China Wi-Max Communications, Inc. - FORM 10-Q/A

Attached files

file	filename
EX-32.1 - China Wi-Max Communications, Inc.	v204851_ex32-1.htm
EX-31.1 - China Wi-Max Communications, Inc.	v204851_ex31-1.htm
EX-31.2 - China Wi-Max Communications, Inc.	v204851_ex31-2.htm
EX-32.2 - China Wi-Max Communications, Inc.	v204851_ex32-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q / A

Amendment No. 1

(Mark One)

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

For the quarterly period ended March 31, 2010

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

For the transition period from __________ to ___________

Commission file number : 000-53268

CHINA WI-MAX COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		61-1504884
(State of Incorporation)		(IRS Employer ID Number)

1905 Sherman Street, Suite 335, Denver, Colorado 80203

(Address of principal executive offices)

303-993-8028

(Registrant's Telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes x No ¨

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

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

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
	Smaller reporting company x

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of May 11, 2010 there were 16,547,063 shares of the registrant's common stock issued and outstanding.

EXPLANATORY NOTE

China Wi-Max Communications, Inc. (the “Company”) is filing this Amendment No. 1 (the “Amendment”) to its Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, which was originally filed with the Securities and Exchange Commission (the “Commission”) on May 24, 2010 (the “Original Filing”).

The purpose of this amendment is to add expanded disclosure to its notes to unaudited interim financial statements as follows: (1) add a section to Note 1 entitled “Basis of Presentation” and (2) add expanded disclosure to Note 2 in the section entitled “Consolidation of Variable Interest Entity” regarding Gao Da. In connection with the filing of this Amendment and pursuant to the rules of the Commission, the Chief Executive Officer and the Chief Financial Officer of the Company have reissued certain of their required certifications presented in Exhibits 31.1 and 31.2.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the dates described in the Original Filing, and we have not updated the disclosures contained therein to reflect any events that occurred subsequent to such dates. Accordingly, this Amendment should be read in conjunction with the Company’s filings made with the Commission subsequent to the filing of the Original Filing, as information in such filings may update or supersede certain information contained in this Amendment.

PART I - FINANCIAL INFORMATION

	Page

Item 1. Financial Statements

Balance Sheets –March 31, 2010 (Unaudited) and December 31, 2009	F-1

Statements of Operations (Unaudited) - Three months ended March 31, 2010 and 2009 and From July 5, 2006 (Inception) to March 31, 2010	F-2

Statements of Changes in Deficit (Unaudited) - From July 5, 2006 (Inception) to March 31, 2010	F-3

Statements of Cash Flows (Unaudited) - Three months ended March 31, 2010 and 2009 and From July 5, 2006 (Inception) to March 31, 2010	F-4

Notes to the Financial Statements (Unaudited)	F-5

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable	6

Item 4T. Controls and Procedures	6

PART II - OTHER INFORMATION

Item 1. Legal Proceedings -Not Applicable	7

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	7

Item 3. Defaults Upon Senior Securities - Not Applicable	8

Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable	8

Item 5. Other Information - Not Applicable	8

Item 6. Exhibits	8

SIGNATURES	9

PART I

ITEM 1. FINANCIAL STATEMENTS

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2010			2009
	(unaudited)

ASSETS
Current assets:
Cash	$	57,270		$	34,524
Prepaid expenses		31,911			52,385

Total current assets		89,181			86,909

Property and equipment, net		507,901			514,731
Intangible assets and other, net		305,678			305,678
		813,579			820,409

	$	902,760		$	907,318

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
Accounts payable	$	624,933		$	357,577
Accrued interest		514,041			425,189
Convertible notes payable		3,628,361			3,468,824

Total current liabilities		4,767,335			4,251,590

Equity (Deficit):
China Wi-Max shareholders' deficit:
Common stock; $.001 par value; 100,000,000 shares authorized;
16,194,004 and 14,654,004 shares issued and outstanding as of
March 31, 2010 and December 31, 2009, respectively		16,194			14,654
Additional paid-in capital		3,156,685			1,892,931
Accumulated other comprehensive income		28,012			25,978
Deficit accumulated during the development stage		(7,049,875	)		(5,277,835	)
Total China Wi-Max shareholders' deficit		(3,848,984	)		(3,344,272	)

Noncontrolling interest		(15,591	)		-
Total deficit		(3,864,575	)		(3,344,272	)

Total liabilities and deficit	$	902,760		$	907,318

See notes to unaudited consolidated financial statements.

