
                                        )
                                        
                                        
                                        (170,812
                                        )General
      and administrative expenses
                                        
                                        
                                        (700,544
                                        )
                                        
                                        
                                        (603,635
                                        )Income
      from operation
                                        
                                        $
                                        3,346,078
                                        
                                        
                                        $
                                        2,212,835Gain
      on disposal of investments
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,306,841Interest
      expenses
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (6,170
                                        )Interest
      income
                                        
                                        
                                        8,267
                                        
                                        
                                        
                                        24,422Income
      before income taxes
                                        
                                        $
                                        3,354,345
                                        
                                        
                                        $
                                        3,537,928Income
      taxes
                                        
                                        
                                        (484,486
                                        )
                                        
                                        
                                        (527,142
                                        )Net
      income
                                        
                                        $
                                        2,869,859
                                        
                                        
                                        $
                                        3,010,786Net
      income per share:-Basic
      and diluted
                                        
                                        $
                                        0.16
                                        
                                        
                                        $
                                        0.16-Diluted
                                        
                                        $
                                        0.10
                                        
                                        
                                        $
                                        0.16Weighted
      average number of common stock-Basic
                                        
                                        
                                        18,446,045
                                        
                                        
                                        
                                        19,207,455-Diluted
                                        
                                        
                                        27,587,392
                                        
                                        
                                        
                                        19,207,455





See
accompanying notes to consolidated financial statements


8




SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITYFOR
      THE YEAR ENDED DECEMBER 31, 2007 AND NINE MONTHS ENDED SEPTEMBER 30,
      2008(Stated
      in US Dollars)(Unaudited)





AccumulatedPreferred
                                                                        
                                                                        
                                                                        Preferred
                                                                        
                                                                        
                                                                        No. of
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        Additional
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        otherSeries
                                                                        
                                                                        
                                                                        Series
                                                                        
                                                                        
                                                                        shares
                                                                        
                                                                        
                                                                        Common
                                                                        
                                                                        
                                                                        paid - in
                                                                        
                                                                        
                                                                        Statutory
                                                                        
                                                                        
                                                                        Retained
                                                                        
                                                                        
                                                                        comprehensiveA
                                                                        
                                                                        
                                                                        B
                                                                        
                                                                        
                                                                        outstanding
                                                                        
                                                                        
                                                                        stock
                                                                        
                                                                        
                                                                        capital
                                                                        
                                                                        
                                                                        reserves
                                                                        
                                                                        
                                                                        earnings
                                                                        
                                                                        
                                                                        income
                                                                        
                                                                        
                                                                        TotalBalance,
      January 1, 2007
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        
                                                                        223,658
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        $
                                                                        4,223,632
                                                                        
                                                                        
                                                                        $
                                                                        1,124,073
                                                                        
                                                                        
                                                                        $
                                                                        4,844,680
                                                                        
                                                                        
                                                                        $
                                                                        843,205
                                                                        
                                                                        
                                                                        $
                                                                        11,035,593Reversal
      of realized  gain on investment
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (423,537
                                                                        )
                                                                        
                                                                        
                                                                        (423,537
                                                                        )Net
      income
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,047,505
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,047,505Appropriation
      to statutory reserves
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        1,003,905
                                                                        
                                                                        
                                                                        
                                                                        (1,003,905
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Issuance
      to Vision re: Debentures
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        199,200
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        199,200Issuance
      of Series B Convertible Preferred Stock
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        11,677,133
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (6,700,000
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        4,977,133Foreign
      currency translation adjustment
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        760,620
                                                                        
                                                                        
                                                                        
                                                                        760,620Balance,
      December 31, 2007
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        
                                                                        223,658
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        $
                                                                        16,099,965
                                                                        
                                                                        
                                                                        $
                                                                        2,127,978
                                                                        
                                                                        
                                                                        $
                                                                        3,188,280
                                                                        
                                                                        
                                                                        $
                                                                        1,180,288
                                                                        
                                                                        
                                                                        $
                                                                        22,596,514Balance,
      January 1, 2008
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        
                                                                        223,658
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        $
                                                                        16,099,965
                                                                        
                                                                        
                                                                        $
                                                                        2,127,978
                                                                        
                                                                        
                                                                        $
                                                                        3,188,280
                                                                        
                                                                        
                                                                        $
                                                                        1,180,288
                                                                        
                                                                        
                                                                        $
                                                                        22,596,514Conversion
      of Preferred Series A into
      Common Stock
                                                                        
                                                                        
                                                                        (1
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        13,711,831
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        1
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Conversion
      of Preferred Series B into
      Common Stock
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        148,140
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Conversion
      of Warrant Series J into
      Common Stock
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        4,362,416
                                                                        
                                                                        
                                                                        
                                                                        1
                                                                        
                                                                        
                                                                        
                                                                        6,529,999
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,530,000Net
      income
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,417,223
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,417,223Foreign
      currency translation adjustment
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        1,647,412
                                                                        
                                                                        
                                                                        
                                                                        1,647,412Balance,
      September 30, 2008
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        1
                                                                        
                                                                        
                                                                        
                                                                        18,446,045
                                                                        
                                                                        
                                                                        $
                                                                        2
                                                                        
                                                                        
                                                                        $
                                                                        22,629,965
                                                                        
                                                                        
                                                                        $
                                                                        2,127,978
                                                                        
                                                                        
                                                                        $
                                                                        9,605,503
                                                                        
                                                                        
                                                                        $
                                                                        2,827,700
                                                                        
                                                                        
                                                                        $
                                                                        37,191,149




See
accompanying notes to consolidated financial statements


9




SUNWAY
      GLOBAL INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007(Stated
      in US Dollars)(Unaudited)





Nine months ended September 30,2008
                                
                                
                                2007Cash
      flows from operating activitiesNet
      income
                                
                                $
                                6,417,223
                                
                                
                                $
                                5,757,393Depreciation
                                
                                
                                588,069
                                
                                
                                
                                553,995Amortization
                                
                                
                                638,114
                                
                                
                                
