UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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(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, 2009
[ ] 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.
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(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
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(Address of principal executive offices)
303-993-8028
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(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 (ss.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]
1
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 May 13, 2009 there were 12,695,002 shares of the registrant's common stock
issued and outstanding.
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements Page
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Balance Sheets -March 31, 2009 (Unaudited) and
December 31, 2008 F-1
Statements of Operations (Unaudited) -
Three months ended March 31, 2009 and 2008 and
From July 5, 2006 (Inception) to March 31, 2009 F-2
Statements of Changes in Shareholders' Deficit (Unaudited) - From July
5, 2006 (Inception) to March 31, 2009 F-3
Statements of Cash Flows (Unaudited) - Three months ended March 31, 2009
and 2008 and From July 5, 2006 (Inception) to March 31, 2009 F-4
Notes to the Financial Statements (Unaudited) F-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk - Not Applicable 4
Item 4. Controls and Procedures 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
3
PART I
ITEM 1. FINANCIAL STATEMENTS
CHINA WI-MAX COMMUNICATIONS, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
ASSETS
March 31, December 31,
2009 2008
------------------ ------------------
(Unaudited)
------------------ ------------------
Current assets:
Cash $ 6,557 $ 147,889
Prepaid expenses 31,702 61,980
------------------ ------------------
Total current assets 38,259 209,869
------------------ ------------------
Property and equipment, net 588,271 531,009
Intangible assets, net 317,905 326,056
------------------ ------------------
906,176 857,065
------------------ ------------------
$ 944,435 $ 1,066,934
================== ==================
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 216,356 $ 119,830
Accrued interest 258,482 195,641
Convertible notes payable 2,445,100 2,350,100
------------------ ------------------
Total liabilities, all current 2,919,938 2,665,571
------------------ ------------------
Shareholders' deficit:
Common stock; $.001 par value; 50,000,000 shares authorized; 11,820,002 and
10,785,002 shares issued and outstanding as of
March 31, 2009 and December 31, 2008, respectively 11,820 10,785
Additional paid-in capital 807,462 534,048
Accumulated other comprehensive income 26,385 25,853
Deficit accumulated during the development stage (2,821,170) (2,169,323)
------------------ ------------------
Total shareholders' deficit (1,975,503) (1,598,637)
------------------ ------------------
$ 944,435 $ 1,066,934
================== ==================
See notes to unaudited financial statement.
F-1
CHINA WI-MAX COMMUNICATIONS, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Period from
July 5, 2006
(inception)
Three Months Ended through
March 31, March 31, March 31,
2009 2008 2009
--------------------- ---------------------------------------------
Operating expenses:
General and administrative expense $ (589,020) $ (412,408) $ (2,543,931)
--------------------- ---------------------- ---------------------
Operating loss (589,020) (412,408) (2,543,931)
--------------------- ---------------------- ---------------------
Other expense:
Interest expense (62,827) (32,923) (277,239)
--------------------- ---------------------------------------------
Net loss (651,847) (445,331) (2,821,170)
Foreign currency translation gain 532 - 26,385
--------------------- ---------------------------------------------
Comprehensive loss $ (651,315) $ (445,331) $ (2,794,785)
===================== ====================== =====================
Basic and diluted net loss per share $ (0.06) $ (0.05)
===================== ======================
Weighted average number of common
shares outstanding 11,236,705 9,794,066
===================== ======================
See notes to unaudited financial statements.
F-2
CHINA WI-MAX COMMUNICATIONS, INC.
(A Development Stage Enterprise)
STATEMENTS OF SHAREHOLDERS' DEFICIT
PERIODS FROM JULY 5, 2006 (INCEPTION) THROUGH MARCH 31, 2009
(Unaudited)
Accumulated Deficit
Additional other accumulated Total
Common stock paid-in comprehen- during the shareholders'
-------------------------- sive development
Shares Amount capital income stage deficit
---------- ----------- ---------- --------- ------------ ----------------
Common stock issued for cash between
July 5, 2006 (inception) and December
31, 2006 at par value ($0.001) 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,
valued at $0.25 per share 1,035,000 1,035 257,715 - - 258,750
Fair value of options vesting during
the period - - 15,699 - - 15,699
Net loss - - - - (651,847) (651,847)
Other comprehensive income
adjustments, gain on foreign currency
translation - - - 532 - 532
---------- ----------- ---------- ---------- ----------- ---------
Balances, March 31, 2009 11,820,002 $ 11,820 $807,462 $ 26,385 (2,821,170) (1,975,503)
========== =========== ========== ========== =========== =========
See notes to unaudited financial statements.