F-1

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

							Period from
							July 5, 2006
							(inception)
	Three Months Ended						through
	March 31,			March 31,			March 31,
	2010			2009			2010

Operating expenses:
General and administrative expense	$	(1,694,450	)	$	(589,020	)	$	(6,454,835	)
Operating loss		(1,694,450	)		(589,020	)		(6,454,835	)

Other expense:
Interest expense		(93,181	)		(62,827	)		(610,631	)

Net loss		(1,787,631	)		(651,847	)		(7,065,466	)
Net loss attributable to the noncontrolling interest		15,591			-			15,591
Net loss attributable to China Wi-Max		(1,772,040	)		(651,847	)		(7,049,875	)

Foreign currency translation gain		2,034			532			28,012

Comprehensive loss	$	(1,785,597	)	$	(651,315	)	$	(7,037,454	)

Basic and diluted net loss per share	$	(0.12	)	$	(0.06	)
Weighted average number of common
shares outstanding		15,002,227			11,236,705

See notes to unaudited consolidated financial statements.

F-2

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

PERIODS FROM JULY 5, 2006 (INCEPTION) THROUGH MARCH 31, 2010

	China Wi-Max Shareholders
									Accumulated		Deficit
							Additional		other		accumulated						Total
	Common stock						paid-in		comprehensive		during the			Noncontrolling			shareholders'
	Shares			Amount			capital		income		development stage			interest			deficit

Common stock issued for cash between July 5, 2006 (inception)and December 31, 2006 at par value ($0.001 per share)		3,825,000		$	3,825		$	-	$	-	$	-		$	-		$	3,825

Net loss								-		-		(8,538	)					(8,538	)

Balances, December 31, 2006		3,825,000			3,825			-		-		(8,538	)		-			(4,713	)

Common stock issued for cash between January and June 2007 at par value ($0.001 per share)		5,230,000			5,230			-		-		-			-			5,230

Common stock issued for cash between June and December 2007 at par value ($0.001 per share)		260,000			260			-		-		-			-			260

Common stock issued for services, valued at $0.25 per share		455,000			455			113,295		-		-			-			113,750

Net loss		-			-			-		-		(444,590	)		-			(444,590	)

Balances, December 31, 2007		9,770,000			9,770			113,295		-		(453,128	)		-			(330,063	)

Shares of common stock cancelled at par value		(260,000	)		(260	)		-		-		-			-			(260	)

Common stock issued for services, valued at $0.25 per share		884,000			884			220,116		-		-			-			221,000

Common stock issued upon conversion of notes and accrued interest in December 2008, valued at $0.25 per share		391,002			391			97,362		-		-			-			97,753

Fair value of options vested during the period		-			-			103,275		-		-			-			103,275

Net loss		-			-			-		-		(1,716,195	)		-			(1,716,195	)

Other comprehensive income adjustments, gain on foreign currency translation		-			-			-		25,853		-			-			25,853

Balances, December 31, 2008		10,785,002			10,785			534,048		25,853		(2,169,323	)		-			(1,598,637	)

Common stock issued for services		1,900,000			1,900			473,100		-		-			-			475,000

Common stock issued upon conversion of notes and accrued interest		1,969,002			1,969			549,422		-		-			-			551,391

Fair value of options vesting during the period		-			-			336,361		-		-			-			336,361

Net loss		-			-			-		-		(3,108,512	)		-			(3,108,512	)

Other comprehensive income adjustments, gain on foreign currency translation		-			-			-		125		-			-			125

Balances, December 31, 2009		14,654,004			14,654			1,892,931		25,978		(5,277,835	)		-			(3,344,272	)

Common stock issued for services		1,540,000			1,540			308,860		-		-			-			310,400

Warrants issued related to convertible notes		-			-			43,292		-		-			-			43,292

Fair value of options vesting during the period		-			-			911,602		-		-			-			911,602

Net loss		-			-			-		-		(1,772,040	)		(15,591	)		(1,787,631	)

Other comprehensive income adjustments, gain on foreign currency translation		-			-			-		2,034		-			-			2,034

Balances, March 31, 2010 (unaudited)		16,194,004		$	16,194		$	3,156,685	$	28,012	$	(7,049,875	)	$	(15,591	)	$	(3,864,575	)

See notes to unaudited consolidated financial statements.

F-3

CHINA WI-MAX COMMUNICATIONS,INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

							Period from
							July 5, 2006
							(Inception)
	Three Months Ended						through
	March 31, 2010			March 31, 2009			March 31, 2010

Cash flows from operating activities:
Net loss	$	(1,787,631	)	$	(651,847	)	$	(7,065,466	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services		310,400			258,750			1,120,150
Accrued interest converted to common stock		-			-			87,244
Non-cash stock option expense		911,602			15,699			1,351,238
Amortization of debt issue costs		4,329			-			4,329
Depreciation		6,911			8,689			40,682
Amortization		-			8,151			25,649
Changes in assets and liabilities:
Decrease (Increase) in prepaid expenses		20,474			30,278			(31,912	)
Decrease in other assets		-			-			38,139
Increase in accounts payable		267,356			96,526			624,933
Increase in accrued interest		88,852			62,841			514,041

