**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D. C. 20549




**FORM
      10-QSB**




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




For
                the quarterly period ended:June
                30, 2007





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




For
                the transition period fromto





Commission
      File number 000-27159





**NATIONAL
      REALTY AND MORTGAGE, INC.**


(Exact
      name of registrant as specified in charter)





Nevada
            
            65-0439467(State
                or other jurisdiction of incorporation)
            
            (IRS
                Employer Identification No.)





Daqing
                Hi-Tech Industry Development Zone
              Daqing,
                Heilongjiang, Post Code 163316
              People’s
                Republic of China(Address
                of principal executive offices)





86-459-604-6043


Issuer’s
      telephone number





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




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




As
      of
      August 10, 2007, the Company had 19,207,455 shares of its common stock, par
      value $.001 per share, outstanding.




Transitional
      Small Business Disclosure Format:      Yes o No x







**Table
      of Contents**





PART
                I. - FINANCIAL INFORMATIONItem
                1.Financial
                Statements
            1Notes
                to Condensed Consolidated Financial Statements (Unaudited)
            7Item
                2.Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            25Item
                3.Controls
                and Procedures
            32PART
                II. - OTHER INFORMATIONItem
                2.Unregistered
              Sales of Equity Securities
            33Item
                4.Submission
              of Matters to a Vote of Security Holders
            33Item
                6.Exhibits
            33Signatures
            34




i




**PART
      I**





**Item
      1.**  **Financial
      Statements**





**NATIONAL
      REALTY AND MORTGAGE, INC.**


**REVIEWED
      FINANCIAL STATEMENTS**


**JUNE
      30, 2007 AND 2006**


**(Stated
      in US dollars)**





NATIONAL
      REALTY AND MORTGAGE, INC.








CONTENTS
            
            PAGESINDEPENDENT
                ACCOUNTANT’S REPORT
            
            1BALANCE
                SHEETS
            
            2
                -
                3STATEMENTS
                OF INCOME
            
            4STATEMENTS
                OF STOCKHOLDERS’ EQUITY
            
            5STATEMENTS
                OF CASH FLOWS
            
            6NOTES
                TO FINANCIAL STATEMENTS
            
            7
                -
                25




ii




Board
      of
      Directors and Stockholders


National
      Realty and Mortgage, Inc.




**Report
      of Independent Registered Public Accounting Firm**




We
      have
      reviewed the accompanying consolidated balance sheets of National Realty and
      Mortgage Inc. as of  June
      30,
      2007 and December 31, 2006, and the related consolidated statements of income
      and stockholders’ equity for the six months and the year then ended and cash
      flows for the three-months and the six-month periods then ended. These interim
      consolidated financial statements are the responsibility of the Company's
      management.





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





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


South
                  San Francisco, California
              Samuel
                  H. Wong & Co., LLPAugust
                  4, 2007
              Certified
                  Public Accountants




1




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**AS
      AT JUNE 30, 2007 AND DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





*Note*
            
            *6/30/2007*
            
            *12/31/2006*ASSETSCurrent
                assetsCash
                and cash equivalents
            
            
            
            
            $
            7,867,980
            
            $
            1,749,048Restricted
                Cash
            
            
            
            
            
            1,280,000
            
            
            -Short
                term investments
            
            
            3
            
            
            1,991,396
            
            
            1,702,718Accounts
                receivable
            
            
            4
            
            
            2,220,718
            
            
            1,467,963Travel
                advances to director
            
            
            5
            
            
            36,276
            
            
            6,457Advances
                to employee
            
            
            
            
            
            427,499
            
            
            54,992Inventories
            
            
            6
            
            
            558,363
            
            
            376,708Advances
                to suppliers
            
            
            
            
            
            923,929
            
            
            294,535Tender
                deposits
            
            
            
            
            
            33,189
            
            
            42,924Prepayments
                and other
            
            
            
            
            
            288,532
            
            
            334,658Total
                current assets
            
            
            
            
            $
            15,627,882
            
            $
            6,030,003Property,
                plant and equipment, net
            
            
            7
            
            
            4,419,407
            
            
            4,715,150Intangibles
            
            
            8
            
            
            1,174,263
            
            
            1,157,950TOTAL
                ASSETS
            
            
            
            
            $
            21,221,552
            
            $
            11,903,103LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilitiesShort
                term bank loan
            
            
            9
            
            $
            196,726
            
            $
            191,877Accounts
                payable
            
            
            
            
            
            40,922
            
            
            57,289Warranty
                liability
            
            
            10
            
            
            42,445
            
            
            22,811Taxes
                payable
            
            
            11
            
            
            478,465
            
            
            360,730Customers’
                deposits
            
            
            
            
            
            146,081
            
            
            67,157Accrued
                liabilities
            
            
            
            
            
            215,093
            
            
            167,646Total
                current liabilities
            
            
            
            
            $
            1,119,732
            
            $
            867,510TOTAL
                LIABILITIES
            
            
            
            
            $
            1,119,732
            
            $
            867,510





See
      accompanying notes to financial statements and accountant’s report.




2





**NATIONAL
      REALTY AND MORTGAGE, INC.**


**CONSOLIDATED
      BALANCE SHEETS (Continued)**


**AS
      AT JUNE 30, 2007 AND DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





*Note*
            
            *6/30/2007*
            
            *12/31/2006*STOCKHOLDERS’
                EQUITYSeries
                A Convertible Preferred Stock $0.001 par value 400,000 shares authorized;
                228,531 shares issued and outstanding at June 30, 2007 and December
                31,
                2006.
            
            
            
            
            
            229
            
            
            229Series
                B Convertible Preferred Stock $0.001 par value 400,000 shares authorized;
                165,432 shares issued and outstanding at June 30, 2007 and December
                31,
                2006
            
            
            
            
            
            165Common
                stock at $0.001 par value, 100,000,000 shares authorized; 19,207,455
                shares issued and outstanding at June 30, 2007 and December 31,
                2006.
            
            
            12
            
            $
            19,208
            
            $
            19,208Additional
                Paid in Capital
            
            
            
            
            
            9,960,368
            
            
            4,204,198Statutory
                reserves
            
            
            14
            
            
            1,124,073
            
            
            1,124,073Retained
                earnings
            
            
            
            
            
            7,591,286
            
            
            4,844,680Accumulated
                other comprehensive income
            
            
            
            
            
            1,406,491
            
            
            843,205$
            20,101,820
            
            $
            11,035,593TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY
            $
            21,221,552
            
            $
            11,903,103




See
      accompanying notes to financial statements and accountant’s report.





3




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**CONSOLIDATED
      STATEMENTS OF INCOME**


**FOR
      THE THREE AND SIX-MONTHS ENDED JUNE 30, 2007 AND 2006**


**(Stated
      in US Dollars)**





**Six months ended**
              **June
                30,**
            
            **Three months ended**
              **June
                30,**Notes
            
            **2007**
            
            **2006**
            
            **2007**
            
            **2006**Sales
                  (net of discounts,returns
                  and allowances)
            
            
            
            
            $
            5,659,211
            
            $
            4,183,231
            
            $
            3,195,695
            
            $
            2,187,502Cost
                of sales
            
            
            
            
            
            (1,699,615
            )
            
            (1,120,277
            )
            
            (1,055,774
            )
            
            (633,746
            )Gross
                profit
            
            
            
            
            $
            3,959,596
            
            $
            3,062,954
            
            $
            2,139,921
            
            $
            1,553,756Selling
                expenses
            
            
            
            
            
            (48,589
            )
            
            (210,061
            )
            
            (35,122
            )
            
            (203,717
            )General
                  and administrativeExpenses
            
            
            
            
            
            (665,218
            )
            
            (473,187
            )
            
            (344,537
            )
            
            (199,859
            )Income
                  from continuingoperations
            
            
            
            
            $
            3,245,789
            
            $
            2,379,706
            
            $
            1,760,262
            
            $
            1,150,180Interest
                income
            
            
            
            
            
            1,600
            
            
            4,022
            
            
            137
            
            
            3,041Interest
                expenses
            
            
            
            
            
            (3,292
            )
            
            (12,317
            )
            
            (115
            )
            
            (12,090
            )Other
                expenses
            
            
            
            
            
            -
            
            
            (72,342
            )
            
            -
            
            
            (72,490
            )Income
                before taxation
            
            
            
            
            $
            3,244,097
            
            $
            2,299,069
            
            $
            1,760,284
            
            $
            1,068,641Income
                tax
            
            
            12
            
            
            (497,491
            )
            
            (356,616
            )
            
            (264,367
            )
            
            (160,296
            )Net
                income
            
            
            
            
            $
            2,746,606
            
            $
            1,942,453
            
            $
            1,495,917
            
            $
            908,345Basic
                  Net Income per CommonShare
            
            
            
            
            $
            0.14
            
            $
            0.10
            
            $
            0.08
            
            $
            0.05Diluted
                  Net Income PerCommon
                  Share
            
            
            
            
            $
            0.14
            
            $
            0.10
            
            $
            0.08
            
            $
            0.05Basic
                  & Diluted Weighted-AverageCommon
                  Shares Outstanding
            
            
            
            
            
            19,207,455
            
            
            19,207,455
            
            
            19,207,455
            
            
            19,207,455





See
      accompanying notes to financial statements and accountant’s report.




4




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY**


**FOR
      THE YEAR ENDED DECEMBER 31, 2006**


**AND
      SIX-MONTHS ENDED JUNE 30, 2007**


**(Stated
      in US Dollars)**


Additional
              
              
              
              
              
              AccumulatedNo.
              
              Preferred
              
              No.
              
              Preferred
              
              No.
              