                                19,299Gain
      on disposal of investment
                                
                                
                                -
                                
                                
                                
                                (1,306,841
                                )Warranty
      expense
                                
                                
                                -
                                
                                
                                
                                20,310Adjustments
      to reconcile net income to net cash provided by operating
      activities:Trade
      receivables, net
                                
                                
                                (1,383,854
                                )
                                
                                
                                (935,915
                                )Inventories
                                
                                
                                (142,793
                                )
                                
                                
                                (201,717
                                )Advances
      to suppliers
                                
                                
                                (747,483
                                )
                                
                                
                                (1,001,819
                                )Other
      receivables
                                
                                
                                -
                                
                                
                                
                                (1,454,379
                                )Prepayments
                                
                                
                                90,978
                                
                                
                                
                                (204,852
                                )Tender
      deposits
                                
                                
                                (62,756
                                )
                                
                                
                                -Travel
      advances to shareholders
                                
                                
                                (31,345
                                )
                                
                                
                                -Advances
      to employees
                                
                                
                                120,991
                                
                                
                                
                                -Trade
      payables
                                
                                
                                (194,875
                                )
                                
                                
                                89,334Income
      tax payable
                                
                                
                                291,223
                                
                                
                                
                                -Turnover
      and other taxes
                                
                                
                                315,610
                                
                                
                                
                                360,078Customers
      deposits
                                
                                
                                (217,655
                                )
                                
                                
                                132,800Accrued
      liabilities and other payables
                                
                                
                                (5,512
                                )
                                
                                
                                24,970Net
      cash provided by operating activities
                                
                                $
                                5,675,935
                                
                                
                                $
                                1,852,656Cash
      flows from investing activitiesPurchase
      of plant and equipment
                                
                                $
                                (1,103,720
                                )
                                
                                $
                                (369,135
                                )Purchase
      of investment securities
                                
                                
                                -
                                
                                
                                
                                (3,458,551
                                )Sales
      of investment securities
                                
                                
                                -
                                
                                
                                
                                2,664,547Deposit
      for acquisition of property, plant and equipment
                                
                                
                                (2,917,536
                                )
                                
                                
                                -Decrease
      in restricted cash
                                
                                
                                99,019
                                
                                
                                
                                -Increase
      in restricted cash
                                
                                
                                -
                                
                                
                                
                                (661,442
                                )Rental
      deposit
                                
                                
                                -
                                
                                
                                
                                (1,995
                                )Decrease
      in amount due from a related company
                                
                                
                                611,191
                                
                                
                                
                                -Decrease
      in amount due from a director
                                
                                
                                1,074,798
                                
                                
                                
                                -Net
      cash used in investing activities
                                
                                $
                                (2,236,248
                                )
                                
                                $
                                (1,826,576
                                )Cash
      flows from financing activitiesProceeds
      from Vision re: Debentures
                                
                                $
                                -
                                
                                
                                $
                                199,202Proceeds
      from issuance of Series B ConvertiblePreferred
      Stock
                                
                                
                                -
                                
                                
                                
                                4,977,133Proceeds
      from exercise of Series J ConvertiblePreferred
      Stock
                                
                                
                                6,530,000
                                
                                
                                
                                -Net
      cash provided by financing activities
                                
                                $
                                6,530,000
                                
                                
                                $
                                5,176,335


10




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





Nine months ended September 30,2008
                              
                              2007Net
      in cash and cash equivalents sourced
                              
                              $
                              9,969,687
                              
                              
                              $
                              5,202,415Effect
      of foreign currency translation on cash and cash
    equivalents
                              
                              
                              499,689
                              
                              
                              
                              197,087Cash
      and cash equivalents-beginning of year
                              
                              
                              5,820,100
                              
                              
                              
                              1,749,048Cash
      and cash equivalents-end of year
                              
                              $
                              16,289,476
                              
                              
                              $
                              7,148,550Supplementary
      cash flow information:Interest
      received
                              
                              $
                              44,698
                              
                              
                              $
                              26,022Interest
      paid
                              
                              
                              -
                              
                              
                              
                              9,462Tax
      paid
                              
                              
                              1,101,281
                              
                              
                              
                              1,024,633




See
accompanying notes to consolidated financial statements


11




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated in US Dollars )(Unaudited)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





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





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





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





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





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





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Method
      of accounting





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





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


12







SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


THE
NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)





(a)
            Method
      of accounting (Continued)





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





(b)
            Principles
      of consolidation





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





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





Name of subsidiaries
                                    
                                    Place of
                                      incorporation
                                    
                                    Attributable interestWorld
      Through Ltd
                                    
                                    British
      Virgin Islands
                                    
                                    
                                    100
                                    %Sunway
      World Through Technology (Daqing) Co Ltd
                                    
                                    PRC
                                    
                                    
                                    100
                                    %*Daqing
      Sunway Technology Co Ltd
                                    
                                    PRC
                                    
                                    
                                    100
                                    %Beijing
      Sunway New-force Medical Treatment Tech Co., Ltd
                                    
                                    PRC
                                    
                                    
                                    100
                                    %*Note:
      Deemed variable interest entity


13




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(c)
            Use
      of estimates





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





(d)
            Economic
      and political risks





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




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





(e)
            Intangible
      assets





Intangible
assets are stated at cost less accumulated amortization. Amortization is
provided over the respective useful lives, using the straight-line method.
Estimated useful lives of the intangible assets are as follows:




Land use rights
              47 yearsTechnology-based design
              10 years




(f)
            Accounting for software systems





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




14





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(g)
            Property,
      plant and equipment





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




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




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





(h)
            Maintenance
      and repairs





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





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





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





During
the reporting periods, there was no impairment loss.