Net cash used in operating activities		(177,707	)		(170,913	)		(3,290,973	)

Cash flows from investing activities:

Purchase of property and equipment		-			(65,419	)		(521,329	)
Purchase of intangible assets		-			-			(364,195	)

Net cash used in investing activities		-			(65,419	)		(885,524	)

Cash flows from financing activities:
Proceeds from issuance of convertible notes payable and warrants		198,500			95,000			4,229,224
Proceeds from issuance of common stock		-			-			9,055
Debt issue costs		-			-			(5,270	)

Net cash provided by financing activities		198,500			95,000			4,233,009

Effect of exchange rate changes on cash		1,953			-			758

Net increase (decrease) in cash		22,746			(141,332	)		57,270
Cash, beginning of period		34,524			147,889			-

Cash, end of period	$	57,270		$	6,557		$	57,270

Supplemental disclosure of non-cash investing
and financing activities:

Convertible notes and interest converted to common stock	$	-		$	-		$	649,144

See notes to unaudited consolidated financial statement.

F-4

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2010 AND 2009

(Unaudited)

Organization, basis of presentation, going concern and management's plans:

Organization and basis of presentation:

China Wi-Max Communications, Inc. (the "Company") is a development stage telecommunications broadband provider. The Company is a Nevada corporation formed in July 2006, and is focused on providing commercial customers with high bandwidth connections throughout first and second tier markets in China. For accounting purposes, the Company is classified as a development stage enterprise.

The Company plans to build, own, and operate metropolitan area Internet Protocol (IP)-based broadband networks using a combination of Company-owned optical fiber and licensed Wi-Max (Worldwide Interoperability for Microwave Access) capable wireless spectrum. These networks are designed to provide the reliability, redundancy, scalability, and other features expected of a carrier class network. The Company intends to provide value-added services such as IP transport, Internet Service Provider (ISP) services, and broadband internet access. The Company plans to position itself to bypass the local loop facilities of the current local exchange carriers to connect enterprise customers directly to a global communications network.

In September 2008, the Company effectuated the formation and control of two wholly-owned subsidiaries in China: Beijing Yuan Shan Da Chuan Business Development Ltd. ("Da Chuan") and Beijing Yuan Shan Shi Dai Technology Ltd. ("Shi Dai"). Da Chuan has contractual agreements with two local Chinese companies to use licenses to deliver "Value Added Telecommunications Services" (Note 4). Shi Dai owns optical fiber assets located in Beijing and Hangzhou; Shi Dai's purchases of optical fiber assets were made at the direction of and with funding from China Wi-Max prior to consolidation. The Company began initial operation of its network in Beijing in 2008, but has not generated any revenue to date.

The Company's financial statements as of March 31, 2010, the year ended December 31, 2009, and the periods from September 24, 2008 (the date at which the Company gained 100% ownership of Da Chuan and Shi Dai) through March 31, 2010, include the accounts of Da Chuan and Shi Dai. In June 2009, the Financial Accounting Standards Board (“FASB”) issued FASB ASC 810-10-65 (Prior authoritative literature: SFAS No. 167, Amendments to FASB Interpretation No. 46(R) ) which amends the consolidation guidance applicable to a variable interest entity (“VIE”). This standard also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is therefore required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. Previously, the standard required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. The Company adopted this guidance on January 1, 2010. In connection with the adoption of the new accounting rules for entities “VIE’s” the Company began consolidating Beijing Gao Da Yang Guang Communication Technology Ltd. (“Gao Da”) beginning on January 1, 2010. All intercompany balances and transactions have been eliminated in consolidation. The non-controlling interest in Gao Da has been presented separately within the Company's balance sheet and statement of operations. The consolidation of Gao Da did not have a material impact on the consolidated financial statements.

The Company's foreign subsidiaries (Da Chuan and Shi Dai and Gao Da beginning January 1, 2010) are located in China, and foreign transactions are conducted in currencies other than the U.S. dollar, primarily the Chinese Renmimbi (RMB). Da Chuan, Shi Dai and Gao Da financial statements are maintained in the functional currency. For financial reporting purposes, the financial statements of the subsidiaries have been translated into United States (U.S.) dollars. Assets and liabilities are translated into U.S. dollars at year-end exchange rates. Income and expense items are translated at weighted-average rates of exchange prevailing during the year. Any resulting translation adjustments are charged or credited to other comprehensive income in shareholders' deficit. Gains and losses on foreign currency transactions are included in other income and expense.

F-5

The Company is exposed to movements in foreign currency exchange rates. In addition, the Company is subject to risks including adverse developments in the foreign political and economic environment, trade barriers, managing foreign operations and potentially adverse tax consequences. There can be no assurance that any of these factors will not have a material negative impact on the Company's financial condition or results of operations in the future.

