UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




FORM
10-Q/A


Amendment
No. 1




(Mark
One)




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




FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2009




OR




 ̈
            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. Yesx  No  ̈





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





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




Large
      accelerated filer ̈
              Accelerated
      filer ̈Non-accelerated
      filer ̈
              Smaller
      reporting companyx




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


Yes  ̈ Nox




APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS


DURING
THE PRECEDING FIVE YEARS




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




APPLICABLE
ONLY TO CORPORATE ISSUERS




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of May 13, 2009, there were 18,499,736
outstanding shares of the Registrant's Common Stock, $0.0000001 par
value.





TABLE OF CONTENTS





PagePART
      IItem
      1.
                
                Financial
      Statements
                
                3Item
      2.
                
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                
                41Item
      3.
                
                Quantitative
      and Qualitative Disclosures About Market Risk
                
                45Item
      4T
                
                Controls
      and Procedures
                
                46PART
      IIItem
      1.
                
                Legal
      Proceedings
                
                47Item
      1A.
                
                Risk
      Factors
                
                47Item
      2.
                
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                47Item
      3.
                
                Defaults
      Upon Senior Securities
                
                47Item
      4.
                
                Submission
      of Matters to a Vote of Security Holders
                
                47Item
      5.
                
                Other
      Information
                
                47Item
      6.
                
                Exhibits
                
                47SIGNATURES
                
                48





EXPLANATORY
NOTE:





The
Registrant is hereby filing this Form 10-Q/A for the period ended March 31, 2009
to correct and restate its financial statements, notes, and related disclosure
as relates to changes in the classification of the fair value of warrants in
accordance with to paragraph 815-40.15 of the FASB Accounting Standards
Codification (EITF 07-05) as adopted on January 1, 2009 and the classification
of the Company’s acquisition of Qingdao Liheng Textiles Co. Ltd. as an
impairment on investment.


2


PART
I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS




SUNWAY
GLOBAL INC.





CONTENTS
                      
                      PAGESREPORT
      OF INDEPENDENT REGISTERED PUBLICACCOUNTING
    FIRM
                      
                      
                      4CONSOLIDATED
      BALANCE SHEETS
                      
                      
                      5 -
      6CONSOLIDATED
      STATEMENTS OF INCOME
                      
                      
                      7CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY
                      
                      
                      8CONSOLIDATED
      STATEMENTS OF CASH FLOWS
                      
                      
                      9 -
      10NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
                      
                      
                      11 –
      40


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., LL.B., P.C.LL., Barrister-at-law, C.P.A.(Practising).





To:
            The
      board of directors and stockholders
of


Sunway
Global Inc. (“the Company”)





Report of Independent
Registered Public Accounting Firm





We have
reviewed the accompanying interim consolidated balance sheets of Sunway Global
Inc. as of March 31, 2009 and 2008, and the related consolidated statements of
income, stockholders’ equity and cash flows for the three-month periods then
ended, in accordance with the standards of the Public Company Accounting
Oversight Board (United States). All information included in these financial
statements is the representation of the management of Sunway Global
Inc.





A review
consists principally of inquiries of company personnel and analytical procedures
applied to financial data. It is substantially less in scope than an audit in
accordance with the standards of the Public Company Accounting Oversight Board
(United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
 
 Based on
our review, we are not aware of any material modifications that should be made
to the accompanying financial statements in order for them to be in conformity
with U.S. generally accepted accounting principles.
 
 Since our
previous report dated May 13, 2009, it was determined that the consolidated
financial statements needed restatement to make corrections as described in note
19.


Hong
      Kong
            Albert
      Wong & Co.May
      13, 2009
            Certified
      Public AccountantsExcept
      for note 19 which is dated May 13, 2010


4


SUNWAY
GLOBAL INC.


CONSOLIDATED
BALANCE SHEETS


AS
AT MARCH 31, 2009 AND DECEMBER 31, 2008


(Stated
in US Dollars)


Notes
                                        
                                        
                                        March
      31, 2009
                                        
                                        
                                        December
      31, 2008(Unaudited)
                                        
                                        
                                        (Audited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                        
                                        2(k)
                                        
                                        
                                        $
                                        12,212,431
                                        
                                        
                                        $
                                        15,189,941Trade
      receivables, net
                                        
                                        
                                        5
                                        
                                        
                                        
                                        2,702,440
                                        
                                        
                                        
                                        2,953,919Inventories
                                        
                                        
                                        8
                                        
                                        
                                        
                                        1,022,032
                                        
                                        
                                        
                                        590,738Advances
      to suppliers
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,502,484
                                        
                                        
                                        
                                        547,952Prepayments
                                        
                                        
                                        
                                        
                                        
                                        
                                        750,564
                                        
                                        
                                        
                                        -Tender
      deposits
                                        
                                        
                                        
                                        
                                        
                                        
                                        18,406
                                        
                                        
                                        
                                        112,735Travel
      advances to shareholders
                                        
                                        
                                        6
                                        
                                        
                                        
                                        57,483
                                        
                                        
                                        
                                        38,733Advances
      to employees
                                        
                                        
                                        7
                                        
                                        
                                        
                                        331,588
                                        
                                        
                                        
                                        429,804Total
      current assets
                                        
                                        
                                        
                                        
                                        
                                        $
                                        18,597,428
                                        
                                        
                                        $
                                        19,863,822Restricted
      cash
                                        
                                        
                                        
                                        
                                        
                                        
                                        356,046
                                        
                                        
                                        
                                        378,366Amount
      due from a related company
                                        
                                        
                                        4
                                        
                                        
                                        
                                        830
                                        
                                        
                                        
                                        830Property,
      plant and equipment, net
                                        
                                        
                                        9
                                        
                                        
                                        
                                        5,801,161
                                        
                                        
                                        
                                        5,069,871Intangibles,
      net
                                        
                                        
                                        10
                                        
                                        
                                        
                                        9,702,976
                                        
                                        
                                        
                                        6,576,769Deposit
      for acquisition of computer software
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,750,751Deposit
      for technology-based design
                                        
                                        
                                        
                                        
                                        
                                        
                                        3,505,902
                                        
                                        
                                        
                                        -Deposit
      for acquisition of subsidiary
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        7,725,445TOTAL
      ASSETS
                                        
                                        
                                        
                                        
                                        
                                        $
                                        37,964,343
                                        
                                        
                                        $
                                        41,365,854LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                                        
                                        
                                        
                                        
                                        
                                        $
                                        712,325
                                        
                                        
                                        $
                                        59,912Income
      tax payable
                                        
                                        
                                        
                                        
                                        
                                        
                                        211,410
                                        
                                        
                                        
                                        632,893Turnover
      and other taxes
                                        
                                        
                                        
                                        
                                        
                                        
                                        89,834
                                        
                                        
                                        
                                        406,839Expected
      warranty liabilities
                                        
                                        
                                        11
                                        
                                        
                                        
                                        50,460
                                        
                                        
                                        
                                        50,396Customers
      deposits
                                        
                                        
                                        
                                        
                                        
                                        
                                        202,102
                                        
                                        
                                        
                                        -Accrued
      liabilities
                                        
                                        
                                        
                                        
                                        
                                        
                                        293,480
                                        
                                        
                                        
                                        301,461Other
      payables
                                        
                                        
                                        
                                        
                                        
                                        
                                        266,945
                                        
                                        
                                        
                                        15,168Total
      current liabilities
                                        
                                        
                                        
                                        
                                        
                                        $
                                        1,826,556
                                        
                                        
                                        $
                                        1,466,669Warrant
      liabilities
                                        
                                        
                                        
                                        
                                        
                                        
                                        90,383,149
                                        
                                        
                                        
                                        -TOTAL
      LIABILITIES
                                        
                                        
                                        
                                        
                                        
                                        $
                                        92,209,705
                                        
                                        
                                        $
                                        1,466,669





See
accompanying notes to consolidated financial statements


5


SUNWAY
GLOBAL INC.





CONSOLIDATED
BALANCE SHEETS (Continued)


AS
AT MARCH 31, 2009 AND DECEMBER 31, 2008


(Stated
in US Dollars)





Notes
                            
                            
                            March
      31, 2009
                            
                            
                            December
      31, 2008(Unaudited)
                            
                            
                            (Audited)Commitments
      and contingencies
                            
                            
                            16
                            
                            
                            $
                            -
                            
                            
                            $
                            -STOCKHOLDERS’
      EQUITYSeries
      B Convertible Preferred Stock $0.0000001 par value; 400,000 shares
      authorized; 160,494 shares issued and outstanding at March 31, 2009 and
      December 31, 2008  respectively
                            
                            
                            12
                            
                            
                            $
                            1
                            
                            
                            $
                            1Common
      stock at $0.0000001 par value; 100,000,000 shares authorized; 18,499,736
      shares issued and outstanding at March 31, 2009 and December 31, 2008
      respectively
                            
                            
                            
                            
                            
                            
                            2
                            
                            
                            
                            2Additional
      paid-in capital
                            
                            
                            
                            
                            
                            
                            18,689,023
                            
                            
                            
                            22,679,965Statutory
      reserves
                            
                            
                            
                            
                            
                            
                            3,033,855
                            
                            
                            
                            2,127,978(Accumulated
      deficit)/retained earning
                            
                            
                            
                            
                            
                            
                            (78,839,490
                            )
                            
                            
                            12,247,049Accumulated
      other comprehensive income
                            
                            
                            
                            
                            
                            
                            2,871,247
                            
                            
                            
                            2,844,190$
                            (54,245,362
                            )
                            
                            $
                            39,899,185TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                            
                            
                            
                            
                            
                            $
                            37,964,343
                            
                            
                            $
                            41,365,854





See
accompanying notes to consolidated financial statements


6


SUNWAY
GLOBAL INC.