              
              
              Paid
              
              
              
              
              
              otherShares
              
              Series
              
              Shares
              
              Series
              
              Shares
              
              Common
              
              in
              
              Statutory
              
              Retained
              
              comprehensiveOutstanding
              
              A
              
              Outstanding
              
              B
              
              Outstanding
              
              stock
              
              Capital
              
              reserves
              
              earnings
              
              income
              
              TotalBalance,
                  January 1, 2006
              
              
              228,531
              
              $
              229
              
              
              165,432
              
              $
              -
              
              
              19,207,455
              
              $
              19,208
              
              $
              4,204,198
              
              $
              451,906
              
              $
              1,487,294
              
              $
              128,976
              
              $
              6,291,811Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              4,029,553
              
              
              -
              
              
              4,029,553Appropriations
                  to statutory
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -reserves
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              
              
              672,167
              
              
              -672,167
              
              
              -
              
              
              -Dividends
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Unrealized
                  Gain/(Loss) on Investment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              
              
              
              -
              
              
              -
              
              
              423,537
              
              
              423,537Foreign
                  currency translation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              290,692
              
              
              290,692Balance,
                  December 31, 2006
              
              
              228,531
              
              $
              229
              
              
              165,432
              
              $
              -
              
              
              19,207,455
              
              $
              19,208
              
              
              4,204,198
              
              $
              1,124,073
              
              $
              4,844,680
              
              $
              843,205
              
              $
              11,035,593Balance,
                  January 1, 2007
              
              
              228,531
              
              $
              229
              
              
              165,432
              
              
              -
              
              
              19,207,455
              
              $
              19,208
              
              
              4,204,198.
              
              $
              1,124,073
              
              $
              4,844,680
              
              $
              843,205
              
              $
              11,035,593Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,746,606
              
              
              -
              
              
              2,746,606Issuance
                to Vision re: Debentures
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              199,202
              
              
              
              
              
              
              
              
              
              
              
              199,202Issuance
                  of Series B Convertible Preferred Stock
              
              
              
              
              
              
              
              
              
              
              
              165
              
              
              
              
              
              
              
              
              5,556,968.32
              
              
              
              
              
              
              
              
              
              
              
              5,557,133Unrealized
                  Gain/(Loss) on Investment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              256,350
              
              
              256,350Foreign
                  currency translation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Adjustment
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              306,936
              
              
              306,936Balance,
                  June 30, 2007
              
              
              228,531
              
              
              229
              
              
              165,432
              
              
              165
              
              
              19,207,455
              
              $
              19,208
              
              
              9,960,368
              
              $
              1,124,073
              
              $
              7,591,286
              
              $
              1,406,491
              
              $
              20,101,820


See
      accompanying notes to financial statements and accountant’s report.




5


**NATIONAL
      REALTY AND MORTGAGE, INC.**


**STATEMENTS
      OF CASH FLOWS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007 AND 2006**


**(Stated
      in US Dollars)**


**Six
                  months ended June 30,**
              
              **Three
                  months ended June 30,***2007*
              
              *2006*
              
              *2007*
              
              *2006*Cash
                  flows from operating activitiesNet
                  income
              
              $
              2,746,606
              
              $
              1,942,453
              
              $
              1,495,917
              
              $
              908,345Depreciation
              
              
              458,686
              
              
              281,145
              
              
              113,593
              
              
              136,433Amortization
              
              
              13,697
              
              
              12,284
              
              
              (29,094
              )
              
              (33,692
              )Warranty
                  expense
              
              
              19,634
              
              
              -
              
              
              -
              
              
              -Change
                  in operating assets and liabilities(Increase)/decrease
                    in accounts and other receivable
              
              
              (1,728,614
              )
              
              (1,908,183
              )
              
              (626,240
              )
              
              (1,442,801
              )(Increase)/decrease
                  in inventories
              
              
              (181,655
              )
              
              135,690
              
              
              (54,325
              )
              
              259,751Increase/(decrease)
                  in accounts and other payable
              
              
              247,373
              
              
              (147,976
              )
              
              126,200
              
              
              (525,415
              )Net
                  cash provided by operating activities
              
              $
              1,575,727
              
              $
              315,413
              
              $
              773,650
              
              $
              (697,379
              )Cash
                  flows from investing activitiesIncrease
                    in Restricted Cash for futureInvestor
                    Relation, Legal Fees, etc.
              
              
              (1,280,000
              )
              
              
              
              
              (1,280,000
              )Sales/(Purchases)
                  of fixed assets
              
              
              (162,943
              )
              
              (151,896
              )
              
              326,467
              
              
              217,899Net
                    cash provided by/(used in) investing activities
              
              $
              (1,442,943
              )
              $
              (151,896
              )
              $
              (953,533
              )
              $
              217,899Cash
                  flows from financing activitiesShort
                  term bank borrowings
              
              
              -
              
              
              373,170
              
              
              -
              
              
              372,632Short
                  term bank borrowings repayments
              
              
              -
              
              
              (261,219
              )
              
              -
              
              
              -Proceeds
                  from Vision re: Debentures
              
              
              199,202
              
              
              
              
              
              199,202Proceeds
                  from Issuance of Series B Convertible Preferred Stock
              
              
              5,557,133
              
              
              
              
              
              5,557,133Net
                  cash provided by financing activities
              
              $
              5,756,335
              
              $
              111,951
              
              $
              5,756,335
              
              $
              372,632Net
                  cash and cash equivalents sourced
              
              
              5,889,119
              
              
              275,468
              
              
              5,576,452
              
              
              (106,848
              )Effect
                    of foreign currency translation oncash
                    and cash equivalents
              
              
              229,813
              
              
              11,056
              
              
              201,534
              
              
              44,375Cash
                  and cash equivalents - beginning of period
              
              
              1,749,048
              
              
              1,188,325
              
              
              2,089,994
              
              
              1,537,322Cash
                  and cash equivalents-end of period
              
              $
              7,867,980
              
              $
              1,474,849
              
              $
              7,867,980
              
              $
              1,474,849*Supplementary
                  cash flow information:*Interest
                  received
              
              $
              1,600
              
              $
              4,033
              
              $
              143
              
              $
              1,922Interest
                  paid
              
              
              3,056
              
              
              12,121
              
              
              16
              
              
              10,870Tax
                  paid
              
              
              487,195
              
              
              285,879
              
              
              487,195
              
              
              285,879


See
      accompanying notes to financial statements and accountant’s report.




6


**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**1.**
            **ORGANIZATION
                AND****PRINCIPAL
                ACTIVITIES**





*(a)*
            *Organizational
                History of National Realty and Mortgage
                Inc.*





We
      were
      originally incorporated in the State of Nevada on October 18, 1971 under the
      name of Mister Las Vegas, Inc. On December 15, 1994, we merged with a privately
      owned company, National Rehab Properties, Inc., a Florida corporation formed
      on
      October 1, 1993. The surviving Nevada corporation changed its name to National
      Rehab Properties, Inc. and became authorized to conduct business in the State
      of
      Florida on August 17, 1995. On October 10, 2000, we changed our name to National
      Residential Properties, Inc. and in November 2005 we changed our name to
      National Realty and Mortgage, Inc.





From
      1993
      until 1999, our business concentrated on investing in and revitalizing single
      family homes in established older residential neighborhoods in urban areas.
      We
      bought single unit vacant properties and single family homes constructed on
      them, or bought abandoned homes which we then renovated and sold. During 1999,
      while continuing to renovate urban single family homes as one aspect of our
      business, we entered a second phase of business: the development, construction
      and ownership of multifamily housing projects. In 2004, we commenced operations
      as a mortgage lender, which operations have been minimal.





On
      June
      1, 2007, we entered into a securities purchase agreement with Rise Elite
      International Limited, a British Virgin Islands company (“Rise Elite”), Vision
      Opportunity Master Fund, a Cayman Islands company, our then-current directors
      Richard Astrom and Christopher Astrom, and the holders of certain of our
      outstanding convertible debentures, pursuant to which, for a purchase price
      of
      $675,000 in cash, Rise Elite acquired the right to nominate all members of
      our
      board, Vision acquired our then outstanding convertible debentures in the amount
      of $199,202, and the holders of our then outstanding Class A common stock agreed
      to return it to us for cancellation. Pursuant to this agreement, our former
      directors and officers resigned from their position and effective June 1, 2007,
      Mr. Liu Bo has been serving as our Chairman and President and Chief Executive
      Officer and Mr. David Wang has been serving as our Secretary and Chief Financial
      Officer, and effective June 18, 2007, Mr. Liang Deli has been serving as our
      director. Mr. Liu Bo and Mr. Liang Deli hold a 70.39% and a 7.66% ownership
      interest in Rise Elite, respectively. Messrs. Liu Bo, David Wang and Liang
      Deli
      each hold similar management positions at Rise Elite, SWT (defined below) and
      Sunway (defined below).





7




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES
                (CONT’D)**





*(b)*
              *Organizational
                  History of Rise Elite International Ltd, World Through Ltd, Sunway
                  World
                  Through Technology (Daqing) Co., Ltd and Daqing Sunway Technology
                  Co.,
                  Ltd.*





Rise
      Elite was incorporated on August 10, 2006 in the Territory of the British Virgin
      Islands by the shareholders of Sunway, including, Liu Bo,  Zhao Qichao, Li
      Jing, Liang Deli, Ma Guohua and Sun Weishan. On August 16, 2006, Rise Elite
      incorporated World Through Limited, a British Virgin Islands corporation (“WTL”)
      as its wholly-owned subsidiary. On February 15, 2007, WTL formed Sunway World
      Through Technology (Daqing) Co., Ltd. (“SWT”) under the laws of the People’s
      Republic of China (the “PRC”). Prior to the reverse merger, none of Rise Elite,
      WTL or SWT had any business operations, assets or liabilities, apart from
      fundraising activities for Sunway (defined below) and serving as Sunway’s
      holding companies.