Basis of Presentation:

The accompanying interim, unaudited financial statements of the Company have been prepared in accordance with the instructions to quarterly reports on Form 10-Q. In the opinion of management, all adjustments necessary to present fairly the financial position, results of operations and cash flows at March 31, 2010, and for all periods presented, have been made. Certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. It is therefore suggested that these interim financial statements be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The results of operations for the periods ended March 31, 2010, are not necessarily an indication of operating results for the full year.

Going concern and management's plans:

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss of $1,787,631 for the three months ended March 31, 2010, and a working capital deficiency and deficit of approximately $4,678,000 and $3,865,000, respectively, at March 31, 2010. The Company has a limited operating history and no current revenue producing operations. In addition, the Company does not have a revolving loan agreement with any financial institution, nor can the Company provide any assurance it will be able to enter into any such agreement in the future, or be able to raise funds through a future issuance of debt or equity. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company's continuance as a going concern is dependent on its future profitability and on the on-going support of its shareholders and creditors. In order to mitigate the going concern issues, the Company is continuing its efforts to raise capital. The Company raised approximately $198,500 during the three months ended March 31, 2010. The Company is planning a $1 million to $5 million private placement of stock in mid 2010. However, additional financing may not be available in amounts or on terms acceptable to the Company or at all. As a consequence, if the Company is unable to obtain any additional financing in the near term, the Company will be required to delay its business plan implementation, and/or the Company may be required to cease operations in order to offset the lack of available funding, which would have a material adverse impact on the Company.

Summary of significant accounting policies:

Use of estimates in the preparation of financial statements:

The preparation of financial statements in conformity with accounting principles generally accepted 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. Actual results could differ from those estimates.

Property and equipment:

Property and equipment are stated at cost, and depreciation is provided by use of the straight-line method over the estimated useful lives of the related assets. Major improvements are capitalized, while expenditures for repairs and maintenance are expensed when incurred. Estimated useful lives of property and equipment are as follows:

F-6

Fiber optic cable	25 years
Network support equipment	5 years

Impairment of long-lived assets:

Management assesses the carrying values of long-lived assets for impairment when circumstances indicate that such amounts may not be recoverable from future operations. Generally, assets to be held and used are considered impaired if the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. Management does not believe any impairment has occurred as of March 31, 2010. The accounting estimates for the Company's long-lived assets require management to make significant assumptions about fair value. Management's assumptions regarding fair value require significant judgments about economic factors, industry factors and technology considerations, as well as about the Company's business prospects. Changes in these judgments may have a significant effect on the estimated fair values of the Company's long-lived assets and could result in an impairment charge that could have a material adverse effect on the Company’s statements of position and results of operations.

Fair value of financial instruments:

The fair value of the Company's cash, accounts payable and convertible notes approximate their carrying amounts due to the short maturities of these instruments.

Consolidation of variable interest entity:

In June 2009, the FASB issued new guidance that amended the existing criteria for consolidating VIE’s. The new consolidation criteria requires an ongoing qualitative assessment of which entity has the power to direct matters that most significantly impact the activities of a VIE and has the obligation to absorb losses or benefits that could be potentially significant to the VIE. This new guidance was effective for the Company beginning January 1, 2010.

In connection with the adoption of the new accounting rules for VIE’s, the Company consolidated an affiliate company, Gao Da, beginning on January 1, 2010. The Company is the sole variable interest holder of Gao Da, and it is the primary beneficiary, as there is a service agreement between the Company and Gao Da, in which the Company has agreed to fund all of Gao Da’s operations. Gao Da is a development stage, PRC enterprise, with no revenue-producing operations; at March 31, 2010, Gao Da's assets consist of license rights with a carrying value of approximately $ 326,000 (Note 4) and liabilities of approximately $418,000, which are due to China Wi-Max. These account balances eliminate in consolidation. Gao Da's license rights cannot be sold or transferred without the prior approval of the licensor.

Prior to January 1, 2010, advances made by the Company to Gao Da for operations were expensed by the Company. In addition, prior to January 1, 2010, the Company had recorded contractual license rights, which represented the amount the Company paid to Gao Da to purchase the frequency licenses held by Gao Da. The carrying value of the contractual license rights was approximately the same amount as the carrying value of the frequency licenses recorded by Gao Da through December 31, 2009. Therefore, upon consolidation of Gao Da on January 1, 2010, after elimination of intercompany account balances and transactions, there was no material impact on the Company’s consolidated financial statements.

Revenue recognition:

As of March 31, 2010, the Company has no revenue-producing operations. When revenue generating operations begin, the Company will recognize revenue pursuant to Securities and Exchange Commission, Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial Statements, as amended by SAB No. 104, Revenue Recognition. Consistent with the requirements of these SABs, revenue will be recognized only when: a) persuasive evidence of arrangement exists, b) delivery has occurred, c) the seller's price to the buyer is fixed, and d) collectability is reasonably assured.

