China Wi-Max Communications (CHWM) 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q 

(Mark One)

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

For the quarterly period ended June 30, 2010

¨ 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 ¨ 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 August 20, 2010 there were 19,545,115 shares of the registrant's common stock issued and outstanding.

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
Balance Sheets –June 30, 2010 (Unaudited) and December 31, 2009		F-1
Statements of Operations (Unaudited) - Three months and six months ended June 30, 2010 and 2009 and the period From July 5, 2006 (Inception) to June 30, 2010		F-2 – F-3
Statements of Changes in Deficit (Unaudited) - From July 5, 2006 (Inception) to June 30, 2010		F-4
Statements of Cash Flows (Unaudited) - Six months ended June 30, 2010 and 2009 and From July 5, 2006 (Inception) to June 30, 2010		F-5
Notes to the Financial Statements (Unaudited)		F-6
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	4
Item 4T.	Controls and Procedures	5
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings -Not Applicable	5
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5
Item 3.	Defaults Upon Senior Securities - Not Applicable	5
Item 4.	Submission of Matters to a Vote of Security Holders - Not Applicable	6
Item 5.	Other Information - Not Applicable	6
Item 6.	Exhibits	6
SIGNATURES		7

2

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
Current assets:
Cash	$	308		$	34,524
Prepaid expenses		30,309			52,385
Total current assets		30,617			86,909
Property and equipment, net		502,997			514,731
Intangible assets		305,678			305,678
		808,675			820,409
	$	839,292		$	907,318
LIABILITIES AND DEFICIT
Current liabilities:
Accounts payable	$	656,492		$	357,577
Accrued interest		580,943			425,189
Notes payable		3,661,444			3,468,824
Total current liabilities		4,898,879			4,251,590
Deficit:
China Wi-Max shareholders' deficit:
Common stock; $.001 par value; 100,000,000 shares authorized; 17,892,063 and 14,654,004 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively		17,892			14,654
Additional paid-in capital		3,559,174			1,892,931
Accumulated other comprehensive income		26,889			25,978
Deficit accumulated during the development stage		(7,643,686	)		(5,277,835	)
Total China Wi-Max  shareholders' deficit		(4,039,731	)		(3,344,272	)
Noncontrolling interest		(19,856	)		-
Total deficit		(4,059,587	)		(3,344,272	)
Total liabilities and deficit	$	839,292		$	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)

	Three Months Ended
	June 30,			June 30,
	2010			2009
Operating expenses:
General and administrative expense	$	(432,991	)	$	(843,257	)
Operating loss		(432,991	)		(843,257	)
Other expense:
Interest expense		(165,085	)		(70,850	)
Net loss		(598,076	)		(914,107	)
Net loss attributable to the noncontrolling interest		4,265			-
Net loss attributable to China Wi-Max		(593,811	)		(914,107	)
Foreign currency translation loss		(1,123	)		(532	)
Comprehensive loss	$	(599,199	)	$	(914,639	)
Basic and diluted net loss per share attribute to China Wi-Max common shareholders	$	(0.04	)	$	(0.07	)
Weighted average number of common shares outstanding		16,373,938			12,558,464

See notes to unaudited consolidated financial statements.

F-2

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

							Period from
							July 5, 2006
							(inception)
	Six Months Ended						through
	June 30,			June 30,			June 30,
	2010			2009			2010
Operating expenses:
General and administrative expense	$	(2,127,441	)	$	(1,432,291	)	$	(6,887,826	)
Operating loss		(2,127,441	)		(1,432,291	)		(6,887,826	)
Other expense:
Interest expense		(258,266	)		(133,677	)		(775,716	)
Net loss		(2,385,707	)		(1,565,968	)		(7,663,542	)
Net loss attributable to the noncontrolling interest		19,856			-			19,856
Net loss attributable to China Wi-Max		(2,365,851	)		(1,565,968	)		(7,683,398	)
Foreign currency translation gain		911			54			26,889
Comprehensive loss	$	(2,384,796	)	$	(1,565,914	)	$	(7,636,653	)
Basic and diluted net loss per share attribute to China Wi-Max common shareholders	$	(0.15	)	$	(0.13	)
Weighted average number of common shares outstanding		15,601,408			11,963,317

See notes to unaudited consolidated financial statements.