Daqing
      Sunway Technology Co., Ltd. (“Sunway”) was initially formed as a limited
      liability company in the PRC on July 9, 1997 under the name of Daqing
      Development Zone Sunway Co., Ltd. by Mr. Liu Bo and Daqing Hi-Tech Industry
      Develop Zone Hi-Tech Development Company, holding 54% and 46% of the equity
      interests in Sunway, respectively. Sunway was initially formed to engage in
      the
      business of computer software development consulting, data processing, data
      base
      services, computer equipment maintenance, production and sale of electronic
      and
      communication equipment, sale of medical and household appliances and petroleum
      chemical technical services. The registered capital of Sunway was RMB
      12,000,000. On January 8, 1999, Daqing Hi-Tech Industry Develop Zone Hi-Tech
      Development Company transferred its 46% interest in Sunway to Mr. Liu Bo and
      several other individuals pursuant to a share transfer agreement by and among
      them. On June 22, 2000, Sunway’s registered capital was increased to RMB
      27,000,000. On August 30, 2000, Sunway was changed from a limited liability
      company to a joint-stock company and increased its registered capital to RMB
      35,000,000. The following directors and executive officers of the Company,
      each
      of whom serves as part of the management of Sunway, hold an aggregate of 78.05%
      of Sunway’s equity, all of which has been pledged to SWT along with irrevocable
      proxies.




Set
      forth
      below is the percentage of ownership interest in Sunway owned by each of the
      members of the board of directors and executive officers of the Company as
      of
      June 12, 2007:


**Name**
            
            **Position**
            
            **Ownership
                Percentage**Liu,
                Bo
            
            CEO,
                Director, Chairman of the Board
            
            70.39%Liang,
                Deli
            
            Director
            
            7.66%Wang,
                David
            
            Secretary
                and CFO
            
            -Total
            
            
            
            78.05%





8





**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES
                (CONT’D)**





*(c)*
            *Reverse-Merger*





On
      June
      6, 2007, National Realty and Mortgage Inc. (“NRMI” or the “Company”) underwent a
      reverse-merger with WTL involving a share exchange transaction with Rise Elite
      to exchange 210,886 shares of the Company’s Series A Convertible Preferred
      Stock, par value $0.001 per share, for all of the issued and outstanding stock
      of WTL, which was held by Rise Elite. As a result of the share exchange
      transaction, WTL became the wholly-owned subsidiary of the Company, and SWT
      became the indirectly wholly-owned subsidiary of the Company.




In
      connection with the share exchange transaction, on June 6, 2007, the Company
      consummated a private financing transaction, in which the Company issued an
      aggregate of 165,432 shares of its series B convertible preferred stock, and
      warrants (including a warrant issued to the placement agent of the private
      financing transaction) to purchase an aggregate of 19,182,351 shares of its
      common stock, in exchange for $6,700,000 in gross cash proceeds. The share
      exchange transaction and the private financing transaction are collectively
      referred to hereafter as the “reverse merger transaction.”





On
      July
      27, 2007, the Company announced that the holders of a majority of its
      outstanding voting stock, acting by written consent, voted to approve a change
      of the Company’s name to SUNWAY GLOBAL INC. As of August 14, 2007, the name
      change is not yet effective.





The
      share
      exchange transaction has been accounted for as a recapitalization of NRMI where
      the Company (the legal acquirer) is considered the accounting acquiree and
      WTL
      (the legal acquiree) is considered the accounting acquirer. As a result of
      this
      transaction, the Company is deemed to be a continuation of the business of
      WTL.





Accordingly,
      the accompanying consolidated financial statements are those of the accounting
      acquirer (WTL). The historical stockholders’ equity of the accounting acquirer
      prior to the share exchange has been retroactively restated as if the share
      exchange transaction occurred as of the beginning of the first period presented.
      See also Note 12 - Capitalization.





*(d)*
            *PRC
                Restructuring Arrangement*





Immediately
      following the above transactions, SWT executed a series of agreements with
      Sunway, as a result of which SWT acquired control over Sunway’s business,
      personnel and finances as if it were a wholly owned subsidiary of SWT
      (collectively, the "Restructuring Agreements"). The reasons that SWT used the
      Restructuring Agreements to acquire control of Sunway, instead of using a
      complete acquisition of Sunway's assets or equity to make Sunway a wholly-owned
      subsidiary of SWT, are that (i) new PRC laws governing share exchanges with
      foreign entities, which became effective on September 8, 2006, make the
      consequences of such acquisitions uncertain and (ii) other than by share
      exchange, PRC law requires that Sunway be acquired for cash and WTL was not
      able
      to raise sufficient financing at a valuation acceptable to it to pay the full
      appraised value for Sunway’s assets or shares as required under PRC
      law.





9




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**





**(Stated
      in US Dollars)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES
                (CONT’D)**





Certain
      of the transactions contemplated by the Restructuring Agreements are in the
      process of being completed. Specifically, SWT must apply for, and obtain the
      approval of the trademark office, patent office and copyright office for, the
      transfer of intellectual property to it from Sunway, and (iv) SWT must obtain
      a
      new business license from the PRC State Administration for Industry and Commerce
      in Daqing, PRC to reflect SWT's status as an operating company. Because the
      intellectual property transfer involves the approval of PRC governmental
      entities, it is uncertain when they will be completed; however, the patent
      and
      copyright portions of the intellectual property transfer are likely to be
      concluded within approximately three months, and the trademark portion of the
      intellectual property transfer is likely to be concluded within one year. SWT
      currently has a temporary business license, issued by the PRC State
      Administration for Industry and Commerce in Daqing, to conduct operations in
      the
      PRC. If that regulatory agency finds that the Company is not in compliance
      with
      relevant PRC regulations, the temporary business license could be
      cancelled.





The
      following is a summary of the material terms of each of the Restructuring
      Agreements. All references to the Restructuring Agreements and other agreements
      are qualified, in their entirety, by the text of those agreements. The
      transactions contemplated under the Restructuring Agreements are hereinafter
      collectively referred to as the PRC restructuring transactions.





(i)
      Consignment Agreements and Consignment Transfer
      Agreement





Each
      of
      Sunway’s six shareholders, together holding 100% of Sunway’s equity interests
      (collectively, the “Sunway Shareholders”), entered into a Consignment Agreement
      with Rise Elite (each a “Consignment Agreement” and collectively, the
“Consignment Agreements”). Pursuant to these agreements, each such Sunway
      Shareholder consigned all its rights and interests as a shareholder of Sunway
      to
      SWT, including without limitation, its rights to elect directors and officers,
      obtain information about Sunway, dispose of the consigned equity interests
      and
      other shareholder rights and interests. These agreements will remain effective
      until SWT or its designees have acquired 100% of the equity interest of Sunway
      or substantially all assets of Sunway. Prior to the termination of the
      Consignment Agreements, the Sunway Shareholders are prohibited from disposing,
      encumbering, consigning or restructuring the consigned interests without the
      prior written consent of SWT. Pursuant to a Consignment Transfer Agreement
      dated
      the same date, Rise Elite transferred all its rights and interests under the
      Consignment Agreements to WTL.





10




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**1.**
            **ORGANIZATION
                AND PRINCIPAL ACTIVITIES
                (CONT’D)**




(ii)
      Exclusive Purchase Option Agreement





Under
      the
      Exclusive Purchase Option Agreement, the Sunway Shareholders granted WTL an
      exclusive option to purchase all or part of the Shareholders’ equity interest in
      Sunway and Sunway granted WTL an exclusive option to purchase all Sunway’s
      assets, when and as permitted under PRC laws and regulations. The agreement
      provides that, unless otherwise required under PRC laws and regulations, the
      consideration for the equity transfer or the asset transfer under the agreement
      will be the lowest price permitted under the PRC laws and regulations.





Prior
      to
      the termination of the Exclusive Purchase Option Agreement, without the prior
      written consent of SWT, Sunway is restricted from, among other things, (i)
      supplementing or amending its articles of association or rules of the company
      in
      any manner, and changing its registered capital or shareholding structure in
      any
      manner, (ii) transferring, mortgaging or otherwise disposing of the lawful
      rights and interests to and in its assets or income, or encumbering its assets
      and income in any way that would affect SWT’s security interest, (iii)
      incurring, assuming or guaranteeing any debts except those that are incurred
      during its normal business operation or agreed to by SWT in advance, (iv)
      entering into any material contract (exceeding RMB5,000,000 in value), unless
      it
      is necessary for the company’s normal business operation; (v) providing any loan
      or guarantee to any third party; (vi) acquiring or consolidating with any third
      party, or investing in any third party; (vii) distributing any dividends to
      the
      shareholders in any manner, and, at SWT’s request, shall promptly distribute all
      distributable dividends to the Sunway Shareholders (collectively, the
“restrictive provisions”).





These
      agreements will remain effective until SWT or its designees have acquired 100%
      of the equity interests of Sunway or substantially all assets of Sunway.





(iii)
      Intellectual Property Transfer Agreement





Under
      the
      Intellectual Property Transfer Agreement, Sunway agreed to transfer to SWT
      all
      of its 13 patents, two trademarks, one registered software program and
      other intellectual property rights, and all rights, titles, related interests
      thereto, including all technical instructions, drawings, designs, and other
      documentation (collectively, the “Transferred IP”) for a purchase price of
      5,000,000 yuan (or approximately $654,108, which is subject to a purchase price
      adjustment based on the minimum appraised value on IP rights allowed under
      PRC
      laws and regulations for such transfer. This appraisal is expected to be
      completed in 15 days.




11




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**1.**  **ORGANIZATION
      AND PRINCIPAL ACTIVITIES (CONT’D)**




(iv)
      Intellectual Property Licensing Agreement





Under
      the
      Intellectual Property Licensing Agreement, SWT agreed to grant an exclusive
      license to Sunway, for a term of 5 years, to use the Transferred IP for an
      annual licensing fee equal to 5% of Sunway’s revenue of that year.





(v)
      Consigned Management Agreement





Pursuant
      to this consigned management agreement between SWT, Sunway and the shareholders
      of Sunway (the "Consigned Management Agreement"), SWT and its shareholders
      agreed to entrust the business operations of Sunway and its management to SWT
      until SWT acquires all of the assets or equity of Sunway (as more fully
      described in the Exclusive Purchase Option Agreement description above). Under
      the Consigned Management Agreement, SWT will provide financial, technical and
      human resources management services to Sunway which will enable SWT to control
      Sunway's operations, assets and cash flow. In turn, it will be entitled to
      3% of
      Sunway’s revenue on a yearly basis.