CONSOLIDATED
STATEMENTS OF INCOME


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Three
      months ended March 31,2009
                                                                
                                                                
                                                                2008NotesNet
      revenues
                                                                
                                                                
                                                                17
                                                                
                                                                
                                                                $
                                                                2,933,573
                                                                
                                                                
                                                                $
                                                                3,604,034Cost
      of net revenues
                                                                
                                                                
                                                                17
                                                                
                                                                
                                                                
                                                                (893,980
                                                                )
                                                                
                                                                
                                                                (1,141,745
                                                                )Gross
      profit
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                2,039,593
                                                                
                                                                
                                                                $
                                                                2,462,289Selling
      expenses
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (180,349
                                                                )
                                                                
                                                                
                                                                (25,237
                                                                )General
      and administrative expenses
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (631,894
                                                                )
                                                                
                                                                
                                                                (786,242
                                                                )Income
      from operation
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                1,227,350
                                                                
                                                                
                                                                $
                                                                1,650,810Interest
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                23,577
                                                                
                                                                
                                                                
                                                                143Impairment
      on investment
                                                                
                                                                
                                                                18
                                                                
                                                                
                                                                
                                                                (4,831,386
                                                                )
                                                                
                                                                
                                                                -Change
      in fair value of warrants
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (20,481,276
                                                                )
                                                                
                                                                
                                                                --Income
      before (loss)/income taxes
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                (24,061,735
                                                                )
                                                                
                                                                $
                                                                1,650,953Income
      taxes
                                                                
                                                                
                                                                14
                                                                
                                                                
                                                                
                                                                (207,996
                                                                )
                                                                
                                                                
                                                                (273,542
                                                                )Net
      (loss)/income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                (24,269,731
                                                                )
                                                                
                                                                $
                                                                1,377,411Net
      (loss)/income per share:-Basic
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                (1.31
                                                                )
                                                                
                                                                $
                                                                0.16-Diluted
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                $
                                                                (1.31
                                                                )
                                                                
                                                                $
                                                                0.05Weighted
      average number of common stock-Basic
                                                                
                                                                
                                                                13
                                                                
                                                                
                                                                
                                                                18,499,736
                                                                
                                                                
                                                                
                                                                8,360,349-Diluted
                                                                
                                                                
                                                                13
                                                                
                                                                
                                                                
                                                                18,499,736
                                                                
                                                                
                                                                
                                                                27,642,747





See notes
to consolidated financial statements


7


SUNWAY
GLOBAL INC.


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY


FOR
THE YEAR ENDED DECEMBER 31, 2008 AND THREE MONTHS ENDED


MARCH
31, 2009


(Stated
in US Dollars)(Unaudited)





Additional
                                                                  
                                                                  
                                                                  
                                                                  Retained
                                                                  
                                                                  AccumulatedPreferred
                                                                  
                                                                  Preferred
                                                                  
                                                                  No.
                                                                  
                                                                  
                                                                  
                                                                  paid
      -
                                                                  
                                                                  
                                                                  
                                                                  earnings/
                                                                  
                                                                  otherSeries
                                                                  
                                                                  Series
                                                                  
                                                                  shares
                                                                  
                                                                  Common
                                                                  
                                                                  in
                                                                  
                                                                  Statutory
                                                                  
                                                                  (accumulated
                                                                  
                                                                  comprehensiveA
                                                                  
                                                                  B
                                                                  
                                                                  outstanding
                                                                  
                                                                  stock
                                                                  
                                                                  capital
                                                                  
                                                                  reserves
                                                                  
                                                                  deficit)
                                                                  
                                                                  income
                                                                  
                                                                  TotalBalance,
      January 1, 2008
                                                                  
                                                                  $
                                                                  1
                                                                  
                                                                  $
                                                                  1
                                                                  
                                                                  
                                                                  223,658
                                                                  
                                                                  $
                                                                  1
                                                                  
                                                                  $
                                                                  16,099,965
                                                                  
                                                                  $
                                                                  2,127,978
                                                                  
                                                                  $
                                                                  3,188,280
                                                                  
                                                                  $
                                                                  1,180,288
                                                                  
                                                                  $
                                                                  22,596,514Conversion
      of Preferred Series Ainto Common Stock
                                                                  
                                                                  
                                                                  (1
                                                                  )
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  13,711,831
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  1
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -Conversion
      of Preferred Series Binto Common Stock
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  148,140
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -Conversion
      of Warrant Series Jinto Common Stock
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  4,416,107
                                                                  
                                                                  
                                                                  1
                                                                  
                                                                  
                                                                  6,579,999
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  6,580,000Net
      income
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  9,058,769
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  9,058,769Foreign
      currency translationadjustment
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  1,663,902
                                                                  
                                                                  
                                                                  1,663,902Balance,
      December 31, 2008
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  $
                                                                  1
                                                                  
                                                                  
                                                                  18,499,736
                                                                  
                                                                  $
                                                                  2
                                                                  
                                                                  $
                                                                  22,679,965
                                                                  
                                                                  $
                                                                  2,127,978
                                                                  
                                                                  $
                                                                  12,247,049
                                                                  
                                                                  $
                                                                  2,844,190
                                                                  
                                                                  $
                                                                  39,899,185Balance,
      January 1, 2009
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  $
                                                                  1
                                                                  
                                                                  
                                                                  18,499,736
                                                                  
                                                                  $
                                                                  2
                                                                  
                                                                  $
                                                                  22,679,965
                                                                  
                                                                  $
                                                                  2,127,978
                                                                  
                                                                  $
                                                                  12,247,049
                                                                  
                                                                  $
                                                                  2,844,190
                                                                  
                                                                  $
                                                                  39,899,185Net
      loss
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  (24,269,731
                                                                  )
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  (24,269,731
                                                                  )Reclassification
      of warrants from equity to derivative liabilities
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  (3,990,942
                                                                  )
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  (65,910,931
                                                                  )
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  (69,901,873
                                                                  )Appropriations
      to statutoryreserves
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  905,877
                                                                  
                                                                  
                                                                  (905,877
                                                                  )
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -Foreign
      currency translationadjustment
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  27,057
                                                                  
                                                                  
                                                                  27,057Balance,
      March 31, 2009
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  $
                                                                  1
                                                                  
                                                                  
                                                                  18,499,736
                                                                  
                                                                  $
                                                                  2
                                                                  
                                                                  $
                                                                  18,689,023
                                                                  
                                                                  $
                                                                  3,033,855
                                                                  
                                                                  $
                                                                  (78,839,490
                                                                  )
                                                                  $
                                                                  2,871,247
                                                                  
                                                                  $
                                                                  (54,245,362
                                                                  )





See notes
to consolidated financial statements


8





SUNWAY
GLOBAL INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Three
      months ended March 31,2009
                                        
                                        
                                        2008Cash
      flows from operating activitiesNet
      (loss)/income
                                        
                                        $
                                        (24,269,731
                                        )
                                        
                                        $
                                        1,377,411Depreciation
                                        
                                        
                                        240,444
                                        
                                        
                                        
                                        177,687Amortization
                                        
                                        
                                        253,803
                                        
                                        
                                        
                                        196,280Change
      in fair value of warrants
                                        
                                        
                                        20,481,276
                                        
                                        
                                        
                                        -Impairment
      on investment
                                        
                                        
                                        4,831,386
                                        
                                        
                                        
                                        -Adjustments
      to reconcile net income to net cash provided by operating
      activities:Trade
      receivables, net
                                        
                                        
                                        255,153
                                        
                                        
                                        
                                        (620,159
                                        )Inventories
                                        
                                        
                                        (430,489
                                        )
                                        
                                        
                                        (77,394
                                        )Advances
      to suppliers
                                        
                                        
                                        (776,077
                                        )
                                        
                                        
                                        964,951Prepayments
                                        
                                        
                                        (178,370
                                        )
                                        
                                        
                                        383,008Tender
      deposits
                                        
                                        
                                        94,457
                                        
                                        
                                        
                                        -Travel
      advances to shareholders
                                        
                                        
                                        (18,699
                                        )
                                        
                                        
                                        (39,137
                                        )Advances
      to employees
                                        
                                        
                                        98,741
                                        
                                        
                                        
                                        (398,153
                                        )Accounts
      payable
                                        
                                        
                                        652,243
                                        
                                        
                                        
                                        (254,484
                                        )Income
      tax payable
                                        
                                        
                                        (422,216
                                        )
                                        
                                        
                                        118,380Turnover
      and other taxes
                                        
                                        
                                        (289,028
                                        )
                                        
                                        
                                        85,220Loans
      from unrelated parties
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,572,360Amount
      due from a director
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (726,133
                                        )Customers
      deposits
                                        
                                        
                                        202,073
                                        
                                        
                                        
                                        (216,932
                                        )Accrued
      liabilities
                                        
                                        
                                        (8,336
                                        )
                                        
                                        
                                        36,341Other
      payables
                                        
                                        
                                        324,750
                                        
                                        
                                        
                                        (7,113
                                        )Net
      cash provided by operating activities
                                        
                                        $
                                        1,041,380
                                        
                                        
                                        $
                                        2,572,133Cash
      flows from investing activitiesPurchase
      of technology-based designs
                                        
                                        
                                        (3,505,390
                                        )
                                        
                                        
                                        -Purchase
      of intangibles assets
                                        
                                        
                                        (596,754
                                        )
                                        
                                        
                                        -Purchase
      of plant and equipment
                                        
                                        
                                        (78,781
                                        )
                                        
                                        
                                        (939,630
                                        )Used
      of restricted cash
                                        
                                        
                                        22,320
                                        
                                        
                                        
                                        23,095Deposit
      for acquisition of computer software
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (1,281,650
                                        )Net
      cash used in investing activities
                                        
                                        $
                                        (4,158,605
                                        )
                                        
                                        $
                                        (2,198,185
                                        )Cash
      flows from financing activities
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -Net
      cash provided by financing activities
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -


9


SUNWAY
GLOBAL INC.


