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 September 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)





1009
Washington Street, Grafton, Wisconsin 53024





(Address
of principal executive offices)





800-830-1978





(Registrant's
Telephone number)





1905
Sherman Street, Suite 335, Denver, Colorado 80203





(Former
address)







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.


YesxNo ̈





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
November 19, 2010 there were 21,216,115 shares of the registrant's common stock
issued and outstanding.








PagePART
      I - FINANCIAL INFORMATIONItem
      1. Financial StatementsBalance
      Sheets – September 30, 2010 (Unaudited) andDecember
      31, 2009
                                          
                                          F-1Statements
      of Operations (Unaudited) -Three
      months and nine months ended September 30, 2010 and 2009,
    andthe
      period from July 5, 2006 (Inception) to September 30, 2010
                                          
                                          F-2
      – F-3Statements
      of Changes in Deficit (Unaudited) - From July5,
      2006 (Inception) to September 30, 2010
                                          
                                          F-4Statements
      of Cash Flows (Unaudited) - Nine months ended September 30,
      2010and
      2009, and the period from July 5, 2006 (Inception) toSeptember
      30, 2010
                                          
                                          F-5Notes
      to the (Unaudited) Financial Statements
                                          
                                          F-6Item
      2. Management's Discussion and Analysis of Financial Conditionand
      Results of
      Operations
                                          
                                          3Item
      3. Quantitative and Qualitative Disclosures About Market Risk - Not
      Applicable
                                          
                                          7Item
      4. Controls and Procedures
                                          
                                          7PART
      II - OTHER INFORMATIONItem
      1. Legal Proceedings - Not Applicable
                                          
                                          8Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
                                          
                                          8Item
      3. Defaults Upon Senior Securities - Not Applicable
                                          
                                          9Item
      4. Submission of Matters to a Vote of Security Holders - Not
      Applicable
                                          
                                          9Item
      5. Other Information - Not Applicable
                                          
                                          9Item
      6. Exhibits
                                          
                                          9SIGNATURES
                                          
                                          10


2





CHINA WI-MAX COMMUNICATIONS, INC.


(A
Development Stage Enterprise)





CONSOLIDATED
BALANCE SHEETS





September
      30,
                    
                    
                    December
      31,2010
                    
                    
                    2009(unaudited)ASSETSCurrent
      assets:Cash
                    
                    $
                    12,580
                    
                    
                    $
                    34,524Prepaid
      expenses
                    
                    
                    31,969
                    
                    
                    
                    52,385Total
      current assets
                    
                    
                    44,549
                    
                    
                    
                    86,909Property
      and equipment, net
                    
                    
                    504,174
                    
                    
                    
                    514,731Intangible
      assets, net
                    
                    
                    174,428
                    
                    
                    
                    305,678678,602
                    
                    
                    
                    820,409Total
      assets
                    
                    $
                    723,151
                    
                    
                    $
                    907,318LIABILITIES
      AND DEFICITCurrent
      liabilities:Accounts
      payable
                    
                    $
                    1,004,845
                    
                    
                    $
                    357,577Accrued
      interest
                    
                    
                    1,566,397
                    
                    
                    
                    425,189Notes
      payable, net of discount of $143,639 (2010)
                    
                    
                    3,634,615
                    
                    
                    
                    3,468,824Derivative
      liability
                    
                    
                    138,582
                    
                    
                    
                    -Total
      liabilities (all current)
                    
                    
                    6,344,439
                    
                    
                    
                    4,251,590Deficit:China
      Wi-Max shareholders' deficit:Common
      stock; $.001 par value; 100,000,000 shares authorized;19,545,115
      and 14,654,004 shares issued and outstanding as ofSeptember
      30, 2010 and December 31, 2009, respectively
                    
                    
                    19,545
                    
                    
                    
                    14,654Additional
      paid-in capital
                    
                    
                    3,744,433
                    
                    
                    
                    1,892,931Accumulated
      other comprehensive income
                    
                    
                    39,366
                    
                    
                    
                    25,978Deficit
      accumulated during the development stage
                    
                    
                    (9,400,609
                    )
                    
                    
                    (5,277,835
                    )Total
      China Wi-Max  shareholders' deficit
                    
                    
                    (5,597,265
                    )
                    
                    
                    (3,344,272
                    )Noncontrolling
      interest
                    
                    
                    (24,023
                    )
                    
                    
                    -Total
      deficit
                    
                    
                    (5,621,288
                    )
                    
                    
                    (3,344,272
                    )Total
      liabilities and deficit
                    
                    $
                    723,151
                    
                    
                    $
                    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 EndedSeptember
      30,
                  
                  
                  September
      30,2010
                  
                  
                  2009Operating
      expenses:General
      and administrative expense
                  
                  $
                  (745,893
                  )
                  