Loss per share:

Basic loss per share of common stock is computed based on the weighted average number of common shares outstanding during the year. Stock options and common shares issuable upon the conversion of debt securities (16,490,719 at March 31, 2010 and 7,624,550 at March 31, 2009) are not considered in the calculation, as the effect would be antidilutive. Therefore, diluted loss per share is equivalent to basic loss per share.

F-7

3.	Property and equipment:

As of March 31, 2010 and December 31, 2009, property and equipment consists of the following:

	March 31, 2010			December 31, 2009

Fiber optic cable	$	507,957		$	507,875
Network equipment		40,649			40,643
		548,606			548,518
Less accumulated depreciation		(40,705	)		(33,787	)
	$	507,901		$	514,731

4.	Intangible assets:

As of March 31, 2010 and December 31, 2009, intangible assets consist of the following:

	March 31, 2010		December 31, 2009

License rights	$	326,056	$	326,056
Less accumulated amortization				(20,378	)
	$	326,056	$	305,678

Prior to January 1, 2010, the Company's intangible asset, contractual license rights, represents the Company’s rights to certain frequency licenses held by Gao Da. The contractual license rights represent the right to revenue generated from customers who contract to utilize frequency licenses held by Gao Da (Note 8). Prior to January 1, 2010, the Company amortized this intangible asset over the twenty-year term of the agreement. With the consolidation of Gao Da effective January 1, 2010, the Company has recorded the underlying frequency licenses held by Gao Da and has eliminated the contractual license rights in consolidation. The Company does not Amortize these license rights. The Company evaluates this intangible asset for impairment annually, and between annual evaluations if events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. In cases where required, an impairment provision is recognized in an amount by which the carrying value exceeds the estimated fair value of the asset.

The underlying value of the frequency licenses held by Gao Da is dependent on numerous factors, including successful deployment of networks and connectivity, and/or radio links. The Company considers the underlying licenses to have an indefinite useful life under the provisions of ASC Topic 350, Goodwill and Other Intangible Assets. These licenses are typically renewed if the licensee files a renewal application prior to license expiration wherein the licensee demonstrates its engagement in supplying services or related activities to satisfy the appropriate criteria for renewal. If at any time the Company determines that these criteria will most likely not be met, or if there is a change in management's future business plans or disposition of one or more licenses underlying the contractual license rights, the Company will first test the contractual license rights for impairment, and then the Company will modify the life of the contractual license rights and begin amortizing the cost over the remaining underlying license period. The Company also tests its contractual license rights for impairment if there are any legal, regulatory, contractual, competitive, and economic or other factors that are determined to limit the useful lives of the licenses.

F-8

5. Convertible notes payable:

As of March 31, 2010, the holders of 12% convertible notes totaling $518,500 agreed to extend the maturity date to June 30, 2010, and holders of notes totaling $5,000 have requested conversion to common stock.

As of March 31, 2010, 10% convertible notes totaling $1,754,945 are due through June 30, 2010, and notes totaling $1,046,479 are due on December 31, 2010. At March 31, 2010, holders of notes totaling $10,000 have requested conversion to common stock, and other note holders with notes totaling $105,000 have demanded payment as of March 31, 2010.

During the three month period ended March 31, 2010, the Company issued $198,500 of 10%, unsecured convertible notes payable. Principal and interest on these notes are payable solely in shares of the Company's common stock. Principal and interest are convertible at any time into shares of the Company's common stock at $0.50 per share at the option of the note holders if converted prior to December 31, 2010. On December 31, 2010, if not converted, the conversion price is the lesser of $0.50 per share or the Average daily closing price ten days prior to December 31, 2010. Of the $198,500 debt issued during the three month period ended March 31, 2010, $148,500 included detachable warrants. For each dollar, two warrants were granted with a five-year term and are exercisable at $1.00 per share. The Company recorded the warrants at their relative fair value a discount of $38,963 has been recorded at March 31, 2010.

Subsequent to March 31, 2010, the Company issued $30,000 of 10% convertible notes payable and warrants to purchase 60,000 shares of common stock at $1.00 per share.

Subsequent to March 31, 2010, certain notes payable were converted to 353,059 shares of common stock.

6. Income taxes:

Based on the U.S. statutory income tax rates, the Company's expected income tax benefit was approximately $607,795 and $222,000 for the three months ended March 31, 2010 and 2009, respectively. The expected income tax benefit differs from the actual benefit of $0 each period, due primarily to the valuation allowance.

7. Equity (deficit):

Stock option plan:

In the three months ended March 31, 2010, the Company recorded total stock-based compensation of approximately $912,000 for options that vested during the period, which is included in general and administrative expense and interest expense. As of March 31, 2010, the fair value of 600,000 unvested stock options was $103,800 which is expected to be recognized over a weighted average period of approximately three years.