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





Three
      months ended March 31,2009
                
                
                2008Net
      in cash and cash equivalents (used)/sourced
                
                $
                (3,117,225
                )
                
                $
                373,948Effect
      of foreign currency translation oncash
      and cash equivalents
                
                
                139,715
                
                
                
                262,621Cash
      and cash equivalents–beginning of period
                
                
                15,189,941
                
                
                
                5,820,100Cash
      and cash equivalents–end of period
                
                $
                12,212,431
                
                
                $
                6,456,669Supplementary
      cash flow information:Tax
      paid
                
                $
                630,304
                
                
                $
                157,694Interest
      received
                
                
                23,577
                
                
                
                143





SUPPLEMENTAL
NON-CASH DISCLOSURES:





1.
            During
      the three months ended March 31, 2009 and 2008, an amount of $1,752,695
      and nil were transferred from “deposit for the acquisition of computer
      software” to “property, plant and equipment”,
  respectively.





2.
            During
      the three months ended March 31, 2009 and 2008, an amount of $7,725,445
      and nil were transferred from “deposit for the acquisition of subsidiary”
      to “acquisition of subsidiary, net of cash
  acquisition”.





See notes
to consolidated financial statements


10


SUNWAY GLOBAL
INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





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





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





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





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





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





2.
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





(a)
            Method
      of Accounting





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


11


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(a)
            Method
      of Accounting (Continued)





The
interim results of operations are not necessarily indicative of the results to
be expected for the fiscal period ending March 31, 2009. The Company’s
consolidation balance sheet as of December 31, 2008 has been taken from the
Company’s consolidation balance sheet as of the date. All other financial
statements contained herein are unaudited and, in the opinion of management,
contain all adjustments (consisting only of normal recurring accruals) necessary
for a fair presentation of financial position, results of operations and cash
flows for the period presented.





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





(b)
            Principles
      of Consolidation





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





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





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


12


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(c)
            Use
      of estimates





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





(d)
            Economic
      and political risks





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





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





(e)
            Intangibles





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


Land
      use rights
              Over
      lease termsTechnology-based
      design
              10
      years


13


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(f)
              Property,
      plant and equipment





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





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





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





(g)
            Maintenance
      and repairs





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





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





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





During
the reporting period, there was no impairment loss.





(i)
              Inventories





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


14


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(j)
              Trade
      receivables





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





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





(k)
            Cash
      and cash equivalents





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





March
      31, 2009
                            
                            
                            December
      31, 2008Bank
      of Communications, Branch of DaqingCity
      Economic Zone
                            
                            $
                            11,858,175
                            
                            
                            $
                            9,606,188Daqing
      City Commercial Bank
                            
                            
                            -
                            
                            
                            
                            4,536,667Agricultural
      Bank of China
                            
                            
                            82,434
                            
                            
                            
                            930,332China
      Construction Bank, Bejing Branch
                            
                            
                            180,115
                            
                            
                            
                            -HSBC
                            
                            
                            70,148
                            
                            
                            
                            109,151Cash
      on hand
                            
                            
                            21,559
                            
                            
                            
                            7,603$
                            12,212,431
                            
                            
                            $
                            15,189,941





(l)
              Restricted
      cash





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





(m)
            Revenue
      recognition





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


-
Persuasive evidence of an arrangement exists;


-
Delivery has occurred or services have been rendered;


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


-
Collection is reasonably assured.





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


15


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(n)
            Expected
      warranty liabilities





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





(o)
            Cost
      of net revenues





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





(p)
            Leases





The Group
did not have lease which met the criteria of capital lease. Leases which do not
qualify as capital lease are classified as operating lease. Operating lease
rental payment included in general and administrative expenses were $26,333 and
$4,853 and cost of sales were $6,297 and nil for the three months ended March
31, 2009 and 2008 respectively.





(q)
            Advertising





The Group
expensed all advertising costs as incurred.  Advertising expenses
included in selling expenses were nil and $20,979 for the three months ended
March 31, 2009 and 2008 respectively.





(r)
            Shipping
      and handling





All
shipping and handling are expensed as incurred.  Shipping and handling
expenses included in selling expenses, general and administrative expenses, cost
of net revenues and were $5,728 and $3,881 for the three months ended March 31,
2009 and 2008 respectively.





(s)
            Research
      and development





All
research and development costs are expensed as incurred. The research and
development costs included in general and administrative expenses were $20,534
and $377 for the three months ended March 31, 2009 and 2008
respectively.





(t)
              Retirement
      benefits





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit expenses included in general and administrative
expenses and selling expenses were $26,719 and $10,118 for the three months
ended March 31, 2009 and 2008 respectively.


16


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(u)
            Income
      taxes





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





(v)
            Foreign
      currency translation





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





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





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





March
      31, 2009
                  
                  
                  December
      31, 2008
                  
                  
                  March
      31, 2008Twelve
      months endedRMB
      : USD exchange rate
                  
                  
                  -
                  
                  
                  
                  6.8542
                  
                  
                  
                  -Three
      months endedRMB
      : USD exchange rate
                  
                  
                  6.8456
                  
                  
                  
                  -
                  
                  
                  
                  7.0222Average
      three months endedRMB
      : USD exchange rate
                  
                  
                  6.8466
                  
                  
                  
                  -
                  
                  
                  
                  7.1757





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.


17


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(w)
            Statutory
      reserves





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





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


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


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





(x)
            Comprehensive
      income





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





(y)
            Recent
      accounting pronouncements





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





In April
2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the
Useful Life of Intangible Assets, which amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets. This Staff Position is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited.
Application of this FSP is not currently applicable to the Company as the
Company’s intangible assets consist of land used rights which has a fixed useful
life of 47 years.


18


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (Continued)





(y) Recent
accounting pronouncements(continued)





In May
2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance
Contracts, an interpretation of FASB Statement No. 60 (SFAS
163).  This statement clarifies accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises.  SFAS 163 is
effective for fiscal years and interim periods within those years, beginning
after December 15, 2008.  Because the Company does not issue financial
guarantee insurance contracts, it does not expect the adoption of this standard
to have an effect on its financial position or results of
operations.





In May
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.


19


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





3.
            CONCENTRATIONS
      OF CREDIT RISK AND MAJOR CUSTOMERS





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





As of
March 31, 2009 and December 31, 2008, the Group’s bank deposits were all placed
with banks in the PRC where there is currently no rule or regulation in place
for obligatory insurance of bank accounts.





For the
three months ended March 31, 2009 and 2008, all of the Group’s sales were
generated from the PRC. In addition, all trade receivables as of March 31, 2009
and December 31, 2008 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 three months ended March 31,2009
                  
                  
                  2008Customer
      B
                  
                  $
                  398,738
                  
                  
                  $
                  378,799Customer
      E
                  
                  
                  -
                  
                  
                  
                  448,577Customer
      I
                  
                  
                  -
                  
                  
                  
                  541,141Customer
      J
                  
                  
                  -
                  
                  
                  
                  463,530Customer
      K
                  
                  
                  552,099
                  
                  
                  
                  -Customer
      L
                  
                  
                  350,539
                  
                  
                  
                  -





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





March
      31, 2009
                  
                  
                  December
      31, 2008Customer
      A
                  
                  $
                  -
                  
                  
                  $
                  499,583Customer
      B
                  
                  
                  277,549
                  
                  
                  
                  -Customer
      C
                  
                  
                  -
                  
                  
                  
                  387,263Customer
      D
                  
                  
                  358,917
                  
                  
                  
                  -Customer
      E
                  
                  
                  498,043
                  
                  
                  
                  396,822Customer
      F
                  
                  
                  300,459
                  
                  
                  
                  371,218Customer
      G
                  
                  
                  -
                  
                  
                  
                  325,129Customer
      H
                  
                  
                  410,190
                  
                  
                  
                  -


20


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





4.
            AMOUNT
      DUE FROM A RELATED COMPANY





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





5.
            TRADE
      RECEIVABLES, NET


March
      31, 2009
                        
                        
                        December
      31, 2008Trade
      receivables, gross
                        
                        $
                        2,710,864
                        
                        
                        $
                        2,962,333Provision
      for doubtful debts
                        
                        
                        (8,424
                        )
                        
                        
                        (8,414
                        )$
                        2,702,440
                        
                        
                        $
                        2,953,919





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





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


March
      31, 2009
                        
                        
                        December
      31, 2008Balance
      at beginning of period/year
                        
                        $
                        8,414
                        
                        
                        $
                        7,884Foreign
      exchange adjustment
                        
                        
                        10
                        
                        
                        