                  $
                  (466,729
                  )Operating
      loss
                  
                  
                  (745,893
                  )
                  
                  
                  (466,729
                  )Other
      expense:Interest
      expense
                  
                  
                  (1,015,197
                  )
                  
                  
                  (79,440
                  )Net
      loss
                  
                  
                  (1,761,090
                  )
                  
                  
                  (546,169
                  )Net
      loss attributable to the noncontrolling interest
                  
                  
                  4,167
                  
                  
                  
                  -Net
      loss attributable to China Wi-Max
                  
                  
                  (1,756,923
                  )
                  
                  
                  (546,169
                  )Foreign
      currency translation gain
                  
                  
                  12,477
                  
                  
                  
                  491Comprehensive
      loss
                  
                  $
                  (1,748,613
                  )
                  
                  $
                  (545,678
                  )Basic
      and diluted net loss per share attributable to China Wi-Max common
      shareholders
                  
                  $
                  (0.09
                  )
                  
                  $
                  (0.04
                  )Weighted
      average number of commonshares
      outstanding
                  
                  
                  19,059,980
                  
                  
                  
                  14,267,620





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
      fromJuly
      5, 2006(inception)Nine
      Months Ended
                  
                  
                  throughSeptember
      30,
                  
                  
                  September
      30,
                  
                  
                  September
      30,2010
                  
                  
                  2009
                  
                  
                  2010Operating
      expenses:General
      and administrative expense
                  
                  $
                  (2,873,334
                  )
                  
                  $
                  (1,921,373
                  )
                  
                  $
                  (7,633,719
                  )Operating
      loss
                  
                  
                  (2,873,334
                  )
                  
                  
                  (1,921,373
                  )
                  
                  
                  (7,633,719
                  )Other
      expense:Interest
      expense
                  
                  
                  (1,273,463
                  )
                  
                  
                  (213,117
                  )
                  
                  
                  (1,790,913
                  )Net
      loss
                  
                  
                  (4,146,797
                  )
                  
                  
                  (2,134,490
                  )
                  
                  
                  (9,424,632
                  )Net
      loss attributable to the noncontrolling interest
                  
                  
                  24,023
                  
                  
                  
                  -
                  
                  
                  
                  24,023Net
      loss attributable to China Wi-Max
                  
                  
                  (4,122,774
                  )
                  
                  
                  (2,134,490
                  )
                  
                  
                  (9,400,609
                  )Foreign
      currency translation gain
                  
                  
                  13,388
                  
                  
                  
                  545
                  
                  
                  
                  39,366Comprehensive
      loss
                  
                  $
                  (4,133,409
                  )
                  
                  $
                  (2,133,945
                  )
                  
                  $
                  (9,385,266
                  )Basic
      and diluted net loss per share attributable to China Wi-Max common
      shareholders
                  
                  $
                  (0.25
                  )
                  
                  $
                  (0.17
                  )Weighted
      average number of commonshares
      outstanding
                  
                  
                  16,868,597
                  
                  
                  
                  12,665,316





See notes
to unaudited consolidated financial statements.


F-3





CHINA
WI-MAX COMMUNICATIONS, INC.


(A
Development Stage Enterprise)




CONSOLIDATED
STATEMENTS OF CHANGES IN DEFICIT





PERIODS
FROM JULY 5, 2006 (INCEPTION) THROUGH SEPTEMBER 30, 2010





China
      Wi-Max ShareholdersAccumulated
                          
                          
                          DeficitAdditional
                          
                          
                          other
                          
                          
                          accumulatedCommon
      stock
                          
                          
                          paid-in
                          
                          
                          comprehensive
                          
                          
                          during
      the
                          
                          
                          Noncontrolling
                          
                          
                          TotalShares
                          
                          
                          Amount
                          
                          
                          capital
                          
                          
                          income
                          
                          
                          development
      stage
                          
                          
                          Interest
                          
                          
                          deficitCommon
      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
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          3,825Net
      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
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          5,230Common
      stock issued for cash between June and December 2007 at par value ($0.001
      per share)
                          
                          
                          260,000
                          
                          
                          
                          260
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          260Common
      stock issued for services, valued at $0.25 per share
                          
                          
                          455,000
                          
                          
                          
                          455
                          
                          
                          
                          113,295
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          113,750Net
      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
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          221,000Common
      stock issued upon conversion of notes and accrued interest in December
      2008, valued at $0.25 per share
                          
                          
                          391,002
                          
                          
                          
                          391
                          
                          
                          
                          97,362
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          97,753Fair
      value of options vested during the period
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          103,275
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          103,275Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,716,195
                          )
                          
                          
                          -
                          
                          
                          