F-3

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

PERIODS FROM JULY 5, 2006 (INCEPTION) THROUGH JUNE 30, 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		2,697,500			2,697			563,565		-		-			-			566,262
Common stock issued upon conversion of notes and accrued interest		240,559			241			69,673		-		-			-			69,914
Warrants/Shares issued related to convertible notes		300,000			300			108,178		-		-			-			108,478
Fair value of options vesting during the period		-			-			924,827		-		-			-			924,827
Net loss		-			-			-		-		(2,365,851	)		(19,856	)		(2,385,707	)
Other comprehensive income adjustments, gain on foreign currency translation		-			-			-		911		-			-			911
Balances, June 30, 2010 (unaudited)		17,892,063		$	17,892		$	3,559,174	$	26,889	$	(7,643,686	)	$	(19,856	)	$	(4,059,587	)

See notes to unaudited consolidated financial statements.

F-4

CHINA WI-MAX COMMUNICATIONS,INC.

(A Development Stage Enterprise)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended						Period from July 5, 2006 (Inception) through
	June 30, 2010			June 30, 2009			June 30, 2010
Cash flows from operating activities:
Net loss	$	(2,385,707	)	$	(1,565,968	)	$	(7,663,542	)
Adjustments to reconcile net loss to net cash used in operating activities:
Common stock issued for services		566,262			508,750			1,376,012
Non-cash stock option expense		924,827			183,724			1,364,463
Common stock issued to note holders		42,000						42,000
Amortization of debt issue costs		34,498			-			34,498
Depreciation		13,851			18,565			47,623
Amortization		-			12,227			25,649
Changes in assets and liabilities:
Decrease (Increase) in prepaid expenses		22,076			(15,105	)		(30,309	)
Decrease in other assets		-			20,400			38,139
Increase in accounts payable		298,915			183,397			656,491
Increase in accrued interest		181,768			133,742			694,201
Net cash used in operating activities		(301,510	)		(520,308	)		(3,414,775	)
Cash flows from investing activities:
Purchase of property and equipment		-			(70,325	)		(521,329	)
Purchase of intangible assets		-			-			(364,195	)
Net cash used in investing activities		-			(70,325	)		(885,524	)
Cash flows from financing activities:
Proceeds from issuance of notes payable and warrants		268,500			601,403			4,299,224
Proceeds from issuance of common stock		-			-			9,055
Debt issue costs		-			-			(5,270	)
Net cash provided by financing activities		268,500			601,403			4,303,009
Effect of exchange rate changes on cash		(1,206	)		-			(2,401	)
Net (decrease) increase in cash		(34,216	)		10,770			309
Cash, beginning of period		34,524			147,889			-
Cash, end of period	$	308		$	158,659		$	309
Supplemental disclosure of non-cash investing and financing activities:
Convertible notes and interest converted to common stock	$	69,914		$	342,260		$	719,058

See notes to unaudited consolidated financial statement.

F-5

CHINA WI-MAX COMMUNICATIONS, INC.

(A Development Stage Enterprise)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(Unaudited)

1.       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 June 30, 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 June 30, 2010, include the accounts of Da Chuan and Shi Dai.  Intercompany balances and transactions have been eliminated in consolidation. In  connection with the adoption of new accounting rules for variable interest 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. The consolidation did not have a material impact on the financial statements (Note 2).

The Company's foreign subsidiaries (Da Chuan and Shi Dai) and its controlled affiliate (Gao Da) are located in China, and foreign transactions are conducted in currencies other than the U.S. dollar,  primarily the Chinese  Renmimbi  (RMB). Da Chuan and Shi Dai 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-6

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.

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 $2,385,707 for the six months ended June 30, 2010, and a working  capital  deficiency and  shareholders'  deficit of $4,868,262  and  $4,039,731,  respectively,  at June 30, 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 $233,500 during the six months ended June 30, 2010. In July 2010, the Company entered into a financing agreement with a third party, in which, subject to variuos conditions and restrictions, this party may purchase up to $10 million of the Company's common  stock. 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.

2.       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.

F-7

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:

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 June 30, 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 entities:

In June 2009, the FASB issued new guidance that amended the existing criteria for consolidating variable interest entities (“VIEs”). 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. The new guidance was effective for the Company beginning January 1, 2010.