F-3
CHINA WI-MAX COMMUNICATIONS,INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
July 5, 2006
(Inception)
Three Months Ended through
March 31, 2009 March 31, 2008 March 31, 2009
-------------------- -------------------- -----------------
Cash flows from operating activities:
Net loss $ (651,847) $ (445,331) $ (2,821,170)
Adjustments to reconcile net loss to net cash
used in operating activities:
Common stock issued for services 258,750 98,500 593,500
Accrued interest converted to common stock - - 13,753
Non-cash stock option expense (Note 6) 15,699 71,925 118,974
Depreciation 8,689 - 15,012
Amortization 8,151 790 13,421
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses 30,278 3,760 (31,703)
Increase (decrease) in accounts payable 96,526 (40,786) 216,356
Increase in accrued interest 62,841 31,874 258,483
Increase in accrued expenses - 56,573 -
----------------- ----------------- -----------------
Net cash used in operating activities (170,913) (222,695) (1,623,374)
-------------------- -------------------- -----------------
Cash flows from investing activities:
Purchase of property and equipment (65,419) (51,721) (576,898)
Purchase of intangible assets - (141,056) (326,056)
-------------------- -------------------- -----------------
Net cash used in investing activities (65,419) (192,777) (902,954)
-------------------- -------------------- -----------------
Cash flows from financing activities:
Proceeds from issuance of convertible notes payable 95,000 540,300 2,529,100
Proceeds (payments) from issuance (return) of common stock - 2,260 9,055
Debt issue costs - - (5,270)
-------------------- -------------------- -----------------
Net cash provided by financing activities 95,000 542,560 2,532,885
-------------------- -------------------- -----------------
Net (decrease) increase in cash (141,332) 127,088 6,557
Cash, beginning of period 147,889 182,401 -
-------------------- -------------------- -----------------
Cash, end of period $ 6,557 $ 309,489 $ 6,557
==================== ==================== =================
Supplemental disclosure of non-cash investing and financing activities:
Convertible notes and interest converted to common stock $ - $ - $ 97,753
==================== ==================== =================
Receivable from issuance of common stock $ - $ 50 $ 5,720
==================== ==================== =================
See notes to unaudited financial statement.
F-4
CHINA WI-MAX COMMUNICATIONS, INC.
(A Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(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
in accordance with Statement of Financial Accounting Standards ("SFAS") No. 7.
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, 2009, and for the
period from September 24, 2008, the date at which the Company gained 100%
ownership of Da Chuan and Shi Dai, through March 31, 2009, include the accounts
of Da Chuan and Shi Dai. Intercompany balances and transactions have been
eliminated in consolidation.
The Company's foreign subsidiaries (Da Chuan and Shi Dai) 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
period-end exchange rates.
Income and expense items are translated at weighted-average rates of exchange
prevailing during the year, and equity is translated at historical exchange
rates. 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.
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
F-5
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.
In the opinion of the management of the Company, the accompanying unaudited
financial statements include all material adjustments, including all normal and
recurring adjustments, considered necessary to present fairly the financial
position and operating results of the Company for the periods presented. The
financial statements and notes are presented as permitted by Form 10-Q, and do
not contain certain information included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2008. Amounts as of December 31,
2008 are derived from the audited consolidated financial statements. It is the
Company's opinion that when the interim financial statements are read in
conjunction with the December 31, 2008 Annual Report on Form 10-K, the
disclosures are adequate to make the information presented not misleading.
Interim results are not necessarily indicative of results for a full year or any
future period.
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 approximately $652,000 for the three months ended March
31, 2009, and a working capital deficiency and shareholders' deficit of
approximately $2,882,000 and $1,976,000, respectively, at March 31, 2009. The
Company has a limited operating history and no 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 to raise
capital through its $2.0 million bridge loan financing, which consists of 10%
convertible notes maturing on December 31, 2009 (Note 5). The Company raised
approximately $1,430,000 through December 31, 2008, approximately $95,000 during
the three months ended March 31, 2009, and has raised an additional $197,400
subsequent to March 31, 2009. The 10% convertible note placement is anticipated
to be completed in the second quarter of 2009.