                          (1,716,195
                          )Other
      comprehensive income adjustments, gain on foreign currency
      translation
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          25,853
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          25,853Balances,
      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
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          475,000Common
      stock issued upon conversion of notes and accrued interest
                          
                          
                          1,969,002
                          
                          
                          
                          1,969
                          
                          
                          
                          549,422
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          551,391Fair
      value of options vesting during the period
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          336,361
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          336,361Net
      loss
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (3,108,512
                          )
                          
                          
                          -
                          
                          
                          
                          (3,108,512
                          )Other
      comprehensive income adjustments, gain on foreign currency
      translation
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          125
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          125Balances,
      December 31, 2009
                          
                          
                          14,654,004
                          
                          
                          
                          14,654
                          
                          
                          
                          1,892,931
                          
                          
                          
                          25,978
                          
                          
                          
                          (5,277,835
                          )
                          
                          
                          -
                          
                          
                          
                          (3,344,272
                          )Common
      stock issued for services (unaudited)
                          
                          
                          4,350,551
                          
                          
                          
                          4,350
                          
                          
                          
                          735,483
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          739,833Common
      stock issued upon conversion of notes and accrued interest
      (unaudited)
                          
                          
                          240,559
                          
                          
                          
                          241
                          
                          
                          
                          69,673
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          69,914Common
      stock and warrants issued to convertible note holders
      (unaudited)
                          
                          
                          300,000
                          
                          
                          
                          300
                          
                          
                          
                          108,178
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          108,478Fair
      value of options vesting during the period (unaudited)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          938,168
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          938,168Net
      loss (unaudited)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (4,122,774
                          )
                          
                          
                          (24,023
                          )
                          
                          
                          (4,146,797
                          )Other
      comprehensive income adjustments, gain on foreign currency translation
      (unaudited)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          13,388
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          13,388Balances,
      September 30, 2010 (unaudited)
                          
                          
                          19,545,114
                          
                          
                          $
                          19,545
                          
                          
                          $
                          3,744,433
                          
                          
                          $
                          39,366
                          
                          
                          $
                          (9,400,609
                          )
                          
                          $
                          (24,023
                          )
                          
                          $
                          (5,621,288
                          )





See notes
to unaudited consolidated financial statements.


F-4





CHINA
WI-MAX COMMUNICATIONS, INC.


(A
Development Stage Enterprise)





CONSOLIDATED
STATEMENTS OF CASH FLOWS





(UNAUDITED)





Period
      fromJuly
      5, 2006(Inception)Nine
      Months Ended
                    
                    
                    throughSeptember 30, 2010
                    
                    
                    September 30, 2009
                    
                    
                    September 30, 2010Cash
      flows from operating activities:Net
      loss
                    
                    $
                    (4,146,797
                    )
                    
                    $
                    (2,134,490
                    )
                    
                    $
                    (9,424,632
                    )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Stock
      based compensation
                    
                    
                    1,719,974
                    
                    
                    
                    657,265
                    
                    
                    
                    2,969,360Amortization
      of debt issue costs
                    
                    
                    50,488
                    
                    
                    
                    -
                    
                    
                    
                    50,488Impairment
      loss
                    
                    
                    131,250
                    
                    
                    
                    -
                    
                    
                    
                    131,250Depreciation
                    
                    
                    21,163
                    
                    
                    
                    20,552
                    
                    
                    
                    54,935Amortization
                    
                    
                    -
                    
                    
                    
                    16,303
                    
                    
                    
                    25,649Changes
      in assets and liabilities:
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Decrease
      (increase) in prepaid expenses
                    
                    
                    23,160
                    
                    
                    
                    (29,936
                    )
                    
                    
                    (29,225
                    )Decrease
      in other assets
                    
                    
                    -
                    
                    
                    
                    26,657
                    
                    
                    
                    38,139Increase
      in accounts payable
                    
                    
                    647,268
                    
                    
                    
                    146,981
                    
                    
                    
                    1,004,844Increase
      in accrued interest
                    
                    
                    1,177,975
                    
                    
                    
                    213,117
                    
                    
                    
                    1,690,408Net
      cash used in operating activities
                    
                    
                    (375,519
                    )
                    
                    
                    (1,083,551
                    )
                    
                    
                    (3,488,784
                    )Cash
      flows from investing activities:Purchase
      of property and equipment
                    
                    
                    -
                    
                    
                    
                    (13,945
                    )
                    
                    
                    (521,329
                    )Purchase
      of intangible assets
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (364,195
                    )Net
      cash used in investing activities
                    
                    
                    -
                    
                    
                    
                    (13,945
                    )
                    
                    
                    (885,524
                    )Cash
      flows from financing activities:Proceeds
      from issuance of notes payable and warrants
                    
                    
                    353,510
                    
                    
                    
                    1,321,590
                    
                    
                    