In connection with the adoption of the new accounting rules for VIEs, the Company consolidated affiliate Gao Da beginning on January 1, 2010. All intercompany balances and transactions have been eliminated. The consolidation did not have a material impact on the financial statements.

Revenue recognition:

As of June 30, 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.

F-8

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 (15,934,016 at June 30, 2010 and 11,967,890 at June 30, 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.

3.       Property and equipment:

As of June 30, 2010 and December 31, 2009, property and equipment consists of the following:

	June 30, 2010			December 31, 2009
��
Fiber optic cable	$	510,009		$	507,875
Network equipment		40,797			40,643
		550,806			548,518
Less accumulated depreciation		(47,809	)		(33,787	)
	$	502,997		$	514,731

4.       Intangible assets:

As of June 30, 2010 and December 31, 2009, intangible assets consist of contractual license rights in the amount of 305,678.

Prior to January 1, 2010, the Company's intangible asset, contractual license rights, represented the Company’s rights to certain frequency licenses held by Gao Da. The contractual license rights represented 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 Amoritize 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 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 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. The Company is in the process of obtaining a formal renewal for one of Gao Da's licenses from the local authorities. Management has no reason to beleive it will not receive such formal 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-9

5.       Notes payable:

Convertible notes payable

As of June 30, 2010, all of the 12 % convertible notes totaling $518,500 and 10% convertible Notes totaling $1807,445 are due on demand.

10% notes totaling $1,332,479 are due on December 31, 2010.

The Company has negotiated with holders of Notes due at June 30, 2010 to convert such notes and related accrued interest into shares of the Company's common stock $.19 per share.

During the six months ended June 30, 2010, the Company issued $233,500 of 10% convertible notes payable. These notes bear interest at 10% per annum and are unsecured. 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. Of the $233,500 debt issued during the six month period ended June 30, 2010, $183,500 included detatchable 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 and a discount of approximately $31,000 has been recorded at June 30, 2010.

Subsequent to June 30, 2010, the Company issued a $50,000 unsecured Convertible Note convertible into shares of  common stock at 58% of the average market price during the 10 days preceding the conversion. This note bear interest at 8%.

Other note payable

In the three months ended June 30, 2010, the company issued a $35,000 non-interest bearing unsecured note payable, due on demand, to an existing convertible note holder.

6.       Income taxes:

   Based on the U.S. statutory income tax rates, the Company's expected  income tax benefit was approximately $811,000 and $473,000 for the six months ended  June 30, 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.       Shareholders deficit:

Stock option plan:

In the six months ended June 30, 2010, the Company recorded total stock-based compensation of approximately $925,000 for options that vested during the year, which is included in general and administrative expense and interest expense. As of June 30, 2010, the fair value of 600,000 unvested stock options was $67,137 which is expected to be recognized over a weighted average period of approximately 1 3/4 years.

F-10

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 six months ended June 30, 2010 was $0.22 per share. The assumptions utilized to determine the fair value of options granted during the six months ended June 30, 2010 and 2009 are provided in the following table:

	June 30,2010		June 30,2009
Risk free interest rates		2.38%-2.44%		1.34% - 2.75%
Expected volatility		181%-185%		135% - 145%
Expected term in years		5		2-3
Expected dividend yield		-		-

F-11

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	$	0.22
Outstanding, June 30, 2010		9,700,000	$	0.32		6,100,000	$	0.21

			Weighted
	Number of		Average
	Options		Fair Value
Nonvested shares at January 1, 2010		3,300,000	$	0.18
Granted		300,000	$	0.22
Nonvested at June 30, 2010		3,600,000	$	0.18

As of June 30, 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 June 30, 2010. There was no intrinsic value attributable to outstanding or vested options at the period ended June 30, 2010.

Common stock issued for services:

During the six months ended June 30, 2010, China Wi-Max issued 2,697,500 shares of its common stock to individuals as employment compensation and payments for services performed for China Wi-Max, valued at approximately $566,000. This amount includes 200,000 shares issued to a third party as part of a debt financing agreement (see subsequent events note 9). During the six month period ended June 30, 2009, the Company issued 2,035,000 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 $508,750 ($0.25 per share).