(j)
            Inventories





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


15





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(k)
            Trade
      receivables





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





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





(l)
            Cash
      and cash equivalents





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





September 30, 2008
                    
                    
                    December 31, 2007Bank
      of Communications, Branch of Daqing City Economic Zone
                    
                    $
                    8,451,668
                    
                    
                    $
                    5,398,866Daqing
      City Commercial Bank
                    
                    
                    4,527,891
                    
                    
                    
                    72,690Agricultural
      Bank of China
                    
                    
                    1,016,470
                    
                    
                    
                    -HSBC
                    
                    
                    2,286,293
                    
                    
                    
                    348,362Cash
      on hand
                    
                    
                    7,154
                    
                    
                    
                    182$
                    16,289,476
                    
                    
                    $
                    5,820,100





(m)
            Restricted
      cash





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





(n)
            Revenue
      recognition





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


-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


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


-
Collection is reasonably assured.





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


16





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(o)
            Expected
      warranty liabilities





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





(p)
            Cost
      of sales





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





(q)
            Leases




The Group
did not have lease which met the criteria of capital lease. Leases which do not
qualify as capital lease are classified as operating lease. Operating lease
rental payment included in general and administrative expenses were $154,839 and
$1,857 for the nine months ended September 30, 2008 and 2007
respectively.





(r)
            Advertising





The Group
expensed all advertising costs as incurred. Advertising expenses included in
selling expenses were $46,779 and   $72,729 for the nine months ended
September 30, 2008 and 2007 respectively.





(s)
            Shipping
      and handling





All
shipping and handling are expensed as incurred. Shipping and handling expenses
included in selling expenses were $16,477 and $22,730 for the nine months ended
September 30, 2008 and 2007 respectively.





(t)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $18,197
and $174,213 and for the nine months ended September 30, 2008 and 2007
respectively.





(u)
            Retirement
      benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit expenses included in general and administrative
expenses were $18,387 and $22,035 for the nine months ended September 30, 2008
and 2007 respectively.


17




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(v)
            Income taxes





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





(w)
            Foreign
      currency translation





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





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





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





September 30, 2008
                                      
                                      December 31,
                                        2007
                                      
                                      September 30, 2007Twelve
      months endedRMB
      : USD exchange rate
                                      
                                      
                                      -
                                      
                                      7.3141
                                      
                                      
                                      -Nine
      months endedRMB
      : USD exchange rate
                                      
                                      
                                      6.8551
                                      
                                      -
                                      
                                      
                                      7.5176Average
      nine months endedRMB
      : USD exchange rate
                                      
                                      
                                      6.9989
                                      
                                      -
                                      
                                      
                                      7.6758Average
      three months endedRMB
      : USD exchange rate
                                      
                                      
                                      6.8529
                                      
                                      -
                                      
                                      
                                      7.5691




The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into USD at
the rates used in translation.


18




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(x)
            Statutory
      reserves





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




(i)
                Making up cumulative prior years’
      losses, if any;
 (ii)
                Allocations to the “Statutory
      surplus reserve” of at least 10% of income after tax, as determined under
      PRC accounting rules and regulations, until the fund amounts to 50% of the
      Company's registered capital, which is restricted for set off against
      losses, expansion of production and operation or increase in registered
      capital;
 (iii)
                Allocations of 5-10% of income
      after tax, as determined under PRC accounting rules and regulations, to
      the Company's “Statutory common welfare fund”, which is restricted for
      capital expenditure for the collective benefits of the Company's
      employees; and
 (iv)
                Allocations to the discretionary
      surplus reserve, if approved in the shareholders’ general
      meeting.





(y)
            Comprehensive
      income





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





(z)
            Recent
      accounting pronouncements





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





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


19





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





2.
            SUMMARY OF SIGNIFICANT
      ACCOUNTING POLICIES ( Continued )





(z)
            Recent
      accounting pronouncements
(continued)





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





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


20





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





3.
            CONCENTRATIONS
      OF CREDIT RISK AND MAJOR CUSTOMERS





Financial
instruments which potentially expose the Group to concentrations of credit risk,
consists of cash and trade receivables as of September 30, 2008 and December 31,
2007. The Group performs ongoing evaluations of its cash position and credit
evaluations to ensure collections and minimize losses.





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





For the
nine months ended September 30, 2008 and 2007, all of the Group’s sales were
generated from the PRC. In addition, all trade receivables as of September 30,
2008 and December 31, 2007 also arose in the PRC.





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





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





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





For the nine months ended September 30,2008
                      
                      
                      2007Customer A
                      
                      $
                      1,550,252
                      
                      
                      $
                      -Customer
      B
                      
                      
                      1,500,244
                      
                      
                      
                      -Customer
      C
                      
                      
                      1,390,226
                      
                      
                      
                      -Customer
      D
                      
                      
                      1,380,225
                      
                      
                      
                      989,479Customer
      G
                      
                      
                      -
                      
                      
                      
                      1,003,158Customer
      J
                      
                      
                      -
                      
                      
                      
                      1,103,474





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





September 30, 2008
                    
                    
                    December 31,
                      2007Customer B
                    
                    $
                    339,304
                    
                    
                    $
                    159,005Customer
      C
                    
                    
                    353,640
                    
                    
                    
                    -Customer
      D
                    
                    
                    315,409
                    
                    
                    
                    221,510Customer
      G
                    
                    
                    -
                    
                    
                    
                    235,149Customer
      H
                    
                    
                    -
                    
                    
                    
                    269,861Customer
      J
                    
                    
                    -
                    
                    
                    
                    275,851


21





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





4.
            AMOUNT
      DUE FROM A RELATED COMPANY





Amount
due from Rise Elite International Ltd (Rise Elite), a related company where Mr.
Liu Bo, the director of the Company 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.
            AMOUNT
      DUE FROM A DIRECTOR




Amount
due from Mr. Liu Bo, the director of the company is unsecured, interest free and
repayable on demand.  The amount is held for the proposed development
of representative offices in Hang Zhou, Xi’an & Shanghai. This leads to a
better working capital arrangement.





