SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities and Exchange Act of 1934
Date of
Report (Date of earliest reported): April 12, 2010
SUNWAY GLOBAL
INC.
(Exact
name of registrant as specified in charter)
| Nevada | 000-27159 | 65-0439467 |
| (State or Other Jurisdiction of | (Commission File Number) | (IRS Employer |
| Incorporation or Organization) | Identification No.) |
Daqing
Hi-Tech Industry Development Zone
Daqing,
Heilongjiang, Post Code 163316
People’s
Republic of China
(Address
of principal executive offices) (Zip Code)
Registrant's
telephone number, including area code: 86-459-604-6043
Copies
to:
Marc
Ross, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas
New York,
New York 10018
Phone:
(212) 930-9700
Fax:
(212) 930-9725
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[ ]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
[ ]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item
4.02 Non-Reliance on Previously Issued Financial Statements or Related Audit
Report or Completed Interim Review.
On April
12, 2010, the management of the Registrant concluded that its financial
statements for the three, six, and nine months ended March 31, June 30, and
September 30, 2009, which are included in its Forms 10-Q for the quarters ended
March 31, June 30, and September 30, 2009, respectively, did not properly
account for the following items as of January 1, 2009 in accordance with United
States generally accepted accounting principles, and, as a result, cannot be
relied upon.
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1.
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Classification
of certain warrants in accordance with to paragraph 815-40.15 of the FASB
Accounting Standards Codification (EITF 07-05) as adopted on January 1,
2009
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During
the course of internal evaluation, our accounting staff evaluated as to the
Company’s accounting treatment as of January 1, 2009 for warrants issued in the
Private Placement which include anti-dilution provisions for adjustment of the
exercise price in the event additional shares of common stock or securities
convertible into common stock at a price less than $1.76 per share with respect
Series A Warrants,$ 2.30 per share with respect to the Series B Warrants, $1.94
per share with respect Series C Warrants and $2.53 per share with respect Series
D Warrants (also referred to as down-round provisions). The question
was raised in light of EITF 07-5, “Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entity’s Own Stock” (FASB ASC 815-40-15-5)
(“ASC 815”) effective as of January 1, 2009, which outlines new guidance for
being indexed to an entity’s own stock and the resulting liability or equity
classification based on that conclusion. Down-round provisions reduce
the exercise price of a warrant or convertible instrument if a company either
issues new warrants or convertible instruments that have a lower exercise
price.
We have
performed a complete assessment of our warrants and concluded that the warrants
issued in the Private Placement are within the scope of ASC 815 due to the
down-round provisions included in the terms of the
agreements. Accordingly, ASC 815 should have been adopted as of
January 1, 2009 by classifying the warrant as a liability measured at fair value
with changes in fair value recognized in earnings each reporting and recording a
cumulative-effect adjustment to the opening balance of retained
earnings. We have calculated the fair value of the warrants at the
date of adoption as well as the March 31, 200, June 30, 2009 and September 30,
2009 reporting periods utilizing a Black-Scholes-Merton stock option valuation
model. Based on our calculations and assessment of the materiality,
we have concluded that our previously filed Form 10-Qs for the March 31, 2009,
June 30, 2009 and September 30, 2009 periods require restatement and amended
Form 10-Qs will be filed.
Upon
adoption of EITF 07-5, the Company reclassified $65,910,931 from retained
earnings and $3,990,942 from paid in capital – warrants to the “Warrant
Liability.”
At the
quarters ended March 31, 2009, June 30, 2009, September 30, 2009 and December
31, 2009, the Company re-measured the outstanding warrants, and recorded a
(charge) benefit of ($20,481,276), $31,415,835, $2,429,394 and $15,729,594 to
other income (expense) for the change in the warrant liability during the
periods.
For the
fiscal year ended December 31, 2009, the Company recorded a total charge to
earnings of $40,808,328 related to the warrant liability. This amount
includes a charge of $65,910,931 to retaining earnings and a total benefit of
$29,093,546 resulting from changes in the fair value of the warrant liability
during the year.
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2.
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Valuation
of assets in accordance with FASB ASC
820-10
|
During
the course of internal evaluation, our accounting staff evaluated as to the
Company’s accounting treatment for the acquisition of Liheng at the quarter
ended March 31, 2009. The question was raised in light of the
definition of a business as set forth in the paragraph 805-10-20 of the FASB
Accounting Standards Codification and as further discussed in paragraphs
805-10-55-4 through 805-10-55-9 of the FASB Accounting Standards Codification.
We concluded that Liheng did not constitute a business and therefore, we
recognized the acquisitions based on the fair value of net assets
obtained. The improper accounting treatment has resulted in an
overstatement of goodwill by $4,831,386. And for the amount over the
fair value of net assets obtained, we wrote off as an impairment loss of
$4,831,386 at the time of acquisition.
Management
of the Registrant will restate its financial statements for the quarterly
periods ended March 31, June 30, and September 30, 2009 to restate all of such
financial statements to correct the errors noted above and file amendments to
the Company’s periodic reports filed with the Securities and Exchange
Commission.
Management
has apprised the Company’s Board and has discussed the matters in this Report
with its independent auditors.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| Date: April 13, 2010 | SUNWAY GLOBAL INC. | ||
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By:
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/s/
Bo Liu
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Bo
Liu
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Chief
Executive Officer
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