(vi)
      Loan
      Agreement





Under
      the
      Loan Agreement, SWT agreed to provide a loan to Sunway in the principal amount
      of 40,400,000 yuan (or approximately $5,298,152) to Sunway to be used as working
      capital for its business operations. Repayment should be made in its entirety
      or
      in part, at SWT’s option and upon 10 days written notice, either (i) in cash, or
      (ii) by a transfer of equity interests of Sunway or all its assets (at the
      minimum price allowed under PRC law with any excess over such price continued
      to
      be subject to repayment obligation under the Loan Agreement). The Loan Agreement
      also provides restrictive provisions substantially similar to those provided
      under the Exclusive Purchase Option Agreement as described above under
“Exclusive Purchase Option Agreement” in this Section.





The
      source of funds for SWT to make payment under the Intellectual Property Transfer
      Agreement and to fund the Loan Agreement is the proceeds of the private
      placement offering.





(vii)
      Equipment Lease Agreement





Under
      the
      Equipment Lease Agreement, SWT agreed to lease all its equipment to be purchased
      using the proceeds from the private financing to Sunway in exchange for an
      annual rental fee equal to 28% of its annual revenue.





Sunway,
      which is the major operating company in PRC, is considered as a VARIABLE
      INTEREST ENTITY pursuant to FASB Interpretation 46 and is, therefore permitted
      to have its financial statements to be included in the Company’s consolidated
      financial statements notwithstanding of the above contractual
      arrangement.





12




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**1.**  **ORGANIZATION
      AND PRINCIPAL ACTIVITIES (CONT’D)**





*(e)*
            *Business
                Activities*





As
      a
      result of the consummation of the reverse merger and the PRC restructuring
      arrangement, the Company now engages in the business of designing,
      manufacturing and selling logistic transport systems and medicine dispensing
      systems and equipment. The principal product is a pneumatic tube logistic
      transport system used in hospitals and other medical facilities. The Company
      recently developed an automatic medicine dispensing and packing system, which
      was introduced to the market in the second quarter of 2007 for
      use in hospitals and medical facilities.


.


**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES**





*(a)*
            *Method
                of Accounting*





The
      Company maintains its general ledger and journals with the accrual method
      accounting for financial reporting purposes. The financial statements and notes
      are representations of management. Accounting policies adopted by the Company
      conform to generally accepted accounting principles in the United States of
      America and have been consistently applied in the presentation of financial
      statements, which are compiled on the accrual basis of accounting.




*(b)*
            *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.




13


**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**





*(c)*
            *Economic
                and political risks*





The
      Company’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
      Company’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
      Company’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.





*(d)*
            *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
            45
                years




*(e)*
            *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
                yearsOffice
                equipment and motor vehicles
            10
                yearsMachinery
                and equipment
            6
                yearsMolds,
                Dies, & Castings
            6
                yearsSoftware
                systems
            3
                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. The cost of maintenance and repairs is charged to income as incurred,
      whereas significant renewals and betterments are capitalized.




14


**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**





**(Stated
      in US Dollars)**





**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**





*(f)*
              *Accounting
                  for Software Systems*





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





*(g)*
            *Accounting
                for the Impairment of Long-Lived
                Assets*





The
      long-lived assets held and used by the Company are reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      assets may not be recoverable. It is reasonably possible that these assets
      could
      become impaired as a result of technology or other industry changes.
      Determination of recoverability of assets to be held and used is by comparing
      the carrying amount of an asset to future net undiscounted cash flows to be
      generated by the assets.





If
      such
      assets are considered to be impaired, the impairment to be recognized is
      measured by the amount by which the carrying amount of the assets exceeds the
      fair value of the assets. Assets to be disposed of are reported at the lower
      of
      the carrying amount or fair value less costs to sell.





During
      the reporting periods, there was no impairment loss.





*(h)*
            *Inventories*





Inventories
      consisting of raw materials, and finished goods are stated at the lower of
      cost
      or market value. Finished goods are comprised of direct materials, direct labor
      and an appropriate proportion of overhead.





*(i)*
            *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
      made when collection of the full amount is no longer probable. Bad debts are
      written off as incurred.





Allowance
      for doubtful debt included in general and administrative expenses were nil
      and
      nil for the six months ended June 30, 2007 and 2006, respectively.





15




**NATIONAL
      REALTY AND MORTGAGE, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**FOR
      THE SIX-MONTHS ENDED JUNE 30, 2007**


**AND
      THE YEAR ENDED DECEMBER 31, 2006**


**(Stated
      in US Dollars)**





**2.**  **SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)**





*(j)*
              *Cash
                  and cash equivalents*





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




*6/30/2007*
            
            *12/31/2006*Bank
                of Communications, Branch of DaqingCity
                Economic Zone
            
            
            3,262,269
            
            
            1,630,320Daqing
                City Commercial Bank
            
            
            103,748
            
            
            100,573








*(k)*
            *Foreign
                currency translation*





The
      accompanying financial statements are presented in United States dollars. The
      functional currency of the Company is the Renminbi (RMB). The financial
      statements are translated into United States dollars from RMB at year-end
      exchange rates as to assets and liabilities and average exchange rates as to
      revenues and expenses. Capital accounts are translated at their historical
      exchange rates when the capital transactions occurred.





*6/30/2007*
            
            12/31/2006
            
            *6/30/2006*Twelve
                months ended
              RMB
                : US$ exchange rate
            
            
            -
            
            
            7.81750
            
            
            -Six
                months ended
              RMB
                : US$ exchange rate
            
            
            7.6248
            
            
            -
            
            
            8.0065Average
                six months ended
              RMB
                : US$ exchange rate
            
            
            7.7300
            
            
            -
            
            
            8.0392Average
                three months end
              RMB
                : US$ exchange rate
            
            
            7.6891
            
            
            -
            
            
            8.0229





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 US$
      at
      the rates used in translation.




16


**NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES
                  (CONT’D)**
 
 *(l)*
              *Revenue
                  recognition*
 
 Revenue
        represents the invoiced value of goods sold recognized upon the delivery
        of
        goods to customers. Revenue is recognized when all of the following criteria
        are
        met:
 ·
              Persuasive
                  evidence of an arrangement exists;
 ·
              Delivery
                  has occurred or services have been rendered;
                  and
 ·
              The
                  seller’s price to the buyer is fixed or
                  determinable.
 
 Contract
        revenues are recognized when the manufacturing and installation of the medical
        equipments is completed. Generally, the company receives total contract sum
        from
        clients in 3 installments. Deposit of 30% is received from client when the
        contract is signed. Second payment of 30% is received when the project
        commenced. The final sum of the remaining portion is received after the
        installation is completed within 4 months.
 
 *(m)*
              *Operating
                  lease rental*
 
 Operating
        lease rental payment which is the temporary rental for the office of
        representatives in Hangzhou, included in general and administrative expenses
        were $10,294 and nil for the six months ended June 30, 2007 and 2006,
        respectively.
 
 
 *(n)*
              *Advertising*
 
 The
        Company expensed all advertising costs as incurred. Advertising expenses
        included in selling expenses were $26,805 and $82,398 for the six months
        ended
        June 30, 2007 and 2006, respectively.
 
 *(o)*
              *Shipping
                  and handling*
 
 All
        shipping and handling are expensed as incurred. Shipping and handling expenses
        included in selling expenses were $15,090 and $11,893 for the six months
        ended
        June 30, 2007 and 2006, respectively.
 
 *(p)*
              *Research
                  and development*
 
 All
        research and development costs are expensed as incurred. Research and
        development costs included in general and administrative expenses were $83,536
        and $116,000 for the six months ended June 30, 2007 and 2006.
 
 *(q)*
              *Retirement
                  benefits*
 
 Retirement
        benefits in the form of contributions under defined contribution retirement
        plans to the relevant authorities are charged to the statement of income
        as
        incurred. The retirement benefit expenses included in general and administrative
        expenses were $27,297 and $5,433 for the six months ended June 30, 2007 and
        2006, respectively.
  17
 
 **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES
                  (CONT’D)**
 
 *(r)*
              *Income
                  taxes*
 
 The
        Company 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 Company is able to realize
        their benefits, or that future realization is uncertain.
 
 The
        Company is operating in the PRC, and in accordance with the relevant tax
        laws
        and regulations of PRC, the corporation income tax rate is 33%. However,
        the
        Company is a high technology company, and in accordance with the relevant
        regulations regarding the favorable tax treatment for high technology companies,
        the Company is entitled to a reduced tax rate of 15% as long as the company
        located and registered in the high and advance technology development
        zone.
 
 *(s)*
              *Statutory
                  reserves*
 
 Statutory
        reserves refer to the amount appropriated from the net income in accordance
        with
        laws or regulations, which can be used to recover losses and increase capital,
        as approved, and are to be used to expand production or operations.
 
 *(s)*  *Comprehensive
        income*
 
 Comprehensive
        income is defined as including all changes to equity, except those resulting
        from investments by owners and distributions to owners. Among other disclosures,
        all items that is 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 Company’s current component of other comprehensive
        income is the foreign currency translation adjustment and the unrealised
        gain on
        investment held for resale.
 
 *(t)*  *Warranty
        Policy*
 
 The
        estimation of warranty obligations is determined in the same period that
        revenue
        from the sale of the related products is recognized. The warranty obligation
        is
        based on historical experience and reflects management’s best estimate of
        expected costs at the time products are sold. Warranty accruals are adjusted
        for
        known or anticipated warranty claims as new information becomes available.
        Future events and circumstances could materially change our estimates and
        require adjustments to the warranty obligation. New product launches require
        a
        greater use of judgment in developing estimates until historical experience
        becomes available.
 