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-6
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, 2009. 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 results of operations.
Convertible securities:
Convertible notes are accounted for in accordance with the provisions of
Emerging Issues Task Force ("EITF") Issue No. 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features ("EITF 98-5") and EITF Issue No.
00-27, Application of Issue No. 98-5 to Certain Convertible Instruments ("EITF
00-27"). Under these pronouncements, the Company, where applicable, records a
beneficial conversion feature amortized as additional discount on debt and
recorded as expense. The Company has also considered EITF No. 05-2, The Meaning
of Conventional Convertible Debt Instruments and EITF Issue No. 00-19,
Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company's Own Stock.
Fair value of measurements:
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement. This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles, and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value
measurements, but provides guidance on how to measure fair value by providing a
fair value hierarchy used to classify the source of the information. SFAS No.
157 defines fair value as the price that would be received to sell an asset or
pay to transfer a liability in an orderly transaction between market
participants at the measurement date. Additionally, SFAS No. 157 requires the
use of valuation techniques that maximize the use of observable inputs and
minimize the use of unobservable inputs. These inputs are prioritized below:
Level 1: Observable inputs such as quoted market prices in active markets
for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are
corroborated by market data.
Level 3: Unobservable inputs for which there is little or no market data,
which require the use of the reporting entity's own assumptions.
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.
Revenue recognition:
As of March 31, 2009, the Company has no revenue-producing operations. At such
time revenue generating operations begin, the Company will recognize revenue
F-7
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 (7,624,550 at March 31,
2009 and 4,917,200 at March 31, 2008) are not considered in the calculation, as
the effect would be antidilutive. Therefore, diluted loss per share is
equivalent to basic loss per share.
Recently Issued and Adopted Accounting Pronouncements:
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value
Measurements. SFAS No. 157 establishes a framework for measuring the fair value
of assets and liabilities. This framework is intended to provide increased
consistency in how fair value determinations are made under various existing
accounting standards which permit, or in some cases require, estimates of fair
market value. SFAS No. 157 also expands financial statement disclosure
requirements about a company's use of fair value measurements, including the
effect of such measures on earnings. In February 2008, the FASB issued Staff
Position FAS 157-2, which delayed the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The Company adopted Staff Position FAS 157-2 on
January 1, 2009. At March 31, 2009, the Company has no financial assets or
liabilities subject to recurring fair value measurements.
SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities, allows entities to voluntarily choose to measure certain financial
assets and liabilities at fair value (fair value option). The fair value option
may be elected on an instrument-by-instrument basis and is irrevocable, unless a
new election date occurs. If the fair value option is elected for an instrument,
SFAS No. 159 specifies that unrealized gains and losses for that instrument be
reported in earnings at each subsequent reporting date. The Company did not
elect to apply the fair value option to any outstanding instruments.
In April 2009, the FASB issued FSP SFAS 107-1 and Accounting Principles Board
Opinion ("APB") 28-1, Interim Disclosures about Fair Value of Financial
Instruments, (FSP 107-1), which will require that the fair value disclosures
required for all financial instruments within the scope of SFAS 107, Disclosures
about Fair Value of Financial Instruments, be included in interim financial
statements. This FSP also requires entities to disclose the method and
significant assumptions used to estimate the fair value of financial instruments
on an interim and annual basis and to highlight any changes from prior periods.
FSP 107-1 will be effective for interim periods ending after June 15, 2009. The
adoption of FSP 107-1 is not expected to have a material impact on the Company's
consolidated financial statements.
On January 1, 2009, the Company adopted SFAS No. 141(Revised 2007), Business
Combinations, (SFAS No. 141R). SFAS No. 141R provides revised guidance on how
acquirers recognize and measure the consideration transferred, identifiable
F-8
assets acquired, liabilities assumed, noncontrolling interests, and goodwill
acquired in a business combination. SFAS No. 141R also expands required
disclosures surrounding the nature and financial effects of business
combinations. Management believes that the adoption of SFAS 141 (revised 2007)
could have an impact on the accounting for any future acquisition, if one were
to occur. The Company will be required to apply the guidance in SFAS 141R for
any future business combinations.
On January 1, 2009, the Company adopted SFAS No. 160, Noncontrolling Interests
in Consolidated Financial Statements. SFAS 160 establishes accounting and
reporting standards for a noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Because all of the
Company's subsidiaries are wholly-owned by the Company, there are no
noncontrolling interests, and as a result, the adoption of this standard had no
effect on the Company's consolidated financial statements.