                        530Balance
      at end of period/year
                        
                        $
                        8,424
                        
                        
                        $
                        8,414





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





6.
            TRAVEL
      ADVANCES TO SHAREHOLDERS





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


March
      31, 2009
                        
                        
                        December
      31, 2008Bo
      Liu
                        
                        $
                        33,020
                        
                        
                        $
                        23,495Deli
      Liang
                        
                        
                        24,463
                        
                        
                        
                        15,238$
                        57,483
                        
                        
                        $
                        38,733


21


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





7.
            ADVANCES
      TO EMPLOYEES





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





March
      31, 2009
                  
                  
                  December
      31, 2008Beginning
      balance, January 1
                  
                  $
                  429,804
                  
                  
                  $
                  548,364Add:
      Advanced during the period/year
                  
                  
                  142,460
                  
                  
                  
                  659,177Less:
      Transferred to income statement
                  
                  
                  (77,639
                  )
                  
                  
                  (406,262
                  )Recollected from employees
                  
                  
                  (163,037
                  )
                  
                  
                  (371,475
                  )Ending
      balance
                  
                  $
                  331,588
                  
                  
                  $
                  429,804





8.
            INVENTORIES





Inventories
comprise the followings:


March
      31, 2009
                        
                        
                        December
      31, 2008Finished
      goods
                        
                        $
                        459,889
                        
                        
                        $
                        218,448Work
      in progress
                        
                        
                        41,187
                        
                        
                        
                        188,855Raw
      materials
                        
                        
                        520,956
                        
                        
                        
                        183,435$
                        1,022,032
                        
                        
                        $
                        590,738


22


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





9.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property,
plant and equipment, net comprise the followings:


March
      31, 2009
                                
                                
                                December
      31, 2008At
      costBuildings
                                
                                $
                                1,449,221
                                
                                
                                $
                                1,447,402Machinery
      and equipment
                                
                                
                                1,119,996
                                
                                
                                
                                1,116,941Moldings
                                
                                
                                4,160,819
                                
                                
                                
                                4,155,598Computer
      software
                                
                                
                                2,098,260
                                
                                
                                
                                2,073,181Office
      equipment and motor vehicles
                                
                                
                                369,799
                                
                                
                                
                                288,736$
                                9,198,095
                                
                                
                                $
                                9,081,858Less:
      accumulated depreciation
                                
                                
                                (4,264,904
                                )
                                
                                
                                (4,011,987
                                )$
                                4,933,191
                                
                                
                                $
                                5,069,871Construction
      in progress
                                
                                
                                867,970
                                
                                
                                
                                -$
                                5,801,161
                                
                                
                                $
                                5,069,871





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





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





For
      the three months ended March 31,2009
                          
                          
                          2008Cost
      of net revenues
                          
                          $
                          219,089
                          
                          
                          $
                          163,266General
      and administrative expenses
                          
                          
                          11,702
                          
                          
                          
                          14,421Selling
      expenses
                          
                          
                          9,653
                          
                          
                          
                          -$
                          240,444
                          
                          
                          $
                          177,687


23


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





10.
            INTANGIBLE
      ASSETS, NET





Intangible
assets, net are as follows:


March
      31, 2009
                            
                            
                            December
      31, 2008Land
      use rights, at cost
                            
                            $
                            2,484,712
                            
                            
                            $
                            1,354,308Technology-based
      design, at cost
                            
                            
                            8,519,706
                            
                            
                            
                            6,320,577$
                            11,004,418
                            
                            
                            $
                            7,674,885Less:
      accumulated amortization
                            
                            
                            (1,301,442
                            )
                            
                            
                            (1,098,116
                            )$
                            9,702,976
                            
                            
                            $
                            6,576,769





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





The Group
acquired the rights to use a parcel of land totaling 26,522 square meters, for a
consideration of $1,149,788 (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.





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





The Group
acquired the rights to use a parcel of land totaling 10,841 square meters, for a
consideration of $ 106,709 (RMB730,485), located at Qingdao Hi-Tech Industry
Development Zone, Qingdao, Shandong in the People’s Republic of China. The land
has been used to build the Liheng’s facility. We already paid fully in cash but
the issuance of land certificate is in progress. It is believed that the land
certificate will be issued within the current year.





Amortization
expense included in the general and administrative expenses for the three months
ended 2009 and 2008 were $253,803 and $196,280 respectively.


24


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





11.
            EXPECTED
      WARRANTY LIABILITIES





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





March
      31, 2009
                        
                        
                        December
      31, 2008Balance
      at beginning of period/year
                        
                        $
                        50,396
                        
                        
                        $
                        55,351Warranty
      expense for the period/year
                        
                        
                        -
                        
                        
                        
                        (8,533
                        )Foreign
      currency difference
                        
                        
                        64
                        
                        
                        
                        3,578Balance
      at end of period/year
                        
                        $
                        50,460
                        
                        
                        $
                        50,396





12.
            SERIES
      B CONVERTIBLE PREFERRED STOCK AND ASSOCIATED
  WARRANTS




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




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





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




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


25


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





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




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




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




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




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




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




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




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


26




SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





13.
            (LOSS)/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 three months ended March 31,2009
                                        
                                        
                                        2008Earnings:(Loss)/earnings
      for the purpose ofBasic (loss)/earnings per
      share
                                        
                                        $
                                        (24,269,731
                                        )
                                        
                                        $
                                        1,377,411Effect
      of dilutive potential commonStock
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -(Loss)/earnings
      for the purpose ofDilutive (loss)/earnings per
      share
                                        
                                        $
                                        (24,269,731
                                        )
                                        
                                        $
                                        1,377,411Number
      of shares:Weighted
      average number of common stock for the purpose of basic earnings per
      share
                                        
                                        
                                        18,499,736
                                        
                                        
                                        
                                        8,360,349Effect
      of dilutive potential common stock-conversion
      of Series Aconvertible
      preferred stock
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,575,140-conversion
      of Series Bconvertible
      preferred stock
                                        
                                        
                                        -
                                        
                                        
                                        
                                        4,962,960-conversion
      of Warrant Series A
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,520,496-conversion
      of Warrant Series B
                                        
                                        
                                        -
                                        
                                        
                                        
                                        885,551-conversion
      of Warrant Series J
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,623,161-conversion
      of Warrant Series C
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,057,343-conversion
      of Warrant Series D
                                        
                                        
                                        -
                                        
                                        
                                        
                                        657,747Weighted
      average number of common stock for the purpose of dilutive earnings per
      share
                                        
                                        
                                        18,499,736
                                        
                                        
                                        
                                        27,642,747


27


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





14.
            INCOME
      TAXES





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





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





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





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





Three
      months ended March 31,2009
                  
                  
                  2008U.S.
      statutory rate
                  
                  
                  34
                  %
                  
                  
                  34
                  %Foreign
      income not recognized in the U.S.
                  
                  
                  (34
                  )%
                  
                  
                  (34
                  )%PRC
      Enterprise Income Tax
                  
                  
                  25
                  %
                  
                  
                  25
                  %Tax
      holiday
                  
                  
                  (10
                  )%
                  
                  
                  (10
                  )%Provision
      for income tax
                  
                  
                  15
                  %
                  
                  
                  15
                  %





The
provision for income taxes consists of the following:





Three
      months ended March 31,2009
                  
                  
                  2008Current
      tax – PRC EIT
                  
                  $
                  207,996
                  
                  
                  $
                  273,542Deferred
      tax provision
                  
                  
                  -
                  
                  
                  
                  -Income
      tax expenses
                  
                  $
                  207,996
                  
                  
                  $
                  273,542





15.
            FAIR
      VALUE OF FINANCIAL INSTRUMENTS





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


28


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





16.
            COMMITMENTS
      AND CONTINGENCIES





The Group
has entered into a tenancy agreement for factory expiring through 2010. Total
rental expenses for the three months ended March 31, 2009 and for the year ended
December 31, 2008 amounted to $32,630 and $70,922 respectively.





As at
March 31, 2009, the Group’s commitments for minimum lease payments under these
leases for the next one year and thereafter are as follows:





March
      31,2010
                        
                        $
                        70,0012011
      and thereafter
                        
                        
                        -$
                        70,001





17.
            SEGMENT
      INFORMATION





The Group
currently is engaged in the manufacturing and selling of logistic transport
systems. The Group has contracted with customers with four types of product
altogether, workstation type A, workstation type B, workstation type C and
Sunway Automatic Dispensing and Packing (“SADP”).  These three types
of workstation are of the same function but with different product
design.





Net
revenues and cost of revenues by product are as follows:





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





For the three
                          months ended
                          March 31,
                          2008
                        
                        Workstation
                        
                        
                        Workstation
                        
                        
                        WorkstationType A
                        
                        
                        Type B
                        
                        
                        Type C
                        
                        
                        SADP
                        
                        
                        ConsolidatedNet
      revenues
                        
                        $
                        653,597
                        
                        
                        $
                        2,024,198
                        
                        
                        $
                        356,064
                        
                        
                        $
                        570,175
                        
                        
                        $
                        3,604,034Cost
      of net revenues
                        
                        
                        (177,442
                        )
                        
                        
                        (628,720
                        )
                        
                        
                        (134,920
                        )
                        
                        
                        (200,663
                        )
                        
                        
                        (1,141,745
                        )$
                        476,155
                        
                        
                        $
                        1,395,478
                        
                        
                        $
                        221,144
                        
                        
                        $
                        369,512
                        
                        
                        $
                        2,462,289


29


SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





17.  SEGMENT
INFORMATION (Continued)





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





18.
            ACQUISITION





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





Details
of net assets acquired and impairment are as follows:


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





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





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


30





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





18.  ACQUISITION
(Continued)





The
following tabulations were retroactive restatements of pro forma consolidated
income statements for the year ended December 31, 2008.  The
retroactive restatements were based on the assumption that the acquisition of
Qingdao Liheng Textiles Co., Ltd was made at the beginning of 2008 for the
purpose of comparative analysis.