F-12

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.

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.

9.       Subsequent event disclosure:

On July 23, 2010, the Company entered into a Reserve Equity Financing Agreement (“REF”) with AGS Capital Group, LLC (“AGS”), pursuant to which AGS committed to purchase, from time to time over a period of two years, shares of the Company's common stock for cash consideration up to $10,000,000, subject to certain conditions and limitations.  In connection with the REF, the Company also entered into a registration rights agreement with AGS, dated July 14, 2010. The Company intends to use the proceeds in connection with acquisitions and joint ventures through our operating subsidiaries in China, and for general working capital purposes. On July 23, 2010, 1,653,051 shares of stock were issued to AGS in consideration of siging the agreement bringing the total of shares issued to AGS to 1,857,051.

F-13

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.

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RESULTS OF OPERATIONS

Results of Operations for the Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009

During the six months ended June 30, 2010 and 2009, China Wi-Max did not recognize any revenues.

During the six months ended June 30, 2010, China Wi-Max incurred general and administrative expenses of approximately $2,127,000 compared to approximately $1,432,000 for the six months ended June 30, 2009. The $695,000 increase was a result of an increase in the Company's operational activities compared to the prior period. During the six months ended June 30, 2010, there was an increase of approximately $384,000 in salary and wages, expenses for operations in China decreased by approximately $7,000, consulting and professional fees increased by approximately $556,000 and travel and other items decreased by approximately $18,000 over the prior period ended June 30, 2009.

During the six months ended June 30, 2010, China Wi-Max recognized a net loss of approximately $2,386,000 compared to a net loss of approximately $1,566,000 during the six months ended June 30, 2009. The $820,000 increase in net loss was primarily a result of the approximately $695,000 increase in general and administrative expenses, discussed above combined with the approximately $125,000 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 $.15 during the six months ended June 30, 2010 versus a net loss of $0.13 per share during the six months ended June 30, 2009.

LIQUIDITY

Historically, cash flow from operations has not been sufficient to sustain China Wi-Max's operation without additional sources of capital. At June 30, 2010, the Company had total current assets of approximately $31,000, consisting of cash of approximately $300 and prepaid expenses of approximately $30,000. At June 30, 2010, the Company had total current liabilities of approximately $4,899,000. Total current liabilities consisted of accounts payable of approximately $656,000, accrued interest of approximately $581,000 and current convertible notes payable of approximately $3,621,000. At June 30, 2010, the Company had a working capital deficit of approximately $4,868,000.

During the six months ended June 30, 2010, China Wi-Max used approximately $262,000 in its operating activities. The net loss of approximately $2,386,000 was adjusted for approximately $566,000 of services paid for by the issuance of common stock, approximately $925,000 in non-cash option expenses and approximately $14,000 in depreciation and amortization costs. During the six months ended June 30, 2010, there was an approximate $22,000 decrease in prepaid expenses, an approximate $299,000 increase in accounts payable, and an approximate $156,000 increase in accrued interest.

During the six months ended June 30, 2009, China Wi-Max used approximately $520,000 in its operating  activities.  The net loss of approximately $1,566,000  was adjusted for approximately $509,000 of services  paid for by the issuance of common stock,  approximately $184,000 in non-cash  stock option expense and approximately $31,000 in depreciation and amortization expenses. During the six  months  ended  June 30,  2009,  there was an approximate $15,000 increase  in prepaid expenses, an approximate $183,000 increase in accounts payable, an approximate $68,000 increase in accrued interest, and an approximate $20,000 decrease in other assets.

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During the six months ended June 30, 2010, China Wi-Max did not have any investing activities. During the six months ended June 30, 2009, China Wi-Max used approximately $70,000 in its investing activities for the purchase of property and equipment.

During the six months ended June 30, 2010, China Wi-Max received approximately $234,000 from its financing activities. During the six months ended June 30, 2009, China Wi-Max received approximately $601,000 from its financing activities.

During the six months ended June 30, 2010, China Wi-Max issued 2,697,500 shares of its common stock to individuals as employment compensation and payments for services performed for China Wi-Max, valued at approximately $566,000. This amount includes 200,000 shares issued to a third party as part of a debt financing agreement (see note 7). During the six months ended June 30, 2009, China Wi-Max issued 2,035,000 shares of its common stock to individuals as employment signing bonuses and payments for services performed for China Wi-Max, valued at approximately $508,750.