On January 1, 2009, the Company adopted the provisions of Emerging Issues Task
Force ("EITF") 07-05, Determining whether an Instrument (or Embedded Feature) Is
Indexed to an Entity's Own Stock , which provides guidance on determining what
types of instruments or embedded features in an instrument held by a reporting
entity can be considered indexed to its own stock for the purpose of evaluating
the first criteria of the scope exception in paragraph 11(a) of SFAS 133. The
adoption of this EITF did not have an impact on the Company's consolidated
financial statements.
In March 2008 the FASB issued SFAS 161, Disclosures about Derivative Instruments
and Hedging Activities -- an amendment of FASB Statement No. 133. SFAS 161
amends and expands the disclosure requirements of FASB Statement No. 133,
requiring enhanced disclosures about the Company's derivative and hedging
activities. The adoption of SFAS 161 did not have a material impact on the
Company's financial statements.
3. Property and equipment:
As of March 31, 2009 and December 31, 2008, property and equipment consists of
the following:
March 31, 2009 December 31, 2008
Fiber optic cable $507,252 $506,616
Network equipment 96,039 30,716
----------- -----------
603,291 537,332
Less accumulated depreciation (15,020) (6,323)
----------- -----------
$588,271 $531,009
=========== ===========
4. Intangible assets:
As of March 31, 2009 and December 31, 2008, intangible assets consist of the
following:
March 31, 2009 December 31, 2008
Contractual license rights $ 326,056 $ 326,056
Less accumulated amortization (8,151) -
--------- ---------
$ 317,905 $ 326,056
========= =========
F-9
The Company's intangible asset, contractual license rights, represents the
Company rights to certain frequency licenses held by Gao Da Yang Guang
Communication Technology Ltd. ("Gao Da"). The Company entered into this contract
with Gao Da in September 2008. Previous to the contract date, the Company had
recorded deposits, which represented cash paid to Gao Da for the purpose of
acquiring frequency licenses.
The contractual license rights represent the right to revenue generated from
customers who contract to utilize frequency licenses held by Gao Da (Note 8).
The Company amortizes this intangible asset over the twenty-year term of the
agreement (amortization was not considered material in 2008).
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.
Recoverability of the contractual license rights is dependent upon the
recoverability of the underlying licenses of Gao Da. 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 SFAS 142, 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.
5. Convertible notes payable:
In 2007, the Company issued $914,000 of 12% convertible notes payable; an
additional $90,300 of 12% convertible notes was issued in January 2008. These
notes bear interest at 12% per annum, they are unsecured, and their maturity
date was December 31, 2008. Principal and interest are convertible at any time
into shares of the Company's common stock at $0.25 per share, at the option of
the note holders. During 2008, notes for $84,000 and related accrued interest of
$13,753 were converted into 391,002 shares of common stock. As of March 31,
2009, the remaining note holders extended the maturity date to July 1, 2009.
As of March 31, 2009, the Company had issued $1,524,800 of 10% convertible notes
payable which mature December 31, 2009. Of this amount, $95,000 of the notes
were issued in the three months ended March 31, 2009. 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.
F-10
6. Income taxes:
Based on statutory rates, the Company's expected income tax benefit was
approximately $222,000 and $151,000 for the quarters ended March 31, 2009 and
2008, respectively. The cumulative expected income tax benefit as of March 31,
2009 was approximately $955,000. The expected income tax benefit differs from
the actual benefit of $0 each period, due primarily to the valuation allowance.
The Company's subsidiaries operate in the PRC and are therefore subject to the
PRC tax laws and regulations. The Peoples Republic of China (PRC) federal
statutory income tax rate is 25% and the local income tax rate is 3%. As the
Company is unable to determine that it is more likely than not that future
taxable income of the Company will be sufficient to utilize the U.S. and PRC net
operating loss carryforwards, a valuation allowance has been established against
this asset.
7. Shareholders deficit:
Stock option plan:
Effective January 1, 2008, the Company established a Stock Option Award and
Compensation Plan (the "Plan") covering up to 4,000,000 shares of the Company's
common stock. Any employee, consultant or Director of the Company, any parent or
any subsidiary is eligible to participate. The exercise prices of the options
granted are determined by the Plan committee, whose members are appointed by the
Board of Directors, and the exercise prices are generally to be established at
the estimated fair value of the Company's common stock at the date of grant.