SUNWAY
GLOBAL INC


UNAUDITED
PRO FORMA CONSOLIDATED BALANCE SHEET


AS
OF DECEMBER 31, 2008





Registrant
                                                  (Historical)
                                                
                                                
                                                Target
                                                  (Historical)
                                                
                                                
                                                Pro forma
                                                  adjustments
                                                
                                                
                                                Pro forma
                                                  CombinedASSETSCurrent
      assetsCash
      and cash equivalents
                                                
                                                $
                                                15,189,941
                                                
                                                
                                                $
                                                869
                                                
                                                
                                                $
                                                
                                                
                                                
                                                $
                                                15,190,810Trade
      receivables, net
                                                
                                                
                                                2,953,919
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                2,953,919Inventories
                                                
                                                
                                                590,738
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                590,738Advances
      to suppliers
                                                
                                                
                                                547,952
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                547,952Tender
      deposits
                                                
                                                
                                                112,735
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                112,735Travel
      advances toshareholders
                                                
                                                
                                                38,733
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                38,733Advances
      to employees
                                                
                                                
                                                429,804
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                429,804Advances
      to a shareholder
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,074,640
                                                
                                                
                                                
                                                (432,298
                                                )
                                                
                                                
                                                642,342Other
      receivables
                                                
                                                
                                                -
                                                
                                                
                                                
                                                6,954
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                6,954Total
      current assets
                                                
                                                $
                                                19,863,822
                                                
                                                
                                                $
                                                1,082,463
                                                
                                                
                                                $
                                                
                                                
                                                
                                                $
                                                20,513,987Restricted
      cash
                                                
                                                $
                                                378,366
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                
                                                
                                                
                                                $
                                                378,366Amount
      due from a related company
                                                
                                                
                                                830
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                830Property,
      plant and equipment, net
                                                
                                                
                                                5,069,871
                                                
                                                
                                                
                                                555,005
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                5,624,876Intangible
      assets, net
                                                
                                                
                                                6,576,769
                                                
                                                
                                                
                                                196,014
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                6,772,783Deposit
      for acquisition of computer software
                                                
                                                
                                                1,750,751
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                
                                                
                                                
                                                
                                                1,750,751Deposit
      for acquisition of subsidiary
                                                
                                                
                                                7,725,445
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (7,725,445
                                                )
                                                
                                                
                                                -Impairment
      on investment
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                6,598,351
                                                
                                                
                                                
                                                6,598,351TOTAL
      ASSETS
                                                
                                                $
                                                41,365,854
                                                
                                                
                                                $
                                                1,833,482
                                                
                                                
                                                $
                                                
                                                
                                                
                                                $
                                                41,639,944


31





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





18.  ACQUISITION
(Continued)





SUNWAY
GLOBAL INC


UNAUDITED
PRO FORMA CONSOLIDATED BALANCE SHEET


AS
OF DECEMBER 31, 2008





Registrant
                                        (Historical)
                                      
                                      
                                      Target
                                        (Historical)
                                      
                                      
                                      Pro forma
                                        adjustments
                                      
                                      
                                      Pro forma
                                        CombinedLIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesShort-term
      bank loans
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      277,202
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      277,202Accounts
      payable
                                      
                                      
                                      59,912
                                      
                                      
                                      
                                      25,298
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      85,210Income
      tax payable
                                      
                                      
                                      632,893
                                      
                                      
                                      
                                      (28,410
                                      )
                                      
                                      
                                      
                                      
                                      
                                      
                                      604,483Turnover
      and other taxes
                                      
                                      
                                      406,839
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      406,839Expected
      warrantyliabilities
                                      
                                      
                                      50,396
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      50,396Accrued
      liabilities
                                      
                                      
                                      301,461
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      301,461Other
      payables
                                      
                                      
                                      15,168
                                      
                                      
                                      
                                      432,298
                                      
                                      
                                      
                                      (432,298
                                      )
                                      
                                      
                                      15,168Total
      current liabilities
                                      
                                      $
                                      1,466,669
                                      
                                      
                                      $
                                      706,388
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      1,740,759TOTAL
      LIABILITIES
                                      
                                      $
                                      1,466,669
                                      
                                      
                                      $
                                      706,388
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      1,740,759Commitments
      and contingencies
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      -
                                      
                                      
                                      $
                                      
                                      
                                      
                                      $
                                      -


32





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





18.  ACQUISITION
(Continued)





SUNWAY
GLOBAL INC


UNAUDITED
PRO FORMA CONSOLIDATED BALANCE SHEET


AS
OF DECEMBER 31, 2008





Registrant
                                  (Historical)
                                
                                
                                Target
                                  (Historical)
                                
                                
                                Pro forma
                                  adjustments
                                
                                
                                Pro forma
                                  CombinedSHAREHOLDERS’
      EQUITYSeries
      B convertible preferred stock at $0.000001 par value; 400,000 shares
      authorized; 160,494  shares issued
      and  outstanding
                                
                                $
                                1
                                
                                
                                $
                                -
                                
                                
                                $
                                
                                
                                
                                $
                                1Common
      Stock at $0.000001 par value; 100,000,000 shares authorized, 18,499,736
      shares issued and outstanding
                                
                                
                                2
                                
                                
                                
                                1,237,076
                                
                                
                                
                                (1,237,076
                                )
                                
                                
                                2Additional
      paid-in capital
                                
                                
                                22,679,965
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                22,679,965Statutory
      reserves
                                
                                
                                2,127,978
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                2,127,978Retained
      earnings/ (accumulated losses)
                                
                                
                                12,247,049
                                
                                
                                
                                (109,982
                                )
                                
                                
                                109,982
                                
                                
                                
                                12,247,049Accumulated
      other comprehensive income
                                
                                
                                2,844,190
                                
                                
                                
                                -
                                
                                
                                
                                
                                
                                
                                
                                2,844,190$
                                39,899,185
                                
                                
                                $
                                1,127,094
                                
                                
                                $
                                
                                
                                
                                $
                                39,899,185TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                                
                                $
                                41,365,854
                                
                                
                                $
                                1,833,482
                                
                                
                                $
                                
                                
                                
                                $
                                41,639,944


33





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





18.  ACQUISITION
(Continued)





SUNWAY
GLOBAL INC


UNAUDITED
PRO FORMA CONSOLIDATED INCOME STATEMENTS


FOR
THE YEAR ENDED DECEMBER 31, 2008





Registrant
                                                        (Historical)
                                                      
                                                      
                                                      Target
                                                        (Historical)
                                                      
                                                      
                                                      Pro forma
                                                        adjustments
                                                      
                                                      
                                                      Pro forma
                                                        CombinedNet
      revenues
                                                      
                                                      $
                                                      19,845,882
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      
                                                      
                                                      
                                                      $
                                                      19,845,882Cost
      of net revenues
                                                      
                                                      
                                                      (5,634,143
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (5,634,143
                                                      )Gross
      profit
                                                      
                                                      $
                                                      14,211,739
                                                      
                                                      
                                                      $
                                                      -
                                                      
                                                      
                                                      $
                                                      
                                                      
                                                      
                                                      $
                                                      14,211,739Selling
      expenses
                                                      
                                                      
                                                      (425,050
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (425,050
                                                      )General
      and administrative expenses
                                                      
                                                      
                                                      (3,068,027
                                                      )
                                                      
                                                      
                                                      (5,167
                                                      )
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (3,073,194
                                                      )Income(loss)
      from operation
                                                      
                                                      $
                                                      10,718,662
                                                      
                                                      
                                                      $
                                                      (5,167
                                                      )
                                                      
                                                      $
                                                      
                                                      
                                                      
                                                      $
                                                      10,713,495Interest
      income
                                                      
                                                      
                                                      66,935
                                                      
                                                      
                                                      
                                                      244
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      67,179Interest
      expenses
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (27,229
                                                      )
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (27,229
                                                      )Income(loss)
      before income taxes
                                                      
                                                      $
                                                      10,785,597
                                                      
                                                      
                                                      $
                                                      (32,152
                                                      )
                                                      
                                                      $
                                                      
                                                      
                                                      
                                                      $
                                                      10,753,445Income
      taxes
                                                      
                                                      
                                                      (1,726,828
                                                      )
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      (1,726,828
                                                      )Net
      income(loss)
                                                      
                                                      $
                                                      9,058,769
                                                      
                                                      
                                                      $
                                                      (32,152
                                                      )
                                                      
                                                      $
                                                      
                                                      
                                                      
                                                      $
                                                      9,026,617Other
      comprehensive income income:  Foreign currency translation
      adjustment
                                                      
                                                      
                                                      1,663,902
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      
                                                      1,663,902Comprehensive
      income(loss)
                                                      
                                                      $
                                                      10,722,671
                                                      
                                                      
                                                      $
                                                      (32,152
                                                      )
                                                      
                                                      $
                                                      
                                                      
                                                      
                                                      $
                                                      10,690,519


34





SUNWAY
GLOBAL INC.