6.
            TRADE
      RECEIVABLES, NET




September 30,
                            2008
                          
                          
                          December 31,
                            2007Trade
      receivables, gross
                          
                          $
                          3,048,612
                          
                          
                          $
                          1,533,085Provision
      for doubtful debts
                          
                          
                          (8,412
                          )
                          
                          
                          (7,884
                          )$
                          3,040,200
                          
                          
                          $
                          1,525,201





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





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




September 30,2008
                        
                        
                        December 31,2007Balance
      at beginning of period/year
                        
                        $
                        7,884
                        
                        
                        $
                        7,377Foreign
      exchange adjustment
                        
                        
                        528
                        
                        
                        
                        507Balance
      at end of period/year
                        
                        $
                        8,412
                        
                        
                        $
                        7,884





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


22




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





7.
            TRAVEL
      ADVANCES TO SHAREHOLDERS





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




September 30,
                          2008
                        
                        
                        December 31,
                          2007Bo
      Liu
                        
                        $
                        22,033
                        
                        
                        $
                        4,244Qichai
      Zhao
                        
                        
                        7,294
                        
                        
                        
                        700Deli
      Liang
                        
                        
                        -
                        
                        
                        
                        6,568Weishan
      Sun
                        
                        
                        35,564
                        
                        
                        
                        19,312$
                        64,891
                        
                        
                        $
                        30,824





8.
            ADVANCES
      TO EMPLOYEES





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





9.
            INVENTORIES





Inventories
comprise the followings:




September 30,
                          2008
                        
                        
                        December 31,
                          2007Finished
      goods
                        
                        $
                        566,997
                        
                        
                        $
                        161,005Raw
      materials
                        
                        
                        397,076
                        
                        
                        
                        605,928$
                        964,073
                        
                        
                        $
                        766,933





10.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net comprise the followings:


September 30,
                            2008
                          
                          
                          December 31,
                            2007At
      costBuilding
                          
                          $
                          1,447,212
                          
                          
                          $
                          1,356,392Machinery
      and equipment
                          
                          
                          1,106,434
                          
                          
                          
                          1,022,960Moldings
                          
                          
                          4,151,260
                          
                          
                          
                          2,992,166Computer
      software
                          
                          
                          2,033,887
                          
                          
                          
                          1,942,823Office
      equipment and motorvehicles
                          
                          
                          274,088
                          
                          
                          
                          80,439$
                          9,012,881
                          
                          
                          $
                          7,394,780Less:
      accumulated depreciation
                          
                          
                          (3,738,861
                          )
                          
                          
                          (2,945,161
                          )$
                          5,274,020
                          
                          
                          $
                          4,449,619


23





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





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





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


For the nine months ended September
                            30,2008
                          
                          2007Cost
      of sales
                          
                          $
                          577,959
                          
                          
                          $
                          552,540General
      and administrative expenses
                          
                          
                          10,110
                          
                          
                          
                          1,455$
                          588,069
                          
                          
                          $
                          553,995




11.
            INTANGIBLE
      ASSETS, NET





The
details of intangible assets, net are as follows:


September 30,
                                        2008
                                      
                                      
                                      December 31,
                                        2007Land
      use rights, at cost
                                      
                                      $
                                      1,354,131
                                      
                                      
                                      $
                                      1,269,151Less:
      accumulated amortization
                                      
                                      
                                      (84,035
                                      )
                                      
                                      
                                      (58,508
                                      )$
                                      1,270,096
                                      
                                      
                                      $
                                      1,210,643Technology-based
      design , at cost
                                      
                                      $
                                      6,319,747
                                      
                                      
                                      $
                                      5,923,149Less:
      accumulated amortization
                                      
                                      
                                      (808,479
                                      )
                                      
                                      
                                      (200,301
                                      )$
                                      5,511,268
                                      
                                      
                                      $
                                      5,722,848$
                                      6,781,364
                                      
                                      
                                      $
                                      6,933,491





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





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





Amortization
expense included in the general and administrative expenses for the nine months
ended 2008 and 2007 were $638,114 and $19,299 respectively.


24




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





12.
            EXPECTED
      WARRANTY LIABILITIES





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





2008
                        
                        
                        2007Balance
      at beginning of period/year
                        
                        $
                        55,351
                        
                        
                        $
                        22,811Addition
      of warranty liabilities
                        
                        
                        -
                        
                        
                        
                        55,918Warranty
      expense for the year
                        
                        
                        -
                        
                        
                        
                        (23,378
                        )Foreign
      currency difference
                        
                        
                        3,706
                        
                        
                        
                        -Balance
      at end of period/year
                        
                        $
                        59,057
                        
                        
                        $
                        55,351





13.
            SERIES
      B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED
  WARRANTS




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




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





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




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.


25




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





13.
            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 228,531 shares
into 13,711,831 shares of common stock, in which Rise Elite International
Limited, Vision Opportunity Master Fund, Ltd and Kuhns Brothers, Inc converted
210,886, 7,990 and 2,647 shares of Preferred Series A into 12,653,160, 479,400
and 158,820 shares of common stock respectively.




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


26




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





14.
            EARNINGS
      PER SHARE





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





For the nine months ended September
                                                30,2008
                                              
                                              
                                              2007Earnings:Earnings
      for the purpose of basic earnings per share
                                              
                                              $
                                              6,417,223
                                              
                                              
                                              $
                                              5,757,393Effect
      of dilutive potential common stock
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Earnings
      for the purpose of dilutive earnings per share
                                              
                                              $
                                              6,417,223
                                              
                                              
                                              $
                                              5,757,393Number
      of shares:Weighted
      average number of common stock for the purpose of basic earnings per
      share
                                              
                                              
                                              14,003,444
                                              
                                              
                                              
                                              19,207,455Effect
      of dilutive potential common stock-
      conversion of Series A convertible preferred stock
                                              
                                              
                                              1,851,598
                                              
                                              
                                              
                                              --
      conversion of Series B convertible preferred stock
                                              
                                              
                                              4,906,191
                                              
                                              
                                              
                                              --
      conversion of Warrant Series A
                                              
                                              
                                              2,311,283
                                              
                                              
                                              
                                              --
      conversion of Warrant Series B
                                              
                                              
                                              748,849
                                              
                                              
                                              
                                              --
      conversion of Warrant Series J
                                              
                                              
                                              1,848,402
                                              
                                              
                                              
                                              --
      conversion of Warrant Series C
                                              
                                              
                                              521,504
                                              
                                              
                                              
                                              --
      conversion of Warrant Series D
                                              
                                              
                                              2,499,633
                                              
                                              
                                              
                                              -Weighted
      average number of common stock for the purpose of dilutive earnings per
      share
                                              
                                              
                                              28,690,904
                                              
                                              
                                              
                                              19,207,455


27





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





15.
            INCOME
      TAXES





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





SWT,
Sunway and Beijing Sunway, being registered in the PRC, are subject to PRC’s
Corporate Income Tax (“CIT”). Under applicable income tax laws and regulations,
an enterprise located in PRC, including the district where our operations are
located, is subject to a 25% and 33% respectively for the nine months ended
September 30, 2008 and 2007.