Options granted to date have terms that do not exceed five years. There were
893,750 vested options as of March 31, 2009. Before any options may be delivered
or exercised, the shareholders must ratify the Plan. The Company is planning a
shareholder meeting to ratify the Plan once the Company's stock has been
approved for market trading.
The compensation committee may award incentive stock options and nonqualified
stock options under the 2008 Plan. Only employees may receive incentive stock
options. The compensation committee also determines the exercise price of each
option. However, the exercise price of an incentive stock option may not be less
than 100% of the fair market value of the underlying shares on the date of
grant. The exercise price of any option may not be less than the par value of
the underlying share(s).
The compensation committee determines the term of each option, but no term may
exceed 10 years from the date of grant. The compensation committee also
determines at what time or times each option may be exercised and any conditions
that must be met before an option may be exercised. Options may be made
exercisable in installments, and the exercisability of options may be
accelerated by the compensation committee. As of March 31, 2009, the Company's
Board of Directors was serving as the compensation committee.
In the periods ended March 31, 2009 and 2008, the Company recorded total stock
option-based compensation of $15,699 and $71,525 for options that vested during
the periods, which is included in general and administrative expense. As of
March 31, 2009, the estimated fair value of 1,606,250 unvested stock options was
approximately $223,000, which is expected to be recognized over a weighted
average period of approximately one year.
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 2008 was $0.13 per share. There were 300,000 options
granted in the period ended March 31, 2009 that have a weighted average fair
value of $0.16 per share. None of the options granted in the period ended March
31, 2009 had vested as of March 31, 2009. The assumptions utilized to determine
the fair value of options granted through March 31, 2009 are provided in the
following table:
Risk free interest rates 0.66% - 2.89%
Expected volatility 80% - 136%
Expected term in years 2 - 3
Expected dividend yield -
F-11
The following table sets forth the activity in the Company's Plan since its
January 1, 2008 establishment:
Weighted
Number of Average
Shares Under Exercise Average
-lying Options Price Exercisable Fair Value
------------- ------------- --------------- -------------
Outstanding January 1, 2008 - - - -
Granted/vested during period 2,600,000 $0.25 737,500 $0.13
Forfeited/expired (400,000) 0.25 (100,000) 0.14
------------- ------------- --------------- -------------
Outstanding December 31, 2008 2,200,000 $0.25 637,500 $0.13
------------- ------------- --------------- -------------
Granted/vested during period 300,000 $0.25 256,250 $0.16
Forfeited/expired 0 0 0 0
------------- ------------- --------------- -------------
Outstanding, March 31, 2009 2,500,000 $0.25 893,750 $0.14
============= ============= =============== =============
It was determined that there was no intrinsic value attributable to options
granted through the period ended March 31, 2009, as the estimated market price
of the Company's common stock of $0.25 per share is the same as the exercise
price of the options.
Common stock issued for services:
During the three month period ended March 31, 2009, the Company issued 1,035,000
shares of common stock to various parties as employment bonuses and payments for
services performed for the Company, valued at $258,750 ($0.25 per share). During
the three month period ended March 31, 2008, the Company issued 394,000 shares
of common stock to various parties who performed development stage services for
the Company. These shares were valued at $98,500.
Subsequent to March 31, 2009 and through May 13, 2009, the Company issued an
additional 875,000 common shares as signing bonuses and payments for services
performed for the Company, valued at approximately $218,750 ($.25 per share). In
addition, the Company agreed to reimburse an officer and director for the tax
effect of a 500,000 share grant, which is estimated to cost approximately
$95,000 based on a 35% effective tax rate.
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. No fees were payable as of March 31, 2009 under the contract.
Gao Da's control person owns approximately 8.5% of the Company's common stock at
March 31, 2009.
F-12
9. Subsequent event:
In April 2009, the Company entered into a one-year employment agreement with an
individual to serve as Chief Financial Officer of the Company. The full time
base salary is established at approximately $6,500 per month, beginning May 1,
2009. The Agreement also provides a signing bonus of 50,000 options to purchase
common shares at $.25 per share over three years.
On April 16, 2009, the Company entered into a separation agreement with the
former President and Chief Financial Officer. The agreement provided for the
payment of previously deferred and other compensation of approximately $98,000
over the next ten months and vesting of 200,000 previously unvested stock
options.