 18
 
 **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES
                  (CONT’D)**
 
 *(u)*
              *Recent
                  accounting pronouncements*
  In
        May
        2006, the FASB issued a SFAS 154, “Accounting Changes and Error Corrections” to
        replace APB Opinion No. 20, “Accounting Changes” and SFAS 3, “Reporting
        Accounting Changes in Interim Financial Statements” requiring retrospective
        application to prior periods financial statements of changes in accounting
        principle, unless it is impracticable to determine either the period-specific
        effects or the cumulative effect of the change.  When it is impracticable
        to determine the period-specific effects of an accounting change on one or
        more
        individual prior periods presented, SFAS 154 requires the new accounting
        principle be applied to the balances of assets and liabilities as of the
        beginning of the earliest period for which retrospective application is
        practicable and that a corresponding adjustment be made to the opening balance
        of retained earnings (or other appropriate components of equity or net assets
        in
        the statement of financial position) for that period rather than being reported
        in an income statement.  When it is impracticable to determine the
        cumulative effect of applying a change in accounting principle to all prior
        periods, SFAS 154 requires that the new accounting principle be applied as
        if it
        were adopted prospectively from the earliest date practicable.  The
        effective date for this statement is for accounting changes and corrections
        of
        errors made in fiscal year beginning after December 15, 2006.
  In
        July
        2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes
        - an
        Interpretation of FASB Statement No. 109, which clarifies the accounting
        for
        uncertainty in tax positions. This Interpretation requires that the Company
        recognize in its consolidated financial statements the impact of a tax position
        if that position is more likely than not of being sustained on audit, based
        on
        the technical merits of the position. The provisions of FIN 48 are effective
        for
        the Company on January 1, 2007, with the cumulative effect of the change
        in
        accounting principle, if any, recorded as an adjustment to opening retained
        earnings.
  In
        September 2006, the FASB issued SFAS 157, Fair Value Measurements, which
        defines
        fair value, establishes a framework for measuring fair value in generally
        accepted accounting principles, and expands disclosures about fair value
        measurements. SFAS 157 applies under other accounting pronouncements that
        require or permit fair value measurements, where fair value is the relevant
        measurement attribute. The standard does not require any new fair value
        measurements. SFAS 157 is effective for financial statements issued for fiscal
        year beginning after November 15, 2007, and interim periods within those
        fiscal
        years.
 
 In
        September 2006, the SEC issued SAB No. 108, which provides guidance on the
        process of quantifying financial statement misstatements. In SAB No. 108,
        the
        SEC staff establishes an approach that requires quantification of financial
        statement errors, under both the iron-curtain and the roll-over methods,
        based
        on the effects of the error on each of the Company’s financial statements and
        the related financial statement disclosures. SAB No.108 is generally effective
        for annual financial statements in the first fiscal year ending after November
        15, 2006. The transition provisions of SAB No. 108 permits existing public
        companies to record the cumulative effect in the first year ending after
        November 15, 2006 by recording correcting adjustments to the carrying values
        of
        assets and liabilities as of the beginning of that year with the offsetting
        adjustment recorded to the opening balance of retained earnings.
 
 The
        Company’s management does not anticipate that the adoption of these standards
        will have a material impact on these consolidated financial
        statements.
  19
 
 **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **2.**
              **SHORT-TERM
                  INVESTMENTS**
 
 On
        October 22, 2006, the Company invested in Bank of Communication Growth Fund
        (PRC) at a cost of $1,279,181 (RMB 10,000,000). The market value of this
        investment increased to $1,991,396 (RMB 15,184,000) as of June 30,
        2007.
 
 The
        appreciation in value of $712,215 (RMB 5,184,000) was recorded as “Unrealized
        Investment Gain” and included in the Stockholders’ Equity.
 
 **3.**
              **ACCOUNTS
                  RECEIVABLE**
  *6/30/2007*
              
              
              *12/31/2006*Total
                  Accounts Receivable
              $
              2,228,281
              
              $
              1,475,340Less:
                  Allowance for Bad Debts
              
              (7,563)
              
              
              (7,377)$
              2,220,718
              
              $
              1,467,963
 
 All
        of
        the above accounts receivable are due within one year of aging.
 
 An
        analysis of the allowance for doubtful accounts for the six months ended
        June
        30, 2007 and the year ended December 31, 2006 is as follows:
 
 *6/30/2007*
              
              
              *12/31/2006*Balance
                  at beginning of year
              $
              7,377
              
              $
              4,284Addition
                  of bad debt expense
              
              186
              
              
              3,093Balance
                  at end of year
              $
              7,563
              
              $
              7,377
 
 
 **4.**
              **TRAVEL
                  ADVANCES TO DIRECTORS**
 
 Travel
        advances were made to Directors to enable their execution of operational
        duties
        in marketing and sales promotion. The following table provides an analysis
        of
        the outstanding accounts.
 
 *6/30/2007*
              
              
              *12/31/2006*Bo
                  Liu
              $
              4,071
              
              $
              2,794Weishan
                  Sun
              
              10,656
              
              
              3,008Qichao
                  Zhao
              
              671
              
              
              655Deli
                  Liang
              
              20,878
              
              
              -$
              36,276
              
              $
              6,457
  20
  **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **5.**
              **INVENTORIES**
  *6/30/2007*
              
              
              *12/31/2006*Finished
                  goods
              $
              368,328
              
              $
              200,852Raw
                  materials
              
              190,035
              
              
              175,856$
              558,363
              
              $
              376,708
  **6.**
              **PROPERTY,
                  PLANT AND EQUIPMENT, NET**
  *6/30/2007*
              
              
              *12/31/2006**At
                  cost:*Building
              $
              1,301,121
              
              $
              1,269,048Machinery
                  and equipment
              
              928,953
              
              
              902,789Molds,
                  Dies, & Castings
              
              2,747,613
              
              
              2,679,885Computer
                  software
              
              1,442,661
              
              
              1,407,099Office
                  equipment and motor vehicles
              
              57,445
              
              
              56,029$
              6,477,793
              
              $
              6,314,850*Less*:
                  accumulated depreciation
              
              (2,058,386)
              
              
              (1,599,700)$
              4,419,407
              
              $
              4,715,150
 
 Depreciation
        expense included in the cost of sales for the six months ended 2007 was $145,200
        (2006: $38,175), and included in the general and administrative expenses
        for the
        six month ended 2007 was $82,362 (2006: $106,537).
 
 **7.**
              **INTANGIBLES**
  *6/30/2007*
              
              
              *12/31/2006*Land
                  use rights, at cost
              $
              1,217,435
              
              $
              1,187,425*Less:*accumulated amortization
              
              (43,172)
              
              
              (29,475)$
              1,174,263
              
              $
              1,157,950
 
 
 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.
 21
 
 **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **8.**
              **INTANGIBLES
                  (CONT’D)**
 
 The
        company acquired the rights to use a parcel of land totaling 26,522 square
        meters, for a consideration of US$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 Company’s facility.
 
 Amortization
        expense included in the general and administrative expenses for the six months
        ended 2007 and 2006 was $12,775 and $12,284, respectively.
 
 **9.**
              **SHORT
                  TERM BANK LOANS**
 
 The
        Company was granted a loan of $383,754 (RMB 3,000,000) on April 28, 2006
        for a
        term from April 28, 2006 to November 30, 2007 at an interest rate of 5.76% per
        annum to be secured by a mortgage of the Company’s real property being the
        office facility as registered under property permit reference number
        NA216750.
 
 The
        loan
        agreement stipulated a repayment of $191,877 (RMB 1,500,000) on December
        21,
        2006; therefore, the loan balance outstanding at June 30, 2007 amounted to
        $196,726 (RMB 1,500,000). There is an increase of $4,849 of loan amount due
        to
        foreign currency translation.
 
 **10.**
              **WARRANTY
                  LIABILITIES**
 
 An
        analysis of the warranty liabilities for the six months ended June 30, 2007
        and
        the year ended December 31, 2006 is as follows:
 
 *6/30/2007*
              
              
              *12/31/2006*Balance
                  at beginning of period
              $
              22,811
              
              $
              -Addition
                  of warranty liabilities
              
              33,523
              
              
              22,811Warranty
                  expense for the period
              
              (13,889)
              
              
              -Balance
                  at end of period
              $
              42,445
              
              $
              22,811
  **11.**
              **TAXES
                  PAYABLE**
 
 *6/30/2007*
              
              
              *12/31/2006*Sales
                  tax
              $
              198,009
              
              $
              103,632City
                  development tax
              
              13,861
              
              
              7,254Income
                  tax
              
              266,595
              
              
              249,844$
              478,465
              
              $
              360,730
  22
  **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **12.**
              **CAPITALIZATION**
 
 As
        a
        result of the reverse-merger on June 6, 2007 involving an exchange of shares
        and
        issuance of shares to investors and other parties involved in the deal, total
        capitalization of the Company by common stock and Preferred A & B stock with
        related additional paid-in capital at June 30, 2007 and December 31, 2006
        are
        depicted in the following table:
 
 Name
                  of shareholder
              
              Number
                  of shares
              
              Stock
                  Capital
              
              Additional
                Paid-In
                  CapitalPreferred
                  A StockIssued
                  to Rise Elite upon share exchange
              
              
              210,886
              
              $
              211
              
              
              (211
              )Issued
                  to Kuhns Brothers and Designees
              
              
              17,645
              
              
              18
              
              
              (18
              )228,531
              
              
              229
              
              $
              (229
              )Preferred
                  B StockIssued
                  to Private Investors
              
              
              165,432
              
              $
              165
              
              $
              6,699,835Less:
                  Cost of Issue
              
              
              
              
              
              
              
              
              (1,142,867
              )165,432
              
              
              165
              
              
              5,556,968Common
                  StockIssued
                  to Vision re: debenture
              
              
              12,734,689
              
              $
              12,735
              
              $
              186,467Issued
                  to original shareholders before reverse-merger
              
              
              6,472,766
              
              
              6,473
              
              
              -Conversion
                  of Sunway Original Capital before Revere Merger to Additional Paid
                  in
                  Capital
              
              
              
              
              
              
              
              
              4,223,63519,207,455
              
              
              19,208
              
              
              4,410,102
 
 
 The
        Series A and Series B convertible preferred stock and the warrants as described
        below are assumed to be non-convertible or exercisable within 60 days of
        the
        issuance of such preferred stock and warrants.
 