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





The Group
uses the asset and liability method, where deferred tax assets and liabilities
are determined based in the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. There are no material temporary differences
and therefore no deferred tax asset or liabilities as at September 30, 2008 and
2007.





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





For the nine months ended
                                September 30,2008
                              
                              2007U.S.
      statutory rate
                              
                              
                              34
                              %
                              34
                              %Foreign
      income not recognized in the U.S.
                              
                              
                              (34
                              )%
                              (34
                              )%PRC
      CIT
                              
                              
                              25
                              %
                              33
                              %Tax
      holiday
                              
                              
                              (10
                              )%
                              (18
                              )%Provision
      for income taxes
                              
                              
                              15
                              %
                              15
                              %




The
provision for income taxes consists of the following:





For the nine months ended
                            September 30,2008
                          
                          2007Current
      tax - PRC CIT
                          
                          $
                          1,132,451
                          
                          
                          $
                          1,024,633Deferred
      tax provision
                          
                          
                          -
                          
                          
                          
                          -Income
      tax expenses
                          
                          $
                          1,132,451
                          
                          
                          $
                          1,024,633


28




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





16.
            FAIR
      VALUE OF FINANCIAL INSTRUMENTS





The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties. The carrying amounts
of financial assets and liabilities, such as cash and cash equivalents, trade
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.





17.
            COMMITMENTS
      AND CONTINGENCIES





The Group
has entered into a tenancy agreement for factory expiring through 2008. Total
rental expenses for the nine months ended September 30, 2008 and 2007 amounted
to $154,839 and $1,857 respectively.





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





September
      30, 2009
                      
                      $
                      210,7812010
      and thereafter
                      
                      
                      -$
                      210,781





On August
31, 2008, the Group entered a purchase agreement with a third party, to acquire
land use rights and building at a consideration of US$7,293,840
(RMB$50,000,000). The Group has paid US$2,917,536 (RMB$20,000,000) as a deposit.
As at September 30, 2008 and 2007, the Group had a capital commitment of
purchasing property, plant and equipment, with the amounts of $4,376,304
(RMB$30,000,000) and nil respectively. The management of the Group expected the
acquisition would be completed and paid the outstanding amount within 12 months
after September 30, 2008.


29




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007


(Stated
in US Dollars)(Unaudited)





18.
            SEGMENT
      INFORMATION




The Group
currently is engaged in the manufacturing and selling of logistic transport
systems and operating in one segment. 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”).
Workstation types A, B and C are of the same function but with different product
design.





Net
revenue and cost of revenue by product:




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





For the nine months ended
                        Workstation
                        
                        Workstation
                        
                        WorkstationSeptember 30, 2007
                        Type A
                        
                        Type B
                        
                        Type C
                        
                        SADP
                        
                        ConsolidatedNet
      revenue
                        
                        $
                        3,415,536
                        
                        
                        $
                        6,309,317
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        9,724,853Cost
      of net revenue
                        
                        
                        (977,743
                        )
                        
                        
                        (1,800,232
                        )
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        (2,777,975
                        )$
                        2,437,793
                        
                        
                        $
                        4,509,085
                        
                        
                        $
                        -
                        
                        
                        $
                        -
                        
                        
                        $
                        6,946,878




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


30




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





Forward-Looking
Statements





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





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




Overview




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




Three-month
periods ended September 30, 2008 and September 30, 2007





Results
of Operations





In the
three months ended September 30, 2008, the company’s net revenue, gross profit
and operation income rose substantially as compared with the same period of
2007, but operating expenses increased and gain on disposal decreased to null
during these periods, bring on company net income decreased. These decreases are
due to gain on disposal of investments. The cost of net revenue increased
substantially during these periods. The increase in cost of net revenue is due
to increases in raw materials prices and net revenues.





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





Three Months Ended September30,2008
                              
                              
                              2007
                              
                              
                              Change
                              
                              
                              Change rateNet
      Revenue
                              
                              $
                              6,025,075
                              
                              
                              $
                              4,065,642
                              
                              
                              $
                              1,959,433
                              
                              
                              
                              48.19
                              %Cost
      of net revenues
                              
                              $
                              1,790,475
                              
                              
                              $
                              1,078,360
                              
                              
                              $
                              712,115
                              
                              
                              
                              66.04
                              %Gross
      Profit
                              
                              $
                              4,234,600
                              
                              
                              $
                              2,987,282
                              
                              
                              $
                              1,247,318
                              
                              
                              
                              41.75
                              %Gross
      Margin
                              
                              
                              70.28
                              %
                              
                              $
                              73.48
                              %
                              
                              
                              
                              
                              
                              
                              -3.20
                              %Operating
      Income
                              
                              $
                              3,346,078
                              
                              
                              $
                              2,212,835
                              
                              
                              $
                              1,133,243
                              
                              
                              
                              51.21
                              %Net
      Income
                              
                              $
                              2,869,859
                              
                              
                              $
                              3,010,786
                              
                              
                              $
                              -140,927
                              
                              
                              
                              -4.68
                              %Net
      profit margin
                              
                              
                              47.63
                              %
                              
                              
                              74.05
                              %
                              
                              
                              
                              
                              
                              
                              -26.42
                              %




Net
revenues





Net
revenue for the three months ended September 30, 2008, which resulted entirely
from sales of PTS and SADP, was $6,025,075, an increase of 48.19% as compared
with the sales of $4,065,642 for the three months ended September 30, 2007. In
the three months ended September 30, 2008, we sold 1015 workstations, an
increase of 15.08% as compared with 882 workstations sold in the three months
ended September 30, 2007. During the same period ended September 30, 2008, we
also sold three units of SADP. The increase was primarily a result of more
effective sales and marketing efforts.