F-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2008, and for each of the periods then
ended, includes a "going concern" explanatory paragraph, that describes
substantial doubt about the Company's ability to continue as a going concern.
GENERAL
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 four full-time employees and one part-time employee 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 the first quarter of 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. Filings with the United States Securities and Exchange Commission were
successfully completed to position the Company to file for trading status on the
Over The Counter Bulletin Board exchange.
14
The Company plans to begin delivering revenue generating services on a
commercial basis during the second quarter of 2009 in Beijing. Our subsidiaries
are currently recruiting sales and engineering staff to support these efforts. A
Terabit optical router was installed and is now in use. Additional pilot level
testing performed in the first quarter of 2009 is providing the basis for a
successful full scale launch of services in the second quarter of 2009. Adding
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 access to wireless spectrum licenses to provide last mile
bridging services for potential customers during the second or third quarter of
2009.
China Wi-Max closed a private offering of unsecured convertible Notes in early
January 2008 and raised $1,000,000. The Notes bear interest at 12% per annum,
convertible at the Note Holder's option into Common Stock of China Wi-Max at a
conversion price of $.25 per share, and notes not converted to stock have been
extended to July 1, 2009. The Company continues a private offering of unsecured
convertible Notes that bear interest at 10% per annum, convertible at the Note
Holder's option into Common Stock of China Wi-Max at a conversion price of $.50
per share and due December 31, 2009.
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. As of May 1, 2009, we
had retained a new President and new Chief Financial Officer. The former
President and Chief Financial Officer left the Company for other business
opportunities and will continue to assist the Company. We can make no assurances
that we will be able to raise any such capital.
At this time it is difficult to raise capital as the United States and the
global business community are continuing to experience severe instability in
their commercial and investment banking systems. This instability is likely to
continue to have far-reaching effects on the economic activity in the country
for an indeterminable period. The long-term impact on the United States economy
and the Company's operating activities and ability to raise capital cannot be
predicted at this time, but may be substantial.
RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended March 31, 2009 Compared to the
Three Months Ended March 31, 2008
During the three months ended March 31, 2009 and 2008, China Wi-Max did not
recognize any revenues.
During the three months ended March 31, 2009, China Wi-Max incurred general and
administrative expenses of $589,000 compared to $412,000 for the three months
ended March 31, 2008. The $177,000 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, 2009, the Company continued to increase its staff and
outside consultants, as it began implementation of its business plan. As a
result of the staff increases, there was an increase of approximately $20,000 in
salary and wages, expenses for operations in China increased by $53,000,
consulting and professional fees increased by $95,000, insurance costs increased
by $9,000, amortization costs increased by $8,000 and travel and other items
decreased by $8,000 over the prior period ended March 31, 2008.
During the three months ended March 31, 2009, China Wi-Max recognized a net loss
of $651,000 compared to a net loss of $445,000 during the three months ended
March 31, 2008. The $206,000 increase in net loss was primarily a result of the
15
$177,000 increase in general and administrative expenses, discussed above
combined with the $30,000 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 $.06 during the three months ended March
31, 2009 versus a net loss of $0.05 per share during the three months ended
March 31, 2008.
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, 2009, the
Company had total current assets of $38,000, consisting of cash of $6,000 and
prepaid expenses of $32,000. At March 31, 2009, the Company had total current
liabilities of $2,920,000. Total current liabilities consisted of accounts
payable of $216,000, accrued interest of $258,000 and current convertible notes
payable of $2,445,000. At March 31, 2009, the Company had a working capital
deficit of $2,891,000.
During the three months ended March 31, 2009, China Wi-Max used $171,000 in its
operating activities. The net loss of $651,847 was adjusted for $259,000 of
services paid for by the issuance of common stock, $16,000 in non-cash option
expenses and $17,000 in depreciation and amortization costs. During the three
months ended March 31, 2009, there was a $30,000 decrease in prepaid expenses, a
$97,000 increase in accounts payable, a $62,000 increase in accrued interest.
During the three months ended March 31, 2008, China Wi-Max used $220,000 in its
operating activities. A net loss of $445,331 was adjusted for $99,000 of
services paid for by the issuance of common stock and $72,000 in non-cash option
expenses. During the three months ended March 31, 2008, there was a $4,000
decrease in prepaid expenses, a $41,000 decrease in accounts payable, a $32,000
increase in accrued interest and a $57,000 increase in accrued expenses.