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008


(Stated
in US Dollars)(Unaudited)





18.  ACQUISITION
(Continued)





SUNWAY
GLOBAL INC


UNAUDITED
PRO FORMA CONSOLIDATED INCOME STATEMENTS


FOR
THE YEAR ENDED DECEMBER 31, 2008





Earnings
      per common share-
      Basic
                                    
                                    $
                                    0.60-
      Fully diluted
                                    
                                    $
                                    0.31Common
      shares outstanding-
      Basic
                                    
                                    
                                    15,127,645-
      Fully diluted
                                    
                                    
                                    28,870,595





19.
            RESTATEMENTS





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





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





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


35





SUNWAY
GLOBAL INC.





BALANCE
SHEETS


Original
                      
                      
                      RestatedMarch
      31, 2009(Unaudited)
                      
                      
                      (Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                      
                      $
                      12,212,431
                      
                      
                      $
                      12,212,431Trade
      receivables, net
                      
                      
                      2,702,440
                      
                      
                      
                      2,702,440Inventories
                      
                      
                      1,022,032
                      
                      
                      
                      1,022,032Advances
      to suppliers
                      
                      
                      1,502,484
                      
                      
                      
                      1,502,484Prepayments
                      
                      
                      750,564
                      
                      
                      
                      750,564Tender
      deposits
                      
                      
                      18,406
                      
                      
                      
                      18,406Travel
      advances to shareholders
                      
                      
                      57,483
                      
                      
                      
                      57,483Advances
      to employees
                      
                      
                      331,588
                      
                      
                      
                      331,588Total
      current assets
                      
                      $
                      18,597,428
                      
                      
                      $
                      18,597,428Restricted
      cash
                      
                      
                      356,046
                      
                      
                      
                      356,046Amount
      due from a related company
                      
                      
                      830
                      
                      
                      
                      830Property,
      plant and equipment, net
                      
                      
                      5,801,161
                      
                      
                      
                      5,801,161Intangibles,
      net
                      
                      
                      9,702,976
                      
                      
                      
                      9,702,976Deposit
      for acquisition of computer software
                      
                      
                      -
                      
                      
                      
                      -Deposit
      for technology-based design
                      
                      
                      3,505,902
                      
                      
                      
                      3,505,902Deposit
      for acquisition of subsidiary
                      
                      
                      -
                      
                      
                      
                      -Goodwill
                      
                      
                      4,831,386
                      
                      
                      
                      -TOTAL
      ASSETS
                      
                      $
                      42,795,729
                      
                      
                      $
                      37,964,343LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilitiesAccounts
      payable
                      
                      $
                      712,325
                      
                      
                      $
                      712,325Income
      tax payable
                      
                      
                      211,410
                      
                      
                      
                      211,410Turnover
      and other taxes
                      
                      
                      89,834
                      
                      
                      
                      89,834Expected
      warranty liabilities
                      
                      
                      50,460
                      
                      
                      
                      50,460Customers
      deposits
                      
                      
                      202,102
                      
                      
                      
                      202,102Accrued
      liabilities
                      
                      
                      293,480
                      
                      
                      
                      293,480Other
      payables
                      
                      
                      266,945
                      
                      
                      
                      266,945Total
      current liabilities
                      
                      $
                      1,826,556
                      
                      
                      $
                      1,826,556Warrant
      liabilities
                      
                      
                      -
                      
                      
                      
                      90,383,149TOTAL
      LIABILITIES
                      
                      $
                      1,826,556
                      
                      
                      $
                      92,209,705


36





SUNWAY
GLOBAL INC.





BALANCE
SHEETS (Continued)





Original
                        
                        
                        RestatedMarch
      31, 2009(Unaudited)
                        
                        
                        (Unaudited)STOCKHOLDERS’
      EQUITYSeries
      B Convertible Preferred Stock $0.0000001 par value; 400,000 shares
      authorized; 160,494 shares issued and outstanding at March 31,
      2009
                        
                        $
                        1
                        
                        
                        $
                        1Common
      stock at $0.0000001 par value; 100,000,000 shares authorized; 18,499,736
      shares issued and outstanding at March 31, 2009
                        
                        
                        2
                        
                        
                        
                        2Additional
      paid-in capital
                        
                        
                        22,679,965
                        
                        
                        
                        18,689,023Statutory
      reserves
                        
                        
                        3,033,855
                        
                        
                        
                        3,033,855Retained
      earnings/(accumulated deficit)
                        
                        
                        12,384,103
                        
                        
                        
                        (78,839,490
                        )Accumulated
      other comprehensive income
                        
                        
                        2,871,247
                        
                        
                        
                        2,871,247$
                        40,969,173
                        
                        
                        $
                        (54,245,362
                        )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
                        $
                        42,795,729
                        
                        
                        $
                        37,964,343


37





SUNWAY
GLOBAL INC.





STATEMENT
OF INCOME





Original
                                                              
                                                              
                                                              RestatedThree
      months ended March 31, 2009(Unaudited)
                                                              
                                                              
                                                              (Unaudited)Net
      revenues
                                                              
                                                              $
                                                              2,933,573
                                                              
                                                              
                                                              $
                                                              2,933,573Cost
      of net revenues
                                                              
                                                              
                                                              (893,980
                                                              )
                                                              
                                                              
                                                              (893,980
                                                              )Gross
      profit
                                                              
                                                              $
                                                              2,039,593
                                                              
                                                              
                                                              $
                                                              2,039,593Selling
      expenses
                                                              
                                                              
                                                              (180,349
                                                              )
                                                              
                                                              
                                                              (180,349
                                                              )General
      and administrative expenses
                                                              
                                                              
                                                              (631,894
                                                              )
                                                              
                                                              
                                                              (631,894
                                                              )Income
      from operation
                                                              
                                                              $
                                                              1,227,350
                                                              
                                                              
                                                              $
                                                              1,227,350Interest
      income
                                                              
                                                              
                                                              23,577
                                                              
                                                              
                                                              
                                                              23,577Impairment
      on investment
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (4,831,386
                                                              )Change
      in fair value of warrants
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              (20,481,276
                                                              )-Income/(loss)
      before income taxes
                                                              
                                                              $
                                                              1,250,927
                                                              
                                                              
                                                              
                                                              (24,061,735
                                                              )Income
      taxes
                                                              
                                                              
                                                              (207,996
                                                              )
                                                              
                                                              
                                                              (207,996
                                                              )Net
      income/(loss)
                                                              
                                                              $
                                                              1,042,931
                                                              
                                                              
                                                              $
                                                              (24,269,731
                                                              )Net
      income/(loss) per share:-Basic
                                                              
                                                              $
                                                              0.06
                                                              
                                                              
                                                              $
                                                              (1.31
                                                              )-Diluted
                                                              
                                                              $
                                                              0.03
                                                              
                                                              
                                                              $
                                                              (1.31
                                                              )Weighted
      average number of common stock-Basic
                                                              
                                                              
                                                              18,499,736
                                                              
                                                              
                                                              
                                                              18,499,736-Diluted
                                                              
                                                              
                                                              31,578,154
                                                              
                                                              
                                                              
                                                              18,499,736


38





SUNWAY
GLOBAL INC.





STATEMENT
OF CASH FLOWS


Original
                                                              
                                                              
                                                              RestatedThree
      months ended March 31, 2009(Unaudited)
                                                              
                                                              
                                                              (Unaudited)Cash
      flows from operating activitiesNet
      income/(loss)
                                                              
                                                              $
                                                              1,042,931
                                                              
                                                              
                                                              $
                                                              (24,269,731
                                                              )Depreciation
                                                              
                                                              
                                                              240,444
                                                              
                                                              
                                                              
                                                              240,444Amortization
                                                              
                                                              
                                                              253,803
                                                              
                                                              
                                                              
                                                              253,803Change
      in fair value of warrants
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              20,481,276Impairment
      on investment
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              4,831,386Adjustments
      to reconcile net income to net cash provided by operating
      activities:Trade
      receivables, net
                                                              
                                                              
                                                              255,153
                                                              
                                                              
                                                              
                                                              255,153Inventories
                                                              
                                                              
                                                              (430,489
                                                              )
                                                              
                                                              
                                                              (430,489
                                                              )Advances
      to suppliers
                                                              
                                                              
                                                              (953,755
                                                              )
                                                              
                                                              
                                                              (776,077
                                                              )Prepayments
                                                              
                                                              
                                                              377,494
                                                              
                                                              
                                                              
                                                              (178,370
                                                              )Tender
      deposits
                                                              
                                                              
                                                              94,457
                                                              
                                                              
                                                              
                                                              94,457Travel
      advances to shareholders
                                                              
                                                              
                                                              (18,699
                                                              )
                                                              
                                                              
                                                              (18,699
                                                              )Advances
      to employees
                                                              
                                                              
                                                              98,741
                                                              
                                                              
                                                              
                                                              98,741Accounts
      payable
                                                              
                                                              
                                                              652,243
                                                              
                                                              
                                                              
                                                              652,243Income
      tax payable
                                                              
                                                              
                                                              (393,739
                                                              )
                                                              
                                                              
                                                              (422,216
                                                              )Turnover
      and other taxes
                                                              
                                                              
                                                              (317,470
                                                              )
                                                              
                                                              
                                                              (289,028
                                                              )Loans
      from unrelated parties
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -Amount
      due from a director
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -Customers
      deposits
                                                              
                                                              
                                                              202,073
                                                              
                                                              
                                                              
                                                              202,073Accrued
      liabilities
                                                              
                                                              
                                                              (8,336
                                                              )
                                                              
                                                              
                                                              (8,336
                                                              )Other
      payables
                                                              
                                                              
                                                              (172,370
                                                              )
                                                              