31




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




Three Months Ended September 30,2008
                                  
                                  
                                  2007Sales
                                  
                                  
                                  % of total sales
                                  
                                  
                                  Sales
                                  
                                  
                                  % of total salesPTS
                                  
                                  $
                                  5,193,310
                                  
                                  
                                  
                                  86.19
                                  %
                                  
                                  $
                                  4,065,642
                                  
                                  
                                  
                                  100.00
                                  %SADP
                                  
                                  $
                                  831,765
                                  
                                  
                                  
                                  13.81
                                  %
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Total
      net revenue
                                  
                                  $
                                  6,025,075
                                  
                                  
                                  
                                  100.00
                                  %
                                  
                                  $
                                  4,065,642
                                  
                                  
                                  
                                  100.00
                                  %




Gross
Profit





Gross
profit increased 41.75% to $4,234,600 for the three months ended September 30,
2008, as compared to $2,987,282 for the three months ended September 30, 2007.
Our gross profit margin drop 3.20% from 73.48% as of the three months ended
September 30, 2007 to 70.28% as of the same period of 2008, mainly due to raw
materials price rise.





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





Three Months Ended September 30,2008
                        
                        
                        2007US$
                        
                        
                        Gross profitmargin
                        
                        
                        US$
                        
                        
                        Gross profitmarginGross
      Profit
                        
                        $
                        4,234,600
                        
                        
                        
                        70.28
                        %
                        
                        $
                        2,987,282
                        
                        
                        
                        73.48
                        %




Income
from Operations





Operating
income increased 51.21% to $3,346,078 for the three months ended September
30, 2008, as compared with $2,212,835 for the three months ended September 30,
2007. The increase was primarily net revenues rise and operations expenses
slight drop.





Cost
of Net revenues





Cost of
net revenue increased to $1,790,475 for the three months ended September 30,
2008, representing 66.04% increase as compared with $1,078,360 for the same
period of 2007. The increase is primarily due to revenues increased and raw
materials price rise.





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





Three Months Ended September30,2008
                      
                      
                      2007
                      
                      ChangeCost
      of net revenue
                      
                      $
                      1,790,475
                      
                      
                      $
                      1,078,360
                      
                      
                      
                      66.04
                      %




Operating
Expenses





Operating
expenses were $888,522 for the three months ended September 30, 2008, an
increase of 14.73% as compared to $774,447 for the same period of 2007. The
increase was composed of two reasons: i) selling expenses increased $17,166, or
10.05% to $187,978 in the three months ended September 30, 2008 from $170,812
for the same period of 2007; and ii) general and administration expenses
increased $96,909, or 16.05% to $700,544 in the three months ended September 30,
2008 from $603,635 for the same period of 2007. In the three months ended
September 30, 2008, we increased direct sales offices expenses and amortization
of intangible assets. Changes in costs related to direct sales offices expenses
were $78,827 for the three months ended September 30, 2008, as compared to nil
for the same period of 2007; and amortization of intangible assets increased
3,776.15% in the three months ended September 30, 2008 compared with the same
period of 2007.




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




Three Months Ended September30,2008
                                
                                
                                2007
                                
                                ChangeSelling
      expenses
                                
                                $
                                187,978
                                
                                
                                $
                                170,812
                                
                                
                                
                                10.05
                                %General
      and administrative expenses
                                
                                $
                                700,544
                                
                                
                                $
                                603,635
                                
                                
                                
                                16.05
                                %Total
      operating expenses
                                
                                $
                                888,522
                                
                                
                                $
                                774,447
                                
                                
                                
                                14.73
                                %


32




Net
Income





Net
income was $2,869,859 for the three months ended September 30, 2008, a decrease
of 4.68% from $3,010,786 for the same period of 2007. This decrease is primarily
due to gain on disposal, which decreased to nil in the three months ended
September 30, 2008 compared with the same period of 2007.





Nine-month
period ended September 30, 2008 and September 30, 2007





Results
of Operations





In the
nine months ended September 30, 2008, the Company’s net sales, gross profit and
operating income all rose substantially as compared with the same period in the
same period of 2007. These increases are due in large part to increased sales of
PTS and SADP. Cost of sales and operating expense also increased during these
periods, somewhat outpacing the increase in sales. The increase in cost of sales
is due to increased sales and raw material price rises; the increase in
operating expenses is due largely to increased amortization of intangible assets
and salary. Because gain on disposal decreased to nil during these periods,
growth in bring on company net income slowed.





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




Nine months Ended September 30,2008
                                
                                
                                2007
                                
                                
                                Change
                                
                                
                                Change rateNet
      Revenue
                                
                                $
                                14,074,768
                                
                                
                                $
                                9,724,853
                                
                                
                                $
                                4,349,915
                                
                                
                                
                                44.73
                                %Cost
      of net revenue
                                
                                $
                                4,154,866
                                
                                
                                $
                                2,777,975
                                
                                
                                $
                                1,376,891
                                
                                
                                
                                49.56
                                %Gross
      Profit
                                
                                $
                                9,919,902
                                
                                
                                $
                                6,946,878
                                
                                
                                $
                                2,973,024
                                
                                
                                
                                42.80
                                %Gross
      Margin
                                
                                
                                70.48
                                %
                                
                                $
                                71.43
                                %
                                
                                
                                
                                
                                
                                
                                -0.95
                                %Operating
      Income
                                
                                $
                                7,504,976
                                
                                
                                $
                                5,458,625
                                
                                
                                $
                                2,046,351
                                
                                
                                
                                37.49
                                %Net
      Income
                                
                                $
                                6,417,223
                                
                                
                                $
                                5,757,393
                                
                                
                                $
                                659,830
                                
                                
                                
                                11.46
                                %Net
      profit margin
                                
                                
                                45.59
                                %
                                
                                
                                59.20
                                %
                                
                                
                                
                                
                                
                                
                                -13.61
                                %




Net
revenue





Net
revenue for the nine months ended September 30, 2008, which resulted entirely
from sales of PTS and SADP, were $14,074,768, an increase of 44.73% as compared
with the net revenues of $9,724,853 for the nine months ended September 30,
2007. In the nine months ended September 30, 2008, we sold 2522 workstations, an
increase of 19.07% as compared with 2,118 workstations sold in the nine months
ended September 30, 2007; during the same period ended September 30, 2008, we
also sold 5 units of SADP. The increase was primarily a result of more effective
sales and marketing efforts.