The Company uses the Black-Scholes option pricing model to determine the weighted average fair value of options. The weighted average fair value of options granted during the three months ended March 31, 2010 was $0.28 per share. The assumptions utilized to determine the fair value of options granted through March 31, 2010 are provided in the following table:

	March 31,2010	March 31,2009

Risk free interest rates	2.38%-2.44%	0.66% - 2.89%
Expected volatility	181%-185%	80% - 136%
Expected term in years	5	2-3
Expected dividend yield	-	-

F-9

The following table sets forth stock option activity since January 1, 2010:

			Weighted
			Average				Weighted
	Number of		Exercise				Average
	Options		Price		Exercisable		Fair Value

Outstanding, January 1, 2010		5,350,000	$	0.35		2,050,000	$	0.18
Granted/vested during period		4,350,000	$	0.28		4,050,000	$	0.28
Outstanding, March 31, 2010		9,700,000	$	0.32		6,100,000	$	0.21

			Weighted
	Number of		Average
	Shares		Fair Value

No vested shares at January 1, 2010		3,300,000	$	0.18
Granted		330,000	$	0.22
Nonvested at March 31, 2010		3,630,000	$	0.18

As of March 31, 2010, the Company has 3,600,000 unvested stock options of which vesting on 3,000,000 are contingent on future events.

Options granted to date have been granted outside of the plan and have terms that do not exceed five years. There were 6,100,000 vested options as of March 31, 2010. There was no intrinsic value attributable to outstanding or vested options at March 31, 2010.

Common stock issued for services:

During the three month period ended March 31, 2010, the Company issued 1,540,000 shares of common stock to various third parties who performed development stage services for the Company. These shares were valued at $310,400. During the three month period ended March 31, 2009, the Company issued 1,035,000 shares of common stock to various third parties who performed development stage services for the Company and for employee bonuses. These shares were valued at $258,750 ($0.25 per share).

8. Commitments:

Contract with Gao Da:

In September 2008, the Company, through Da Chuan, entered into a 20-year contract with Gao Da, in which the Company is entitled to utilize Gao Da's licenses and contracts that relate to the Company's deployment of fiber and wireless assets for the Company's benefit, as defined. As consideration for the service agreement, the Company is to pay or reimburse Gao Da for any licensing fees for base stations or license renewal expenses, and the Company is to pay a quarterly fee to Gao Da equal to one percent of net revenue generated from the use of Gao Da's contracts and licenses in the Company's business operations, as defined. The Company consolidated Gao Da effective January 1, 2010. All intercompany transactions have been eliminated.

F-10

Leases:

The Company leases office space in Denver, Colorado on a month-to-month basis for approximately $1,100 per month. Da Chuan leases office space in Beijing, China on a month-to-month basis for approximately $5,400 per month.

F-11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion is intended to provide an analysis of China Wi-Max’s financial condition and should be read in conjunction with China Wi-Max’s financial statements and the notes thereto set forth herein. The matters discussed in these sections that are not historical or current facts deal with potential future circumstances and developments. China Wi-Max actual results could differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include those discussed below.

Plan of Operations

China Wi-Max plans to be a telecommunications broadband provider focused on providing commercial customers with high bandwidth connections through first and second tier markets in China through subsidiary companies. Through these wholly and partially owned subsidiaries, China Wi-Max intends to build, own, and operate metropolitan area Internet Protocol (IP) based broadband networks, using both owned optical fiber and licensed Wi-Max capable wireless spectrum.

China Wi-Max operating subsidiaries networks are designed to provide the reliability, redundancy, scalability, and other features expected of a carrier class network. China Wi-Max believes its operating subsidiaries can bypass the local loop facilities of the local exchange carrier to connect enterprise customers directly to the global communications network. At this time, China Wi-Max has six full-time employees in the United States, augmented by a number of personnel in operating subsidiaries, contract personnel and professional services organizations.

Service to customers is provided through direct connections to the optical fiber or transmissions over licensed radio spectrum provided through China Wi-Max’s Chinese operating subsidiaries. Currently, the Company’s operating subsidiaries are offering customers high speed broadband Internet access in a pilot program. Services contemplated to be offered in the future include Voice-over Internet Protocol, or VoIP, bandwidth on demand, bandwidth redundancy, virtual private networks, or VPNs, disaster recovery, bundled data, and video services.

During 2009, the Company continued to put in place the structure and resources necessary to provide the services contemplated in its business plan. The Company put into place the corporate structure of subsidiaries, licenses and contract relationships necessary to provide services in China. Audit work and filings with the United States Securities and Exchange Commission were successfully completed to position the Company to become a trading company on the Over The Counter Bulletin Board exchange. Initial office space and personnel resources were obtained in China.

The addition of customers will require additional capital to acquire access to new buildings, purchase and install equipment, etc. The Company is also pursuing opportunities to utilize its wireless assets to provide last mile bridging services for potential customers. The Company also plans to initialize its network assets in Hangzhou. This project timing will be dependant our ability to raise sufficient capital to proceed. We are optimistic about the opportunity in China, but recognize how difficult it is to raise capital necessary to carry out the Company's plans.