 Pursuant
        to Series B Convertible Preferred Stock Purchase Agreement on June 5, 2007,
        the
        Company agreed to issue warrants to each Series B preferred stock investor
        to
        purchase shares of common stock.
 
 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 /2012Series
                  E
              
              
              496,296
              
              
              1.62
              
              
              6
                  /5 /2012
   23
  **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **13.**
              **INCOME
                  TAXES**
 
 The
        following table accounts for the differences between the actual tax provision
        (15%) and the amounts obtained by applying the relevant applicable corporation
        income tax rate (33%) to income before tax for the six months ended June
        30:
        -
 
 *2007*
              
              
              *2006*Income
                  before tax
              $
              3,230,208
              
              $
              2,299,069Tax
                  at the domestic income tax rate
              $
              1,065,969
              
              $
              758,693Effect
                  of tax exemption granted
              
              (568,478)
              
              
              (402,077)Current
                  income tax expense
              $
              497,491
              
              $
              356,616
 
 
 **14.**
              **STATUTORY
                  RESERVE COMMITMENTS**
 
 Certain
        provisions under existing PRC laws require enterprises operating in China
        to
        reserve up to 50% of its capital for future reinvestment and development.
        The
        PRC government retains exclusive right to enforce compliance with these
        provisions, and these provisions may change at any time. Accordingly, with
        these
        provisions, the Company has appropriated reserves from capital. In addition,
        the
        Company had the following unfunded commitments as at June 30: -
 
 *6/30/2007*
              
              
              *12/31/2006*Common
                  Stock Capital of Daqing Sunway Technology Co., Ltd before
                  reverse-merger
              $
              4,223,635
              
              $
              4,223,635-
                  50% ceiling limit
              
              2,111,818
              
              
              2,111,818*Less*:
                  Reserves provided
              
              (1,124,073)
              
              
              (1,124,073)$
              987,745
              
              $
              987,745
  24
 
 **NATIONAL
        REALTY AND MORTGAGE, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **FOR
        THE SIX-MONTHS ENDED JUNE 30, 2007**
 **AND
        THE YEAR ENDED DECEMBER 31, 2006**
 **(Stated
        in US Dollars)**
 
 **15.**
              **BUSINESS
                  AND GEOGRAPHICAL SEGMENTS**
 
 The
        Company has contracted with customers usually in two business segments
        altogether, one is workstation type A and another one is workstation type
        B. Two
        types of workstation are of same function but with different product design.
 
 ***2007***
              
              *Workstation*
              
              
              *Workstation**Type
                  A*
              
              
              *Type
                  B*
              
              
              *Total*Turnover
              $
              2,304,074
              
              $
              3,355,137
              
              $
              5,659,211Cost
                  of sales
              
              (691,976)
              
              
              (1,007,639)
              
              
              (1,699,615)Segment
                  result
              $
              1,612,098
              
              $
              2,347,498
              
              $
              3,959,596
 
 ***2006***
              
              *Workstation*
              
              
              *Workstation**Type
                  A*
              
              
              *Type
                  B*
              
              
              *Total*Turnover
              $
              4,183,231
              
              $
              -
              
              $
              4,183,231Cost
                  of sales
              
              (1,120,277)
              
              
              -
              
              
              (1,120,277)-Segment
                  result
              $
              3,062,954
              
              $
              -
              
              $
              3,062,954
 
 
 The
        company’s operations are located in the PRC. All sales revenue is derived from
        customers in the PRC. All of the company’s assets are located in the PRC.
        Accordingly, no analysis of the Group's sales and assets by geographical
        market
        is presented.
 
 **Item
        2.**  **Management’s
        Discussion and Analysis**
 
 The
        following discussion and analysis of the consolidated financial condition
        and
        results of operations should be read in conjunction with the consolidated
        financial statements and related notes of Sunway, appearing elsewhere in
        this
        report. This discussion and analysis contains forward-looking statements
        that
        involve risks, uncertainties and assumptions. Actual results may differ
        materially from those anticipated in these forward-looking statements.
 
 As
        a
        result of the reverse merger, financing and related transactions described
        in our current report on Form 8-K/A filed with the SEC on June 27, 2007,
        the
        Company ceased to be a shell company and became a holding company for entities
        that, through contractual relationships, control the business of Daqing Sunway
        Technology Co., Ltd. (“Sunway”), a company organized under the laws of the PRC
        that designs, manufactures and sells logistic transport systems and medicine
        dispensing systems and equipment that are principally used by hospitals and
        other medical facilities in the PRC. Because Sunway’s operations are the only
        significant operations of the Company and its affiliates, this discussion
        and
        analysis focuses on the business results of Sunway, comparing its results
        in the
        second quarter of 2007 with the second quarter of 2006, and its results in
        the
        first half of 2007 with the first half of 2006. We expect to sell our new
        core
        product—a medicine dispensation and packaging system also designed for use in
        hospitals and pharmacies—in the third quarter.
  25
 
 **Results
        of Operations**
 
 **Three-month
        periods ended June 30, 2007 and June 30, 2006**
 **Overview**
 
 As
        the
        following table shows, Sunway’s results for net sales, gross profit, operating
        income and net income in the second quarter of 2007 were all significantly
        higher than in the second quarter of 2006. Higher costs of sales caused a
        slight
        reduction in gross margin, from 71.03% to 66.96%. At the same time, net profit
        margin increased from 41.52% 46.81%.
 Three
                    Months Ended June 30,2007
                
                2006
                
                Change
                
                Change
                    rateNet
                    Sales
                
                $
                3,195,695
                
                $
                2,187,502
                
                $
                1,008,193
                
                
                46.09
                %Cost
                    of sales
                
                $
                1,055,774
                
                $
                633,746
                
                $
                422,028
                
                
                66.59
                %Gross
                    Profit
                
                $
                2,139,921
                
                $
                1,553,756
                
                $
                586,156
                
                
                37.73
                %Gross
                    Margin
                
                
                66.96
                %
                
                71.03
                %
                
                
                
                
                -4.07Operating
                    Income
                
                $
                1,760,262
                
                $
                1,150,180
                
                $
                610,082
                
                
                53.04
                %Net
                    Income
                
                $
                1,495,917
                
                $
                908,345
                
                $
                587,563
                
                
                64.69
                %Net
                    profit margin
                
                
                46.81
                %
                
                41.52
                %
                
                
                
                
                5.29
 
 **Net
        sales**
 Net
        sales
        in the second quarter of 2007, which resulted entirely from sales of pneumatic
        material transport system workstations, were $3,195,695, an increase of 46.09%
        as compared with net sales of $2,187,502 in the second quarter of 2006. In
        the
        second quarter of 2007, we sold 692 workstations, an increase of 55.16% as
        compared with 446 workstations sold in the second quarter of 2006. Management
        believes that our current efforts to build new sales networks could lead
        to
        continued increased sales of workstations.
 
 The
        following table presents information about our sales for the periods
        indicated:
 Three
                    Months Ended June 30,2007
                
                2006
                
                ChangeNet
                    sales
                
                $
                3,195,695
                
                $
                2,187,502
                
                
                46.09
                %
 
 **Gross
        Profit**
 Gross
        profit increased 37.73% to $2,139,921 for the second quarter of 2007, as
        compared to $1,553,756 for the second quarter of 2006. Gross profit margin
        fell
        by 4.07%, mainly due to an increase in the value of our fixed assets caused
        by
        our purchase of new molds for our pneumatic transport systems and the expansion
        of our manufacturing facilities for the production of our newly-developed
        packaging and dispensation systems, which raised depreciation costs. Another
        reason for the fall in gross profit margin is an increase in the cost of
        our raw
        materials caused by our determination to further perfect the surfaces of
        our
        pneumatic transport system workstations by forming those surfaces using
        materials of higher quality. Management believes that an expansion of sales
        could lead to a reduction in the impact of depreciation and a leveling off
        of
        gross profit margins.
 
 The
        table
        below presents information about our gross profit for the periods
        indicated:
 Three
                    Months Ended June 30,2007
                
                2006US$
                
                Gross
                    profit margin
                
                US$
                
                Gross
                    profit marginGross
                    Profit
                
                
                2,139,921
                
                
                66.96
                %
                
                1,553,756
                
                
                71.03
                %
 
 26
  **Income
        from Operations**
 Operating
        income increased 53.04% to $1,760,262 for the second quarter of 2007, as
        compared with $1,150,180 for the second quarter of 2006. This increase was
        due
        primarily to the increase in net sales described above. As a percentage of
        net
        sales, operating income was approximately 55.08% for the second quarter of
        2007,
        representing a 2.5% increase from 52.58% for the second quarter of 2006.
        The
        increase in this percentage was due to our efforts to control operating
        expenses.
 
 **Cost
        of Sales**
 Cost
        of
        sales increased to $1,055,774 for the second quarter of 2007, representing
        a
        66.59% increase as compared with $633,746 for the second quarter of 2006.
        This
        increase is due primarily to depreciation cost increases and direct material
        cost increases in the second quarter of 2007 compared with the second quarter
        of
        2006. Direct material cost increased 70.6% from $359,533 in the second quarter
        of 2006 to $613,365 in the second quarter of 2007. The increase in this cost
        resulted from our use of certain materials of higher quality, including
        materials intended to further improve the appearance of workstation surfaces
        in
        response to customer preferences. These materials include circuit chips,
        LCD
        screens and pneumatic motors. They are 20% more expensive on average than
        the
        materials previously used. By using these high quality materials, we intend
        to
        improve customer satisfaction and reduce after-sale expenses.
 