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




Nine months Ended September 30,2008
                              
                              
                              2007Sales
                              
                              
                              % of total sales
                              
                              
                              Sales
                              
                              
                              % of total salesPTS
                              
                              $
                              12,717,404
                              
                              
                              
                              90.36
                              %
                              
                              $
                              9,724,853
                              
                              
                              
                              100.00
                              %SADP
                              
                              $
                              1,357,364
                              
                              
                              
                              9.64
                              %
                              
                              
                              -
                              
                              
                              
                              -Total
      net revenues
                              
                              $
                              14,074,768
                              
                              
                              
                              100.00
                              %
                              
                              $
                              9,724,853
                              
                              
                              
                              100.00
                              %




Gross
Profit





Gross
profit increased 42.80% to $9,919,902 for the nine months ended September 30,
2008, as compared to $6,946,878 for the nine months ended September 30, 2007.
Our gross profit margin dropped 0.95% from 71.43% for the nine months ended
September 30, 2007 to 70.48% as of the same period of 2008, mainly due to rises
in raw material prices and a slight increase in cost of sales.




33




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




Nine months Ended September 30,2008
                          
                          
                          2007US$
                          
                          
                          Gross profitmargin
                          
                          
                          US$
                          
                          
                          Gross profitmarginGross
      Profit
                          
                          $
                          9,919,902
                          
                          
                          
                          70.48
                          %
                          
                          $
                          6,946,878
                          
                          
                          
                          71.43
                          %





Income
from Operations





Income
from operations increased 37.49% to $7,504,976 for the nine months ended
September 30, 2008, as compared with $5,458,625 for the nine months ended
September 30, 2007. The increase was primarily a result of the high revenue
partially offset by the higher reduction in operationsduring the nine months
ended September 30, 2008 as compared to the same period of 2007.





Cost
of Net revenue





Cost of
net revenue increased to $4,154,866 for the nine months ended September 30,
2008, representing 49.56% increase as compared with $2,777,975 for the same
period of 2007. The increase is due to increases in sales and raw material
prices.





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




Nine months Ended September 30,2008
                      
                      
                      2007
                      
                      ChangeCost
      of net revenue
                      
                      $
                      4,154,866
                      
                      
                      $
                      2,777,975
                      
                      
                      
                      49.56
                      %





Operating
Expenses





Operating
expenses were $2,414,926 for the nine months ended September 30, 2008, an
increase of 62.27% as compared to $1,488,253 for the same period of 2007. The
increase was primarily caused by two reasons: i) selling expenses increased
$59,766, or 27.24% to $279,167 in the nine months ended September 30, 2008 from
$219,401 for the same period of 2007; and ii) general and administration
expenses increased $866,907, or 68.32% to $2,135,759 in the nine months ended
September 30, 2008 from $1,268,852 for the same period of 2007. In the nine
months ended September 30, 2008, we increased salary and benefits of management.
Reflecting this change, costs related to salary and benefits increased 44.51% in
the nine months ended September 30, 2008, as compared with the same period of
2007; and amortization of intangible assets increased $618,815, or 3,206% to
$638,114 in the nine months ended September 30, 2008 from $19,299 as of the same
period of 2007; and direct sales offices expenses were increased from nil as of
the nine months ended September 30, 2007 to $292,204 as of the same period of
2008.




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




Nine months Ended September 30,2008
                            
                            
                            2007
                            
                            ChangeSelling
      expenses
                            
                            $
                            279,167
                            
                            
                            $
                            219,401
                            
                            
                            
                            27.24
                            %General
      & Administrative expenses
                            
                            $
                            2,135,759
                            
                            
                            $
                            1,268,852
                            
                            
                            
                            68.32
                            %Total
      operating expenses
                            
                            $
                            2,414,926
                            
                            
                            $
                            1,488,253
                            
                            
                            
                            62.27
                            %





Net
Income





Net
income was $6,417,223 for the nine months ended September 30, 2008, an increase
of 11.46% from $5,757,393 for the same period of 2007. The increase is primarily
due to i) substantial net revenues increase; ii) partially offset by higher
operating expenses and nil investment yields. Earnings per share were $0.46 and
$0.22 on a diluted basis.




34




Cash
and Cash Equivalents





Cash and
Cash Equivalents increased to $16,289,476 as of the nine months ended September
30, 2008, compared to $5,820,100 as of the fiscal year ended December 31, 2007.
The increase was mainly due to i) net income increase; ii) the warrants J
exercised $6.53 million at June 5, 2008; and iii) amortization and depreciation
increase.





Trade
Receivables





Trade
receivables increased 99.33% to $3,040,200 as of the nine months ended September
30, 2008, compared with $1,525,201 as of the fiscal year ended December 31,
2007. This increase in trade receivables was primarily attributable to a
substantial increase in workstation and SADP systems, which began to be sold
during the nine months ended September 30, 2008.





Inventory





Inventory
consists of raw materials and finished goods. As of the nine months ended
September 30, 2008, the recorded value of our inventory has increased 25.70% to
$964,073 from $766,933 as of the fiscal year ended December 31, 2007. The
increase is mainly due to increase in finished goods from $161,005 as of
December 31, 2007 to $566,997 as of September 30, 2008, an increase of 252.16%,
which was due to increased output of production. Raw materials inventory
decreased from $605,928 as of December 31, 2007 to $397,076 as of September 30,
2008, a decrease of 34.47%. Due to the decrease in the expected prices of raw
materials, we adjusted our inventory strategy by increasing the frequency of
ordering and decreasing each order's quantity, which in turn kept our inventory
of raw materials at a low level.