In the continuance of our business operations, we do not intend to purchase or sell any significant assets and we do not expect a significant change in the number of employees, until additional capital is raised.

RESULTS OF OPERATIONS

Results of Operations for the Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009

During the three months ended March 31, 2010 and 2009, China Wi-Max did not recognize any revenues.

During the three months ended March 31, 2010, China Wi-Max incurred general and administrative expenses of $1,694,450 compared to $589,020 for the three months ended March 31, 2009. The $1,105,430 increase was a result of an increase in the Company's operational activities compared to the prior period. During the three months ended March 31, 2010, there was an increase of approximately $640,000 in salary and wages, expenses for operations in China increased by $23,000, consulting and professional fees increased by $440,000 and travel and other items decreased by $6,000 over the prior period ended March 31, 2009.

During the three months ended March 31, 2010, China Wi-Max recognized a net loss of $1,787,631 compared to a net loss of $651,847 during the three months ended March 31, 2009. The $1,135,784 increase in net loss was primarily a result of the $1,105,430 increase in general and administrative expenses, discussed above combined with the $30,354 increase in interest expense as a result of the issuance of convertible promissory notes discussed below.

China Wi-Max's basic loss per share was $.12 during the three months ended March 31, 2010 versus a net loss of $0.06 per share during the three months ended March 31, 2009.

LIQUIDITY

Historically, cash flow from operations has not been sufficient to sustain China Wi-Max's operation without additional sources of capital. At March 31, 2010, the Company had total current assets of $89,181, consisting of cash of $57,270 and prepaid expenses of $31,911. At March 31, 2010, the Company had total current liabilities of $4,767,335. Total current liabilities consisted of accounts payable of $624,933, accrued interest of $514,041 and current convertible notes payable of $3,628,361. At March 31, 2010, the Company had a working capital deficit of $4,678,154.

During the three months ended March 31, 2010, China Wi-Max used $177,707 in its operating activities. The net loss of $1,787,631 was adjusted for $310,400 of services paid for by the issuance of common stock, $911,602 in non-cash option expenses, amortization of debt issue costs of $4,329 and $6,911 in depreciation and amortization costs. During the three months ended March 31, 2010, there was a $20,474 decrease in prepaid expenses, a $267,356 increase in accounts payable, a $88,852 increase in accrued interest.

During the three months ended March 31, 2009, China Wi-Max used $170,913 in its operating activities. The net loss of $651,847 was adjusted for $258,750 of services paid for by the issuance of common stock, $15,699 in non-cash stock option expenses and $16,840 in depreciation and amortization costs. During the three months ended March 31, 2010, there was a $30,278 decrease in prepaid expenses, a $96,526 increase in accounts payable, a $62,841 increase in accrued interest.

During the three months ended March 31, 2010, China Wi-Max did not have any investing activities. During the three months ended March 31, 2009, China Wi-Max used $65,419 in its investing activities for the purchase of property and equipment.

During the three months ended March 31, 2010, China Wi-Max received $198,500 from its financing activities. During the three months ended March 31, 2009, China Wi-Max received $95,000 from its financing activities.

China Wi-Max has not paid nor is any principal or interest due on notes payable . As of March 31, 2010, there is $3,628,361 in outstanding convertible notes payable and accrued interest of $514,041.

During the three months ended March 31, 2010, China Wi-Max issued 1,540,000 shares of its common stock to individuals as employment compensation and payments for services performed for China Wi-Max, valued at $310,400. During the three months ended March 31, 2009, China Wi-Max issued 1,035,000 shares of its common stock to individuals as employment signing bonuses and payments for services performed for China Wi-Max, valued at $258,750.

During the three months ended March 31, 2010, China Wi-Max issued stock options exercisable for 4,350,000 shares of its common stock, with an exercise price in a range from $0.25 to $0.50 per share and a term of 5 years. The options have variable vesting rates. During the three months ended March 31, 2010, options exercisable for 4,050,000 shares were vested. These options were valued using the Black-Scholes model, and the Company has recorded $911,602 of non-cash stock option expense during the three months ended March 31, 2010.

During the three months ended March 31, 2009, China Wi-Max issued stock options exercisable for 300,000 shares of its common stock, with an exercise price of $0.25 per share and a term of 3 years. The options have variable vesting rates. During the three months ended March 31, 2009, options exercisable for 256,250 shares were vested. These options were valued using the Black-Scholes model, and the Company has recorded $16,000 of stock based compensation expense during the three months ended March 31, 2009.

To the extent China Wi-Max's operation are not sufficient to fund its capital requirements, China Wi-Max may enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or through the issuance of debt. At the present time China Wi-Max does not have a revolving loan agreement with any financial institution nor can it provide any assurance that it will be able to enter into any such agreement in the future or be able to raise funds through the further issuance of debt or equity.