 Manufacturing
        cost increased 112.94%, from $125,097 in the second quarter of 2006 to $266,383
        in the second quarter of 2007, and depreciation cost increased 184.94% from
        $72,498 in the second quarter of 2006 to $206,578 in the second quarter of
        2007.
        The increase in manufacturing cost was due primarily to the increase in sales
        of
        our workstations described above. The increase in depreciation cost was due
        primarily to our purchase of new molds for pneumatic transport systems and
        our
        investment in newly-developed packaging and dispensation systems. We intend
        to
        begin selling those systems in the third quarter of 2007. Because we intend
        to
        continue upgrading our production line and building new production lines,
        management believes that manufacturing costs are likely to continue to increase
        in the short term and level off by the fourth quarter of 2007
 
 The
        table
        below presents information about our cost of sales for the periods
        indicated:
 Three
                    Months Ended June 30,2007
                
                2006
                
                ChangeCost
                    of sales
                
                $
                1,055,774
                
                $
                633,746
                
                
                66.59
                %
 
 **Operating
        Expenses**
 Operating
        expenses were $379,659 for the second quarter of 2007, a decrease of 5.93%
        as
        compared to $403,576 for the second quarter of 2006. This decrease was mainly
        due to the fact that we paid no fees for the exhibition of our products in
        the
        second quarter of 2007, compared with exhibition fees of $115,988 for the
        second
        quarter of 2006. The decrease in exhibition fees was partly offset by an
        increase in salary and benefits to management of 404% in the second quarter
        of
        2007, which raised our average officer salary to $2,716 per month and resulted
        in an increase in general and administrative expense by a total of $78,566.
        General and administrative expense in the second quarter of 2007 also included
        $87,137 related to furnishing a newly rented work place. In order to promote
        our
        products after the recent upgrades, we are likely to incur exhibition fees
        for
        medical device exhibition fairs and other advertising expenses in the near
        term.
        In order to improve our competitive position, we also intend to continue
        improvements to our working environment, public image and worker salary level.
        Management therefore believes that operating expenses will not continue to
        decrease in the near term.
 
 The
        table
        below presents information about our operating expenses for the periods
        indicated:
 Three
                    Months Ended June 30,2007
                
                2006
                
                changeSelling
                    expenses
                
                $
                35,122
                
                $
                203,717
                
                
                -17.24
                %General
                    & Administrative Expenses
                
                $
                344,537
                
                $
                199,859
                
                
                72.39
                %Total
                    operating expenses
                
                $
                379,659
                
                $
                403,576
                
                
                -5.93
                %
  27
  **Net
        Income**
 Net
        income was $ 1,495,917 for the
        second quarter of 2007, an increase of 64.69% from $ 908,345 for the
        second quarter of 2006. This increase is attributable to the increase in
        sales
        of our workstation products described above. Our net profit margin increased
        slightly from 41.52% as of the second quarter of 2006 to 46.81% for the same
        period of 2007, due to the fast growth of workstation sales and slower growth
        of
        operating expenses described above.
 
 **Plan
        For the Third Quarter**
 In
        the
        third quarter, we intend to keep our focus on producing pneumatic tube material
        transport systems and in addition improve our marketing and sales efforts
        using
        funds we raised in June 2007. (For information about that financing, please
        see
        our current report on Form 8-K/A filed with the SEC on June 27, 2007.) Also
        in
        the third quarter, we plan to begin commercial sales of our newly developed
        medicine dispensation and packaging system. We currently have more than 10
        orders for the new systems from our existing pneumatic transport system
        customers.
 
 **Six-month
        periods ended June 30, 2007 and June 30, 2006**
 
 In
        first
        half of 2007, Sunway’s net sales, gross profit, operating income and net income
        all rose substantially as compared with the same period in the preceding
        year.
        These increases are due in large part to increased sales of Sunway’s pneumatic
        tube transport systems. Cost of sales also increased during these periods,
        somewhat outpacing the increase in sales. The increase in cost of sales is
        due
        largely to increased depreciation expenses related to Sunway’s investment in
        2006 in new molds and production lines used in the manufacture of its newly
        designed medicine packaging and dispensing equipment. The company expects
        cost
        of sales to level off or decline once sales of the new equipment begin in
        the
        third quarter of 2007.
 ($)
                
                Six
                    Months Ended June 30,2007
                
                2006
                
                Change
                
                Change
                    rateNet
                    Sales
                
                
                5,659,211
                
                
                4,183,231
                
                
                1,475,980
                
                
                35.28
                %Cost
                    of sales
                
                
                1,699,615
                
                
                1,120,277
                
                
                579,338
                
                
                51.71
                %Gross
                    Profit
                
                
                3,959,596
                
                
                3,062,954
                
                
                896,642
                
                
                29.27
                %Gross
                    Margin
                
                
                69.97
                %
                
                73.22
                %
                
                
                
                
                -3.25Operating
                    Income
                
                
                3,245,789
                
                
                2,379,706
                
                
                866,083
                
                
                36.39
                %Net
                    Income
                
                
                2,746,606
                
                
                1,942,453
                
                
                804,153
                
                
                41.40
                %Net
                    profit margin
                
                
                48.53
                %
                
                56.89
                %
                
                
                
                
                -8.36
 
 **Net
        sales**
 Net
        sales
        in the first half of 2007, which resulted entirely from sales of pneumatic
        material transport system workstations, were $5,659,211, an increase of 35.28%
        as compared with the net sales of $4,183,231 in the first half of 2006. In
        the
        first half of 2007, we sold 1,236 workstations, an increase of 30.11% as
        compared with 950 workstations sold in the first half of 2006.
 
 The
        following table presents information about our sales for the periods
        indicated:
 Six
                    Months Ended June 302007
                
                2006
                
                ChangeNet
                    sales
                
                $
                5,659,211
                
                $
                4,183,231
                
                
                35.28
                %
  28
  **Gross
        Profit**
 Gross
        profit increased 29.27% to $3,959,596 for the first half of 2007, as compared
        to
        $3,062,954 for the first half of 2006. Gross profit margin fell slightly
        by 3.25
        percentage point, mainly due to our efforts to develop new molds and new
        production line, which raised depreciation costs and therefore raised the
        cost
        of sales; at the same time, with using some expensive raw materials instead
        of
        old raw material in order to increase product quality and perfect workstation
        surface, raw material cost increased clearly.
 
 The
        table
        below presents information about our gross profit for the periods
        indicated:
 Six
                    Months Ended June 30,2007
                
                2006US$
                
                Gross
                    profit margin
                
                US$
                
                Gross
                    profit marginGross
                    Profit
                
                
                3,959,596
                
                
                69.97
                %
                
                3,062,954
                
                
                73.22
                %
 
 **Income
        from Operations**
 Operating
        income increased 36.39% to $3,245,789 for the first half of 2007, as compared
        with $2,379,706 for the first half of 2006. As a percentage of net sales,
        operating income was approximately 57.35% for the first half 2007, almost
        the
        same percentage as the first half of 2006.
 
 **Cost
        of Sales**
 Cost
        of
        sales increased to $1,699,615 for the first half of 2007, representing 51.71%
        increase as compared with $1,120,277 for the first half of 2006. This increase
        is due primarily to on August 2006, we purchased several new molds used in
        transport system production line, and on November 2006 we also purchased
        new
        production line using for dispensation and packaging system, both of which
        increased the depreciation cost from the time of purchase forward.
 
 The
        main
        elements of our cost of sales also belong to direct materials cost increase,
        which is up 59.06% from $627,928 in the first half of 2006 to $998,792 in
        the
        first half of 2007. From the beginning of 2007, we begin to use new kind
        of
        materials in order to stabilizing the quality of our product and make the
        surface of the products good. Manufacturing cost increased 119.66% from $177,993
        in the first half of 2006 to $390,986 in the first half of 2007; among which,
        depreciation cost increased 215.78% from $92,472 in the first half of 2006
        to
        $292,005 in the first half of 2007.
 
 The
        table
        below presents information about our cost of sales for the periods
        indicated:
 Six
                    Months Ended June 30,2007
                
                2006
                
                ChangeCost
                    of sales
                
                
                1,699,615
                
                
                1,120,277
                
                
                51.71
                %
 
 **Operating
        Expenses**
 Operating
        expenses were $713,807 for the first half of 2007, an increase of 4.47% as
        compared to $683,248 for the first half of 2006. This increase was composed
        by
        two reasons: (1) decrease in selling expenses; and (2) increase in general
        and
        administration expenses. In the first half of 2007, we decreased exhibition
        fees
        for promoting our products, which totaled only $6,028, compared with $115,753
        for the same period of 2006. Also, in the first half of 2007, we increased
        salary and benefits of management. Reflecting this change, costs related
        to
        salary and benefits increased 402% in the first half of 2007 compared with
        the
        first half of 2006, and our inter mediaries consultant fee for the reverse
        merger and private placement were increased from $10,850 as of the first
        half of
        2006 to $50,737 as of the first half of 2007, 367% increased.
  29
 
 The
        table
        below presents information about our operating expenses for the periods
        indicated:
 Six
                    Months Ended June 30,2007
                
                2006
                
                changeSelling
                    expenses
                
                
                48,589
                
                
                210,061
                
                
                -23.13
                %General
                    & Administrative Expenses
                
                
                665,218
                
                
                473,187
                
                
                40.58
                %Total
                    operating expenses
                
                
                713,807
                
                
                683,248
                
                
                4.47
                %
 
 **Net
        Income**
 Net
        income was $ 2,746,606 for the
        first half of 2007, an increase of 41.40% from $ 1,942,453 for the
        first half of 2006. This increase is attributable to the increase in sales
        of
        our workstation products. Our net profit margin fell 8.36 percentage points
        from
        56.89% as of the first half of 2006 to 48.53% as of the first half of 2007,
        due
        to the increase of cost of sales described above.
 