During the six months ended June 30, 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 six months ended June 30, 2010, options exercisable for 4,050,000 shares were vested. These options were valued using the Black-Scholes model, and the Company has recorded approximately $931,198 of non-cash stock option expense during the six months ended June 30, 2010.

During the six months ended June 30, 2009,  China  Wi-Max  issued stock  options exercisable for 3,150,000 shares of its common stock,  with an exercise price of $0.25 per share and a term of 3 to 5 years.  The options have  variable  vesting rates.  During  the six months  ended June 30,  2009,  options  exercisable  for 1,037,000 shares were vested.  These options were valued using the Black-Scholes model, and the Company has recorded approximately $184,000 of stock based compensation expense during the six months ended June 30, 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 Going Concern comments for the audited period ending December 31, 2009.

On July 23, 2010, we entered into a Reserve Equity Financing Agreement (“REF”) with AGS Capital Group, LLC (“AGS”), pursuant to which AGS committed to purchase, from time to time over a period of two years, shares of our common stock for cash consideration up to $10,000,000, subject to certain conditions and limitations.  In connection with the REF, we also entered into a registration rights agreement with AGS, dated July 14, 2010. We intend to use the proceeds in connection with acquisitions and joint ventures through our operating subsidiaries in China, and for general working capital purposes. On July 23, 2010, 1,657,051 shares of stock were issued to AGS in consideration of siging the agreement bringing the total of shares issued to AGS to 1,857,051.

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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/Chief Financial Officer has 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/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 June 30, 2010.

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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
4/2/2010	Common stock		20,000	$10,000 Convertible Promissory Note	Business Associate
4/9/2010	Common stock		20,000	$10,000 Convertible Promissory Note	Business Associate
4/9/2010	Common stock		10,000	$5,000 Convertible Promissory Note	Business Associate
4/22/2010	Common stock		10,000	$5,000 Convertible Promissory Note	Business Associate

DATE OF SALE	TITLE OF SECURITIES	NO. OF SHARES		CONSIDERATION	CLASS OF PURCHASER
3/8/2010	Common stock		1,300,000	Issued for services	Business Associate
3/25/2010	Common stock		15,000	Issued for services	Business Associate
3/25/2010	Common stock		200,000	Issued for services	Business Associate
3/25/2010	Common stock		5,000	Issued for services	Business Associate
3/25/2010	Common stock		5,000	Issued for services	Business Associate
3/25/2010	Common stock		15,000	Issued for services	Business Associate
5/6/2010	Common stock		30,000	Issued for services	Business Associate
5/6/2010	Common stock		30,000	Issued for services	Business Associate
5/6/2010	Common stock		26,250	Issued for services	Business Associate
5/6/2010	Common stock		26,250	Issued for services	Business Associate
6/22/2010	Common stock		200,000	Issued as part of a Reserve Equity Financing Agreement	Business Associate
6/30/2010	Common stock		20,000	Issued for services	Business Associate
6/30/2010	Common stock		50,000	Issued for services	Business Associate
6/30/2010	Common stock		20,000	Issued for services	Business Associate
6/30/2010	Common stock		100,000	Issued for services	Business Associate
6/30/2010	Common stock		40,000	Issued for services	Business Associate
6/30/2010	Common stock		300,000	Issued for services	Business Associate
6/30/2010	Common stock		20,000	Issued for services	Business Associate
6/30/2010	Common stock		5,000	Issued for services	Business Associate
6/30/2010	Common stock		30,000	Issued for services	Business Associate
6/30/2010	Common stock		170,000	Issued for consulting services	Business Associate
6/30/2010	Common stock		10,000	Issued as an incentive	Business Associate
6/30/2010	Common stock		75,000	Issued for consulting services	Business Associate
6/30/2010	Common stock		300,000	Issued as reimbursement	Business Associate
6/30/2010	Common stock		5,000	Issued as an incentive	Business Associate

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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

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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: August 23, 2010	By:	/s/ Steve T. Berman
		Steven Berman
		President
Dated: August 23, 2010	By:	/s/ Frank Ventura
		Frank Ventura,
		Chief Financial Officer

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