                                                              
                                                              324,750Net
      cash provided by operating activities
                                                              
                                                              $
                                                              922,481
                                                              
                                                              
                                                              $
                                                              1,041,380Cash
      flows from investing activitiesPurchase
      of technology-based designs
                                                              
                                                              
                                                              (3,505,390
                                                              )
                                                              
                                                              
                                                              (3,505,390
                                                              )Purchase
      of intangibles assets
                                                              
                                                              
                                                              (485,275
                                                              )
                                                              
                                                              
                                                              (596,754
                                                              )Purchase
      of plant and equipment
                                                              
                                                              
                                                              (10,051
                                                              )
                                                              
                                                              
                                                              (78,781
                                                              )Used
      of restricted cash
                                                              
                                                              
                                                              22,320
                                                              
                                                              
                                                              
                                                              22,320Acquisition
      of subsidiary, net of cash acquired
                                                              
                                                              
                                                              (7,652,252
                                                              )
                                                              
                                                              
                                                              -Reversal
      of deposit for acquisition of subsidiary
                                                              
                                                              
                                                              7,725,445
                                                              
                                                              
                                                              
                                                              -Net
      cash used in investing activities
                                                              
                                                              $
                                                              (3,905,203
                                                              )
                                                              
                                                              $
                                                              (4,158,605
                                                              )Cash
      flows from financing activities
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -Net
      cash provided by financing activities
                                                              
                                                              $
                                                              -
                                                              
                                                              
                                                              $
                                                              -


39





SUNWAY
GLOBAL INC.





CASH
FLOWS




Original
                            
                            
                            RestatedThree
      months ended March 31, 2009(Unaudited)
                            
                            
                            (Unaudited)Net
      in cash and cash equivalents used
                            
                            $
                            (2,982,722
                            )
                            
                            $
                            (3,117,225
                            )Effect
      of foreign currency translation on cash and cash
    equivalents
                            
                            
                            5,212
                            
                            
                            
                            139,715Cash
      and cash equivalents–beginning of period
                            
                            
                            15,189,941
                            
                            
                            
                            15,189,941Cash
      and cash equivalents–end of period
                            
                            $
                            12,212,431
                            
                            
                            $
                            12,212,431Supplementary
      cash flow information:Tax
      paid
                            
                            $
                            630,304
                            
                            
                            $
                            630,304Interest
      received
                            
                            
                            23,577
                            
                            
                            
                            23,577


40


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





Forward-Looking
Statements





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





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




Overview




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




Affected
by the financial crisis and affected by equivocal reform of the medical
institutions in the PRC, bring about hospital’s investment declines, the company
sales declined quickly in the first quarter of 2009, but we believe the global
liquidity crisis will affect all businesses. However, our strong balance sheet
and liquidity position should allow us to not only weather the current economic
environment but potentially benefit and continue to execute growth strategies
and pursue the numerous opportunities.





This
discussion and analysis focuses on the business results of Daqing Sunway,
comparing its results in the three months period ended March 31, 2009 to the
three months period ended March 31, 2008.





Three-month
periods ended March 31, 2009 and March 31, 2008





Results
of Operations





In the
three months ended March 31, 2009, the Company’s net revenues, gross profit and
net income decreased significantly as compared with the same period in the same
period of 2008, but operating expenses increased slightly during these periods.
These decreases are primarily attributable to (i) adverse effects of the global
financial crisis; (ii) a decline in hospital-related investment due to expected
governmental reforms requiring pharmacies to be operated outside of and separate
from hospitals in the PRC; and (iii) the departure of one of our sales managers,
who left to set up his own company.





The
following table summarizes the results of our operations during the three months
ended March 31, 2009 and 2008, respectively, and provides information regarding
the dollar and percentage increase or (decrease) from the three months ended
March 31, 2009 and 2008.




Three
      Months Ended March 31,2009
                  
                  
                  2008
                  
                  
                  Change
                  
                  Change rateNet
      Revenue
                  
                  $
                  2,933,573
                  
                  
                  $
                  3,604,034
                  
                  
                  $
                  (670,461)
                  
                  (18.60)
                  %Cost
      of net revenue
                  
                  $
                  893,980
                  
                  
                  $
                  1,141,745
                  
                  
                  $
                  (247,765)
                  
                  (21.70)
                  %Gross
      Profit
                  
                  $
                  2,039,593
                  
                  
                  $
                  2,462,289
                  
                  
                  $
                  (422,696)
                  
                  (17.17)
                  %Gross
      Margin
                  
                  
                  69.53
                  %
                  
                  $
                  68.32
                  %
                  
                  
                  -
                  
                  1.21
                  %Operating
      Income
                  
                  $
                  1,227,350
                  
                  
                  $
                  1,650,810
                  
                  
                  $
                  (423,460)
                  
                  (25.65)
                  %Changes
      in fair value of warrants
                  
                  $
                  20,481,276
                  
                  
                  $
                  
                  -
                  
                  $
                  20,481,276
                  
                  -Impairment
      on investment
                  
                  $
                  4,831,386
                  
                  
                  $
                  
                  -
                  
                  $
                  4,831,386
                  
                  -Net
      Loss/income
                  
                  $
                  (24,269,731)
                  
                  
                  $
                  1,377,411
                  
                  
                  $
                  (25,647,142)
                  
                  -Net
      profit margin
                  
                  
                  -
                  
                  
                  
                  38.22
                  %
                  
                  
                  -
                  
                  -


41


Net
Revenue




Net
revenue for the three months ended March 31, 2009, which resulted entirely from
sales were $2,933,573, a decrease of 18.60% as compared with net revenue of
$3,604,034 for the three months ended March 31, 2008. In the three months ended
March 31, 2009, we sold 566 workstations, a decrease of 9.0% as compared with
622 workstations sold in the three months ended March 31, 2008. The decrease was
due primarily to three factors, (i) adverse effects of the global financial
crisis; (ii) a decline in hospital-related investment due to expected
governmental reforms requiring pharmacies to be operated outside of and separate
from hospitals in the PRC; and (iii) the departure of one of our sales managers,
who left to set up his own company.




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





Three
      Months Ended March 31,2009
                    
                    2008sales
                    
                    % of total sales
                    
                    sales
                    
                    % of total salesPTS
                    
                    $
                    2,933,573
                    
                    100.00
                    %
                    $
                    3,033,859
                    
                    84.18
                    %SADP
                    
                    $
                    -
                    
                    -
                    %
                    $
                    570,175
                    
                    15.82
                    %Total
      net revenue
                    
                    $
                    2,933,573
                    
                    100.00
                    %
                    $
                    3,604,034
                    
                    100.00
                    %





Gross
Profit





Gross
profit decreased 17.17% to $2,039,593 for the three months ended March 31, 2009,
as compared to $2,462,289 for the three months ended March 31, 2008. Our gross
profit margin rose 1.21% from 68.32% as of the three months ended March 31, 2008
to 69.53% as of the same period of 2009, mainly due to a drop in raw material
prices and lower costs of initial inventory.





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




Three Months Ended March 31,2009
                  
                  
                  2008US$
                  
                  
                  Gross profit
                    margin
                  
                  
                  US$
                  
                  
                  Gross profit
                    marginGross
      Profit
                  
                  $
                  2,039,593
                  
                  
                  
                  69.53
                  %
                  
                  $
                  2,462,289
                  
                  
                  
                  68.32
                  %





Income
from Operations





Operating
income decreased 25.65% to $1,227,350 for the three months ended March 31,
2009, as compared with $1,650,810 for the three months ended March 31, 2008. The
decrease was primarily attributable to a drop in sales and slight increase in
operating expenses.





Cost
of Net Revenue





Cost of
net revenue decreased to $893,980 for the three months ended March 31, 2009,
representing a 21.70% decrease as compared with $1,141,745 for the same period
of 2008. The decrease is primarily due to a decrease in sales during this
period.





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





Three
      Months Ended March 31,2009
                  
                  
                  2008
                  
                  ChangeCost
      of net revenue
                  
                  $
                  893,980
                  
                  
                  $
                  1,141,745
                  
                  
                  
                  21.70
                  %





Operating
Expenses





Operating
expenses were $812,243 for the three months ended March 31, 2009, an increase of
0.09% as compared to $811,479 for the same period of 2008. The increase was
primarily attributable to two factors: (1) selling expenses increased $155,112,
or 614.62% to $180,349 in the three months ended March 31, 2009 from $25,237 for
the same period of 2008; and (2) general and administration expenses decreased
$154,348, or 19.63% to $631,894 in the three months ended March 31, 2009 from
$786,242 for the same period of 2008. In the three months ended March 31, 2009,
we decreased the salary and benefits of our management. Reflecting this change,
costs related to salary and benefits decreased 6.95%, as compared with the same
period of 2008.





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





Three Months Ended March 31,2009
                
                
                2008
                
                ChangeSelling
      expenses
                
                $
                180,349
                
                
                $
                25,237
                
                
                
                614.62
                %General
      & Administrative expenses
                
                $
                631,894
                
                
                $
                786,242
                
                
                
                (19.63
                )%Total
      operating expenses
                
                $
                812,243
                
                
                $
                811,479
                
                
                
                0.09
                %


42


Changes
in fair value of warrants





Changes
in fair value of warrants were $20,481,276 for the three months ended March 31,
2009.  This is recorded as a non-cash income, which resulted from the
change in fair value of warrants issued to investors in conjunction with the
Company’s issuance of warrants in June of 2007 pursuant to provisions of FASB
ASC Topic 815, “Derivative and Hedging” (ASC 815). The accounting treatment of
the warrants resulted from a provision providing anti-dilution protection to the
warrant holders. On March 18, 2010, the Company entered into a Security Exchange
Agreement intending to exchange all warrants into common stock. As a result of
this agreement, on the closing date of the agreement, the Company will issue
2,000,000 shares of common stock in exchange for the retirement of all of the
outstanding warrants owned by Vision Opportunity Master Fund Ltd. and its
affiliates. The closing of the agreement is conditioned upon a closing of a
financing with minimum proceeds of $10 million to the Company.