 **Cash
        and Cash Equivalents**
 Cash
        and
        Cash Equivalents increased to $ 7,867,980 as of
        June 30, 2007, as compared to $ 1,749,048
        as of December 31, 2006.
        This increase was mainly due to our reverse merger and private placement
        on June
        6, 2007, which resulted in an increase of $4,476,328 in net cash. During
        the
        same period, we did not use much of our cash on hand for material purchasing
        and
        investment.
 
 **Accounts
        Receivable**
 Accounts
        Receivable increased 51.28% to $ 2,220,718 as of
        June 30, 2007, compared with $ 1,467,963 as of
        December 31, 2006. This increase in accounts receivable was primarily
        attributable to a substantial increase in workstation sales and deferred
        receipt
        of payments in the first half of 2007. We will focus corporate resources
        on
        enhancing the cooperation of our marketing and sales department with our
        financial department in order to reduce the deferral of payments by our
        customers and reduce our accounts receivable.
 
 **Inventory**
 Inventory
        consists of raw materials and finished goods As of June 30, 2007, the recorded
        value of our inventory has increased 48.22% to $558,363 from $ 376,708 as of
        December 31, 2006. This increase is mainly due to finished goods increased
        from
        $200,852 as of December 31, 2006 to $368,328 as of June 30, 2007, an increase
        of
        83.38%, also as a result of the increase of direct material cost as we discussed
        above.
 The
        table
        below presents information about our inventory for the periods
        indicated:
 Item
                  
                  June
                      30, 2007
                  
                  December
                      31, 2006
                  
                  changeRaw
                      material
                  
                  
                  190,035
                  
                  
                  175,856
                  
                  
                  8.06
                  %Finished
                      goods
                  
                  
                  368,328
                  
                  
                  200,852
                  
                  
                  83.38
                  %Total
                  
                  
                  558,363
                  
                  
                  376,708
                  
                  
                  48.22
                  %
 
 **Accounts
        payable**
 Accounts
        payable amounted to $ 40,922 as
        of
        June 30, 2007, a decrease of 28.57% from $ 57,289 as of
        December 31, 2006.
 
 **Expected
        warranty expenses**
 We
        provide our clients with one year of free after-sale service including free
        exchange of core components and the post or delivery fee. From the beginning
        of
        2007, we began to set aside funds for this possible expense. If we incur
        expenses in connection with our warranty period, we will write down the expected
        expenses and record a corresponding increase in general and administration
        expenses. In the first half of 2007, we set aside warranty funds for
        $ 42,445 .
 
 **Critical
        Accounting Policies**
 
 Management's
        discussion and analysis of its financial condition and results of operations
        is
        based upon Sunway’s consolidated financial statements, which have been prepared
        in accordance with United States generally accepted accounting principles.
        Sunway’s financial statements reflect the selection and application of
        accounting policies which require management to make significant estimates
        and
        judgments. Management bases its estimates on historical experience and on
        various other assumptions that are believed to be reasonable under the
        circumstances. Actual results may differ from these estimates under different
        assumptions or conditions. Sunway believes that the following reflect the
        more
        critical accounting policies that currently affect Sunway’s financial condition
        and results of operations.
  30
 
 **(A)** **Method
        of Accounting**
 Sunway
        maintains its general ledger and journals with the accrual method accounting
        for
        financial reporting purposes. The financial statements and notes are
        representations of management. Accounting policies adopted by the Company
        conform to generally accepted accounting principles in the United States
        of
        America and have been consistently applied in the presentation of financial
        statements, which are compiled on the accrual basis of accounting.
 
 **(B)** **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.
 
 **(C)**  **Economic
        and** **political
        risks**
 Sunway’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. Sunway’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.
 
 **(D)** **Intangibles**
 Intangibles
        are stated at cost less accumulated amortisation. Amortisation is provided
        over
        the respective useful lives, using the straight-line method. The most important
        intangibles of Sunway now is the land using rights, which is amortized in
        46
        years.
 
 **(E)** **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:
 Items
                
                Depreciation
                    yearsBuildings
                
                
                20Machinery
                    and equipment
                
                
                6Software
                    systems
                
                
                3Molds,
                    Dies, & Casting
                
                
                6Office
                    equipment and motor vehicles
                
                
                10
 
 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. The cost of maintenance and repairs is charged to income as incurred,
        whereas significant renewals and betterments are capitalized.
 
 **(F)** **Accounting for Software Systems**
 Sunway
        adopts FASB No. 86 for accounting of software systems, in that all expenditures
        incurred from start-up to completion of feasibility are expensed; development
        costs, after the feasibility study through system completion, are capitalized,
        and are depreciated over a useful life of three years. Expenditures incurred
        after completion are expensed as repairs and maintenance.
  31
 
 **(G)**   **Trade
        receivables**
 Trade
        receivables are recognized and carried at the original invoice amount less
        allowance for any uncollectible amounts. An estimate for doubtful accounts
        is
        made when collection of the full amount is no longer probable. Bad debts
        are
        written off as incurred.
  **(H)**  **Cash and cash equivalents**
 The
        Company considers all highly liquid investments purchased with original
        maturities of three months or less to be cash equivalents. The Company maintains
        bank accounts only in the PRC. The Company does not maintain any bank accounts
        in the United States of America.
 
 **(I)**  **Revenue
        recognition**
 Revenue
        represents the invoiced value of goods sold recognized upon the delivery
        of
        goods to customers. Revenue is recognized when all of the following criteria
        are
        met:
 ·
              Persuasive
                  evidence of an arrangement exists;
 ·
              Delivery
                  has occurred or services have been rendered,
                  and;
 ·
              The
                  seller’s price to the buyer is fixed or
                  determinable.
 Contract
        revenues are recognized when the manufacturing and installation of the medical
        equipments is completed. Generally, the company receives total contract sum
        from
        clients in 3 installments. Deposit of 30% is received from client when the
        contract is signed. Second payment of 30% is received when the project
        commenced. The final sum of the remaining portion is received after the
        construction is completed within 4 months.
 
 **(J)**  **Income
        taxes**
 Sunway
        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 Company is able to realize
        their benefits, or that future realization is uncertain.
 
 Sunway
        is
        operating in the PRC, and in accordance with the relevant tax laws and
        regulations of PRC, the corporation income tax rate is 33%. However, the
        Company
        is a high technology company, and in accordance with the relevant regulations
        regarding the favorable tax treatment for high technology companies, the
        Company
        is entitled to a reduced tax rate of 15% as long as the company located and
        registered in the high and advance technology development zone.
 
 **Item
        3.**  **Controls
        and Procedures**
 
 At
        the
        conclusion of the quarter ended June 30, 2007, we carried out an evaluation,
        under the supervision and with the participation of our management, including
        our Chairman and Chief Executive Officer and Chief Financial Officer, of
        the
        effectiveness of the design and operation of our disclosure controls and
        procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
        Act.
        Based on this evaluation, our officers concluded that, as of June 30, 2007,
        our
        disclosure controls and procedures were effective and adequately designed
        to
        ensure that the information required to be disclosed by us in the reports
        we
        submit under the Exchange Act is recorded, processed, summarized and reported
        reliably and within the time periods specified in the applicable rules and
        forms
        and that such information is accumulated and communicated to our chief executive
        officer and chief financial officer in a manner that allows for timely decisions
        regarding required disclosure.
 
 In
        the
        course of our evaluation, we did not discover any change in our internal
        control
        over financial reporting that has materially affected or is reasonably likely
        to
        materially affect our internal control over financial reporting.
  32
  **PART
        II**
 
 **Item
        2. Unregistered sales of equity securities**
 
 The
        rights of our common stockholders were affected by the issuance of our Series
        B
        Preferred Stock on June 6, 2007. Holders of our Series B Preferred Stock
        have
        rights to receive a distribution upon a liquidation of the Company that are
        senior to the rights of our common stockholders. In case of a liquidation
        of the
        Company, holders of our Series B Preferred Stock are entitled to receive
        a
        liquidation distribution of $40.50 per share before our common stockholders
        receive any distribution at all. For more information about our Series B
        Preferred Stock, please see the discussion beginning on page 5 of our current
        report on Form 8-K/A filed with the SEC on June 27, 2007, entitled “Item 1.01
        Entry Into a Material Definitive Agreement,” which is incorporated herein by
        reference.
  **Item
        4. Submission of matters to a vote of security holders**
 
 For
        a
        description of measures approved by written consent of a majority of our
        security holders, please see our information statement on Schedule 14C filed
        with the SEC on July 27, 2007, which is incorporated herein by reference.
        That
        information statement is subject to further change based on comments we may
        receive from the SEC.
 
 **Item
        6.**  **Exhibits.**
 
 The
        following exhibits are filed with this report.
 
 **Exhibit
        List**
  **No.**
              
              **Description**
 
 3.1
              
              Amended
                  Articles of Incorporation. (1)
 
 3.2
              
              Amended Bylaws.
                  (1)
 
 31.1
              
              Certification
                  of Bo Liu pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a),
                  as
                  adopted
                pursuant
                  to Section 302 of the Sarbanes-Oxley Act of
                  2002.
 
 31.2
              
              Certification
                  of David Wang pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a),
                  asadopted
                pursuant
                  to Section 302 of the Sarbanes-Oxley Act of
                  2002.
 
 32.1
              
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of the
                Sarbanes-Oxley
                  Act of 2002.
 
 (1)
        Incorporated by reference to the exhibit of the same number to our report
        on
        form 8-K/A filed with the SEC on June 20, 2007.
  33
  **SIGNATURES**
 
 In
        accordance with the requirements of the Securities Exchange Act of 1934,
        as
        amended, the registrant has caused this report to be signed on its behalf
        by the
        undersigned, thereunto duly authorized.
  
 **NATIONAL
                    REALTY AND MORTGAGE, INC.**Date:
                  August 14, 2007
              *By:*
              */s/
                  David Wang**David
                  Wang**Chief
                  Financial Officer*
  34