In the event that our operating plan changes due to changes in our strategic plans, lower than expected revenues, unanticipated expenses, increased competition, unfavorable economic conditions or other unforeseen circumstances, including the continued turmoil and tightening of the credit markets, and further weakening of consumer confidence and spending, our liquidity may be negatively impacted. If so, we could be required to adjust our expenditures for the remainder of 2010 and for 2011 to conserve working capital or raise additional capital, possibly including debt or equity financing, to fund operations and our growth strategy.

Need for Additional Financing

China Wi-Max's business plan requires funding to develop and expand a new capital intensive business. China Wi-Max has been addressing funding needs for the next twelve months estimated at $10 to $15 million dollars to carry out the business plan. To continue to expand and grow the business beyond twelve months will require significant additional capital and China Wi-Max expects to be continually raising funds for at least the next twenty-four months to thirty-six months. Although management believes there is tremendous upside potential, failure to raise sufficient additional capital could result in reduced growth, or in the worst case, failure of the business. These ongoing capital needs are reflected in the Company's independent registered public accounting firm's Audit report for the audited periods ending December 31, 2009, which included a "going concern" emphasis paragraph.

No commitments to provide additional funds have been made by our management or other stockholders. Accordingly, there can be no assurance that any additional funds will be available to us to allow it to cover our expenses as they may be incurred.

ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

ITEM 4T. CONTROLS AND PROCEDURES

Disclosures Controls and Procedures

We have adopted and maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC's rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive Officer)and Chief Financial Officer (Principal Financial Officer), as appropriate, to allow for timely decisions regarding required disclosure.

As required by SEC Rule 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer/Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are ineffective in timely alerting him to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

This quarterly report does not include a report of management's assessment regarding internal control over financial reporting or an attestation report of the Company's registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission of newly public companies.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

NONE

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

The Company made the following unregistered sales of its securities from January 1, 2010 through March 31, 2010.

DATE OF SALE	TITLE OF SECURITIES	NO. OF SHARES		CONSIDERATION	CLASS OF PURCHASER
1/5/2010	Common stock		20,000	$10,000 Convertible Promissory Note	Business Associate
1/15/2010	Common stock		80,000	$40,000 Convertible Promissory Note	Business Associate
2/22/2010	Common stock		20,000	$10,000 Convertible Promissory Note	Business Associate
3/5/2010	Common stock		50,000	$25,000 Convertible Promissory Note	Business Associate
3/8/2010	Common stock		12,000	$6,000 Convertible Promissory Note	Business Associate
3/15/2010	Common stock		20,000	$10,000 Convertible Promissory Note	Business Associate
3/15/2010	Common stock		50,000	$25,000 Convertible Promissory Note	Business Associate
3/15/2010	Common stock		20,000	$10,000 Convertible Promissory Note	Business Associate
3/18/2010	Common stock		10,000	$5,000 Convertible Promissory Note	Business Associate
3/18/2010	Common stock		10,000	$5,000 Convertible Promissory Note	Business Associate
3/18/2010	Common stock		30,000	$15,000 Convertible Promissory Note	Business Associate
3/22/2010	Common stock		4,000	$2,000 Convertible Promissory Note	Business Associate
3/24/2010	Common stock		31,000	$15,500 Convertible Promissory Note	Business Associate
3/24/2010	Common stock		40,000	$20,000 Convertible Promissory Note	Business Associate

Exemption From Registration Claimed

All of the sales by the Company of its unregistered securities were made by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act"). All of the individuals and/or entities listed above that purchased the unregistered securities were almost all existing shareholders, all known to the Company and its management, through pre-existing business relationships, as long standing business associates. All purchasers were provided access to all material information, which they requested, and all information necessary to verify such information and were afforded access to management of the Company in connection with their purchases. All purchasers of the unregistered securities acquired such securities for investment and not with a view toward distribution, acknowledging such intent to the Company. All certificates or agreements representing such securities that were issued contained restrictive legends, prohibiting further transfer of the certificates or agreements representing such securities, without such securities either being first registered or otherwise exempt from registration in any further resale or disposition.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits. The following is a complete list of exhibits filed as part of this Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of Item 601 of Regulation S-K.

Exhibit 31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

Exhibit 31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

Exhibit 32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

Exhibit 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINA WI-MAX COMMUNICATIONS, INC.
	(Registrant)

Dated: December 7, 2010	By: /s/ Steve T. Berman
	Steven Berman
	President

Dated: December 7, 2010	By: /s/ Frank Ventura
	Frank Ventura,
	Chief Financial Officer

China Wi-Max Communications, Inc. - FORM 10-Q/A - December 8, 2010

Attached files

China Wi-Max Communications, Inc. Reports