Impairment
on investment





Impairment
on investment was $4,831,386 for the three months ended March 31, 2009.
Originally, it was showed on goodwill, it represents the excess of the cost of
an acquisition over the fair value of the net acquired identifiable assets at
the date of acquisition. In the first quarter of 2010, after performing extended
analysis into the definition of a business as set forth in the paragraph
805-10-20 of the FASB Accounting Standards Codification, we recognized the
acquisitions based on the fair value of net assets obtained. For the amount over
the fair value of the net assets obtained, we wrote them off as expenses at the
time of acquisition.





Net
Loss





Net loss
was $24,269,731 for the three months ended March 31, 2009, representing a
decrease of 1,861.98% from $1,377,411 for the same period of 2008. In the first
quarter of 2009 our net loss was impacted by a non-cash charges of $25,312,662
unrelated to the Company’s operations, mainly consisting of charge in fair value
of warrants and impairment on investment was $20,481,276 and $4,831,386
respectively. Excluding the $25,312,662 in non-cash charges, the Company’s net
income from operations for the three months ended March 31, 2009 would have been
$1,042,931, representing a decrease of 24.48% from the first quarter of 2008 to
the first quarter of 2009. The decrease is primarily due to the drop in
sales and slight increase in operating expenses.





Earnings
Per Share





Basic and
diluted net loss per share for the three months ended March 31, 2009 were $1.31
and $1.31 compared to earnings per share for the three months ended March 31,
2008 were $0.16 and $0.05. The weighted average number of shares outstanding to
calculate basic EPS was 18,499,736 and 8,360,349 for the three months ended
March 31, 2009 and March 31, 2008, respectively. The weighted average number of
shares outstanding to calculate diluted EPS was 18,499,736 and 27,642,747 for
the three months ended March 31, 2009 and March 31, 2008.





Trade
Receivables, net





Trade
receivables, net decreased 8.51% to $2,702,440 as of March 31, 2009, compared
with $2,953,919 as of December 31, 2008. The decrease in trade receivables was
primarily attributable to the decrease in sales.





Inventory





Inventory
consists of raw materials, finished goods and work in progress. As of March 31,
2009, the recorded value of our inventory has increased 73.01% to $1,022,032
from $590,738 as of December 31, 2008. The increase is mainly due to an increase
in finished goods from $218,448 as of December 31, 2008 to $459,889 as of March
31, 2009, an increase of 110.53%. Raw material inventory increased from $183,435
as of December 31, 2008 to $520,956 as of March 31, 2009, an increase of 184.0%.
Work in progress inventory decreased from $188,855 as of December 31, 2008 to
$41,187 as of March 31, 2009, a decrease of 78.19%. The increase was primarily
attributable to management’s overestimated demands of the market.





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





Item
                  
                  March 31,
                    2009
                  
                  
                  December 31,
                    2008
                  
                  ChangeFinished
      goods
                  
                  $
                  459,889
                  
                  
                  $
                  218,448
                  
                  110.53
                  %Work
      in progress
                  
                  $
                  41,187
                  
                  
                  $
                  188,855
                  
                  (78.19)
                  %Raw
      material
                  
                  $
                  520,956
                  
                  
                  $
                  183,435
                  
                  184.00
                  %Total
                  
                  $
                  1,022,032
                  
                  
                  $
                  590,738
                  
                  73.01
                  %


43


Accounts
Payable





Accounts
payable amounted to $712,325 as of March 31, 2009, an increase of 1,088.95% from
$59,912 as of December 31, 2008. The increase is mainly due to our management’s
over estimation demand of the market, which resulted of an increase in
purchases of raw material.




Liquidity
and Capital Resources





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





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




Three
      months ended March 31,2009
                
                
                2008
                
                
                ChangeNet
      cash provided by (used in) operating activities
                
                $
                1,041,380
                
                
                $
                2,572,133
                
                
                $
                (1,530,753
                )Net
      cash provided by (used in) investing activities
                
                $
                (4,158,605)
                
                
                $
                (2,198,185)
                
                
                $
                (1,960,420
                )Net
      cash provided by (used in) financing activities
                
                $
                -
                
                
                $
                -
                
                
                $
                -Effect
      of foreign currency translation on cash and cash
    equivalents
                
                $
                139,715
                
                
                $
                262,621
                
                
                $
                (122,906
                )Beginning
      cash and cash equivalent
                
                $
                15,189,941
                
                
                $
                5,820,100
                
                
                $
                9,369,841Ending
      cash and cash equivalent
                
                $
                12,212,431
                
                
                $
                6,456,669
                
                
                $
                5,755,762




Operating
Activities





For the
three months ended March 31, 2009, net cash provided by operating activities was
$1,041,380. This was primarily attributable to our net loss of $24,269,731,
adjusted by an add-back of non-cash charges mainly consisting
of depreciation, amortization, impairment on the purchase of Qingdao
Liheng Textiles Co., Ltd, and charges in fair value of warrants of
$240,444, $253,803, $4,831,386, and $20,481,276 respectively, offset
by a $495,798 decrease in working capital. Specifically, decrease in working
capital was primarily due to: i) a $255,153 trade receivables decrease driven by
a drop in revenue; ii) a $430,489 increase in inventories, principally of raw
material and work in progress inventory, due to our over estimation of
market demand; iii) a $776,077 increase in advances to suppliers to buy raw
materials; iv) a $3,871 increase in prepayments, travel advances
to shareholders, other receivables, tender deposits and advances to
employees, consisting primarily of prepayments for raw materials and other
supplies in advance of shipment, working capital for sales staff and payment of
client deposits; partially offset by a $459,486 decrease in accounts payable,
tax payable, loans from unrelated parties, amount due from a director, customer
deposits, accrued liabilities and other payables.





Investing
Activities





For the
three months ended March 31, 2009, net cash used in investing activities was
$4,158,605. This was primarily attributable to: i) a $78,781 capital expenditure
for purchase of new plant and equipment; ii) a $596,754 capital expenditure for
purchase of new intangible assets; iii) a $3,505,390 capital expenditure for the
purchase of technology-based designs, and $22,320 in restricted
cash.





Cash
and Cash Equivalents





Our cash
and cash equivalents as at the beginning of March 31, 2009, were $15,189,941 and
decreased to $12,212,431 by the end of the period.





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 8 months. We may, however, require additional cash resources due
to changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue.





Trends





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





Inflation





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





Obligations
under Material Contracts





We do not
have any material contractual obligations as of March 31, 2009.


44


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. The
Company’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. The Company believes that the following reflect the
more critical accounting policies that currently affect Sunway’s financial
condition and results of operations.





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




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





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





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





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





-
Persuasive evidence of an arrangement exists;




-
Delivery has occurred or services have been rendered;




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




-
Collection is reasonably assured.





Contract
revenues are recognized when the manufacturing and installation of the medical
equipments is completed.  Generally, the company receives total
contract sum from clients in 3 installments. 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.





Off-Balance
Sheet Arrangements




We have
no off-balance sheet arrangements as of March 31, 2009.





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK.




N/A.


45


ITEM 4T. CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





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





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





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





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





Based
upon their evaluation as of the end of the period covered by this quarterly
report, the Company’s chief executive officer and chief financial officer
concluded that, in spite of the significant deficiencies in internal control
over financial reporting described below, the Company’s disclosure controls and
procedures are effective as of March 31, 2009.





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





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





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





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





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





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





Changes
in internal controls




Our
management, with the participation our Chief Executive Officer and Chief
Financial Officer, performed an evaluation as to whether any change in our
internal controls over financial reporting  occurred during the three
months ended March 31, 2009.  Based on that evaluation, our Chief Executive
Officer and our Chief Financial Officer concluded that, other than as disclosed
above, no change occurred in the Company's internal controls over financial
reporting during the three months ended March 31, 2009 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.


46


PART II




OTHER
INFORMATION




ITEM
1 - LEGAL PROCEEDINGS




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




ITEM
1A. RISK FACTORS




Not
Applicable.




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




None.




ITEM
3 - DEFAULTS UPON SENIOR SECURITIES




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




ITEM
4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS





None.




ITEM 5 - OTHER INFORMATION




Except
for the pro-forma consolidated balance sheets of the Company reflecting the
January 2009 acquisition of Qingdao Liheng Textiles Co., Ltd and the audited
financial statements of Qingdao Liheng Textiles Co., Ltd thereto, which the
Company filed with the Commission on a Form 8-K on August 4, 2009, there were no
matters required to be disclosed on a Form 8-K during the three months ended
March 31, 2009 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.


47


SIGNATURES





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





SUNWAY
      GLOBAL, INC.Dated:
        May 13, 2010
                    By:
                    /s/
      Liu BoName:
      Liu BoTitle:
      Chief Executive Officer





Dated:
        May 13, 2010
                  By:
                  /s/
      Samuel ShengName:
      Samuel ShengTitle:
      Chief Financial Officer


48