During the three months ended March 31, 2009, China Wi-Max used $65,000 in its
investing activities, primarily for the purchase of property and equipment.
During the three months ended March 31, 2008, China Wi-Max used $193,000 in its
investing activities for access to wireless licenses and optical fiber payments
in China.
During the three months ended March 31, 2009, China Wi-Max received $95,000 from
its financing activities. During the three months ended March 31, 2008, China
Wi-Max received $543,000 from its financing activities.
In June 2007, the Board of Directors authorized the sale of up to $1 million of
unsecured convertible promissory notes. Principal and interest are convertible
at any time into shares of China Wi-Max's common stock at $0.25 per share, at
the option of the note holders. As of January 2008, the Company oversubscribed
the offering and issued $1,004,300 of notes payable, which mature on December
31, 2008, bear interest at 12% per annum, and are unsecured. Notes not yet
converted have been extended to July 1, 2009. In April 2008, the Board of
Directors authorized the sale of an additional $1 million of unsecured
convertible promissory notes, bearing interest at 10% per annum, and are
unsecured. The Board of Directors subsequently increased the offering to $2
million. Principal and interest are convertible at any time into shares of China
Wi-Max's common stock at $0.50 per share, at the option of the note holders.
During the three months ended March 31, 2009, China Wi-Max issued an additional
$95,000 in unsecured convertible promissory notes, which mature on December 31,
2009, bearing interest at 10% per annum, and are unsecured. Principal and
interest are convertible at any time into shares of China Wi-Max's common stock
at $0.50 per share, at the option of the promissory note holders. China Wi-Max
has not paid nor is any principal or interest due on these notes. As of March
31, 2009, there is $2,445,000 in outstanding convertible notes payable and
accrued interest of $258,000. China Wi-Max is not in default with regard to
these notes.
16
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, 2008, China Wi-Max issued 394,000 shares of its
common stock to individuals as employment signing bonuses and payments for
services performed for China Wi-Max, valued at $98,500.
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.
During the three months ended March 31, 2008, China Wi-Max issued stock options
exercisable for 2,600,000 shares of its common stock, with an exercise price of
$0.25 per share and a term of 5 years. The options have variable vesting rates.
During the three months ended March 31, 2008, options exercisable for 468,750
shares were vested. These options were valued using the Black-Scholes model, and
the Company has recorded $71,925 of stock based compensation expense during the
three months ended March 31, 2008.
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 2009 and for 2010 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, 2008.
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.
17
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. 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.
ITEM 4T. CONTROLS AND PROCEDURES
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, 2009 through March 31, 2009.
18
- --------------- --------------------- ------------ ------------------------------ -------------------------
NO. OF
DATE OF SALE TITLE OF SECURITIES SHARES CONSIDERATION CLASS OF PURCHASER
- --------------- --------------------- ------------ ------------------------------ -------------------------
$20,000 Convertible
2/3/2009 Common stock 40,000 Promissory Note Business Associate
- --------------- --------------------- ------------ ------------------------------ -------------------------
2/5/2009 Common stock 20,000 $10,000 Convertible Business Associate
Promissory Note
- --------------- --------------------- ------------ ------------------------------ -------------------------
2/6/2009 Common stock 20,000 $10,000 Convertible Business Associate
Promissory Note
- --------------- --------------------- ------------ ------------------------------ -------------------------
3/2/2009 Common stock 5,000 $2,500 Convertible Business Associate
Promissory Note
- --------------- --------------------- ------------ ------------------------------ -------------------------
3/2/2009 Common stock 5,000 $2,500 Convertible Business Associate
Promissory Note
- --------------- --------------------- ------------ ------------------------------ -------------------------
3/6/2009 Common stock 30,000 $30,000 Convertible Business Associate
Promissory Note
- --------------- --------------------- ------------ ------------------------------ -------------------------
3/9/2009 Common stock 40,000 $20,000 Convertible Business Associate
Promissory Note
- --------------- --------------------- ------------ ------------------------------ -------------------------
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 32.1 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act
19
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: May 15, 2009 By: /s/ Steven Berman
---------------------------------
Steven Berman
President
Dated: May 15, 2009 By: /s/ Frank R. Ventura
---------------------------------
Frank R. Ventura
Chief Financial Officer
20