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




Item
                              
                              September 30, 2008
                              
                              
                              December 31,2007
                              
                              
                              ChangeRaw
      material
                              
                              $
                              397,076
                              
                              
                              $
                              605,928
                              
                              
                              
                              -34.47
                              %Finished
      goods
                              
                              $
                              566,997
                              
                              
                              $
                              161,005
                              
                              
                              
                              252.16
                              %Total
                              
                              $
                              964,073
                              
                              
                              $
                              766,933
                              
                              
                              
                              25.70
                              %





Trade
payables





Trade
payables amounted to $61,574 as of the nine months ended September 30, 2008, a
decrease from $245,917 as of the fiscal year ended December 31, 2007. This
decrease is mainly due to cash purchases of raw materials.





Liquidity
and Capital Resources





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





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





On June
5, 2008, we had received $6.53 million for the exercise of warrants
J.





On
September 9, 2008, we had received $50,000 for exercise of warrants
J.





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





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




Nine months Ended September 30,2008
                
                
                2007
                
                
                ChangeNet
      cash provided by (used in) operating activities
                
                $
                5,675,935
                
                
                $
                1,852,656
                
                
                $
                3,823,279Net
      cash provided by (used in) investing activities
                
                $
                (2,236,248
                )
                
                $
                (1,826,576
                )
                
                $
                (409,672
                )Net
      cash provided by (used in) financing activities
                
                $
                6,530,000
                
                
                $
                5,176,335
                
                
                $
                (1,353,665
                )Effect
      of foreign currency translation on cash and cash
    equivalents
                
                $
                499,689
                
                
                $
                197,087
                
                
                $
                302,602Beginning
      cash and cash equivalent
                
                $
                5,820,100
                
                
                $
                1,749,048
                
                
                $
                4,071,052Ending
      cash and cash equivalent
                
                $
                16,289,476
                
                
                $
                7,148,550
                
                
                $
                9,140,926




35




Operating
Activities





For the
nine months ended September 30, 2008, net cash provided by operating activities
was $5,675,935. This was primarily attributable to our net income of $6,417,223,
adjusted by an add-back of non-cash expenses mainly consisting of depreciation
and amortization of $1,226,183 offset by a $1,967,471 decrease in working
capital. Specifically, the working capital decrease was primarily due to i) a
$1,383,854 trade receivables increase driven by revenue growth; ii) a $142,793
inventories increase, principally finished goods, to support planned expansion
and sales growth; iii) a $747,483 increase in advance to suppliers to buy raw
materials and software systems ; iv) a $62,756 increase in tender deposits by
tender for client deposits; v)a $180,624 decrease in prepayments , travel
advances to directors and advances to employees, consisting primarily of
prepayments for raw materials supplies in advance of shipment and working
capital of direct sales office; partially offset by a $188,791 increase in trade
payables, tax payable, accrued liabilities and other payables.





Investing
Activities





For the
nine months ended September 30, 2008, net cash used in investing activities was
$2,236,248. This was primarily attributable to i) a $1,103,720 capital
expenditure for rebuild plant and equipment; ii) a $2,917,536 capital
expenditure by an advances to payment for purchase Qingdao Liheng Weave Co.,
Ltd; iii) a $99,019 decrease in restricted cash; iv) a $611,191 decrease in
amount due from a related company; vi) a $1,074,798 decrease in amount due from
a director.





Financing
activities





For the
nine months ended September 30, 2008, net cash used in financing activities was
$6,530,000. This was primarily attributable to the warrants J that were
exercised.





In future
periods, we believe that our existing cash, cash equivalents and cash flows from
operations, combined with availability under our revolving credit facility, will
be sufficient to meet our presently anticipated future cash needs for at least
the next 3 months. We may, however, require additional cash resources due to
changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue.





Critical
Accounting Policies





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





Impairment of long-lived
assets . We account for impairment of property, plant and equipment and
amortizable intangible assets in accordance with SFAS No. SFAS No. 144. The
carrying value of a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately identifiable and is less
than its carrying value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair market value of the long-lived
asset. Fair market value is determined primarily using the anticipated cash
flows discounted at a rate commensurate with the risk involved. Losses on
long-lived assets to be disposed of are determined in a similar manner, except
that fair market values are reduced for the cost to dispose. During the
reporting periods, there was no impairment loss incurred. Competitive pricing
pressure and changes in interest rates, could materially and adversely affect
our estimates of future net cash flows to be generated by our long-lived
assets.





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




36




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





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





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





-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


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


-
Collection is reasonably assured.





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





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





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





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




N/A.





ITEM
4T. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures




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




Pursuant
to Rule 13a-15(b) under the Exchange Act the Company carried out an evaluation
with the participation of the Company’s management, including Liu Bo, the
Company’s Chief Executive Officer (“CEO”) and Samuel Sheng, the Company’s Chief
Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure
controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act)
as of the nine months ended September 30, 2008. Based upon that evaluation, the
Company’s CEO and CFO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CFO, as appropriate, to allow timely decisions regarding required
disclosure.




Changes
in internal controls




Our
management, with the participation our CEO and CFO, performed an evaluation as
to whether any change in our internal controls over financial reporting occurred
during the 2008 Quarter ended September 30, 2008.  Based on that
evaluation, our CEO and our CFO concluded that no change occurred in the
Company's internal controls over financial reporting during the 2008 Quarter
ended September 30, 2008 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




N/A





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




None.




37





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




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





ITEM
6 - EXHIBITS.




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




38





SIGNATURES




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




SUNWAY
      GLOBAL INC.Dated:
        March 6, 2009
                    By:
                    /s/
      Liu BoName:
      Liu BoTitle:
      Chief Executive
Officer





Dated:
        March 6, 2009
                    By:
                    /s/
      Samuel ShengName:
      Samuel ShengTitle:
      Chief Financial
Officer




39