                    4,384,234Proceeds
      from issuance of common stock
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    9,055Debt
      issue costs
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (5,270
                    )Net
      cash provided by financing activities
                    
                    
                    353,510
                    
                    
                    
                    1,321,590
                    
                    
                    
                    4,388,019Effect
      of exchange rate changes on cash
                    
                    
                    65
                    
                    
                    
                    (678
                    )
                    
                    
                    (1,131
                    )Net
      (decrease) increase in cash
                    
                    
                    (21,944
                    )
                    
                    
                    223,416
                    
                    
                    
                    12,580Cash,
      beginning of period
                    
                    
                    34,524
                    
                    
                    
                    147,889
                    
                    
                    
                    -Cash,
      end of period
                    
                    $
                    12,580
                    
                    
                    $
                    371,305
                    
                    
                    $
                    12,580Supplemental
      disclosure of non-cash investingand
      financing activities:Convertible
      notes and interest converted to common stock
                    
                    $
                    69,914
                    
                    
                    $
                    397,560
                    
                    
                    $
                    719,058





See notes
to unaudited consolidated financial statements.


F-5





CHINA
WI-MAX COMMUNICATIONS, INC.


(A
Development Stage Enterprise)


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


NINE-MONTHS
ENDED SEPTEMBER 30, 2010 AND 2009


(Unaudited)





1.
            Organization, basis of
      presentation, going concern and management's
  plans:





Organization:





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").





The
Company's financial statements as of September 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 September 30, 2010, include the
accounts of Da Chuan and Shi Dai.  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 (Note 2).  All
intercompany account balances and transactions have been eliminated in
consolidation.




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),
which is considered to be their 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 reporting
period. Any resulting translation adjustments are charged or credited to other
comprehensive income (loss) 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.





Basis
of Presentation:





The
accompanying interim, unaudited financial statements of the Company have been
prepared in accordance with the instructions to quarterly reports on Form 10-Q.
In the opinion of management, all adjustments necessary to present fairly the
financial position, results of operations and cash flows at September
30, 2010, and for all periods presented, have been made. Certain information and
footnote disclosures normally included in financial statements
prepared in conformity with accounting principles generally accepted in the
United States of America have been condensed or omitted. It is therefore
suggested that these interim financial statements be read in conjunction with
the summary of significant accounting policies and notes to financial statements
included in the Company’s Annual Report on Form 10-K for the year ended December
31, 2009. The results of operations for the periods ended September 30, 2010,
are not necessarily an indication of operating results for the full
year.




Going concern and management's
plans:




The
accompanying unaudited, interim 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 $4.1
million for the nine-months ended September 30, 2010, and a
working  capital deficiency and  shareholders' deficit of
approximately $6.3 million and $5.6 million, respectively, at September 30,
2010.  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 its efforts to raise capital.  The Company
raised approximately $354,000 during the nine-months ended September 30, 2010, in exchange
for notes payable (Note 5).


F-7


In July
2010, the Company entered into a two-year financing agreement with AGS Capital
Group, LLC (“AGS”), a third party, in which, subject to various conditions and
restrictions, AGS is obligated to purchase up to $10 million of the Company’s
common stock.  The Company‘s ability to require AGS to purchase its
common stock however, is subject to restrictive limitations, as defined. Such
restrictions include a maximum advance (and sale of shares) that is limited to
100% of the average daily-trading volume of the Company’s stock for the five
days immediately preceding the advance. The Company also must meet certain terms
and conditions which include, but are not limited to, the Company filing a
Registration Statement with the Securities and Exchange Commission registering
such shares to be issued. Such conditions and terms may significantly limit the
amount of cash that may be raised over the term of this agreement, and that
amount, if any, may be significantly less than the $10 million maximum. Through
September 30, 2010, the Company has not raised any cash under the AGS agreement
(Note 8).





The
Company is also pursuing other financing options; however, these options 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
consolidated 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.





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.





As a
result of this assessment process, management made a determination that an
impairment was evident to one of its frequency license rights as of September
30, 2010. The Company recorded an impairment charge of $131,250 in the quarter
ended September 30, 2010, which is recorded in general and administrative
expense (Note 4).





Fair
value of financial instruments:




Fair
value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date in the principal or most advantageous market. The Company
uses a fair value hierarchy that has three levels of inputs, both observable and
unobservable, with use of the lowest possible level of input to determine fair
value.
 
 Level 1 —
quoted prices (unadjusted) in active markets for identical assets or
liabilities;
 
 Level 2 —
observable inputs other than Level 1, quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets and
liabilities in markets that are not active, and model-derived prices whose
inputs are observable or whose significant value drivers are observable;
and
 
 Level 3 —
assets and liabilities whose significant value drivers are
unobservable.
 
 Observable
inputs are based on market data obtained from independent sources, while
unobservable inputs are based on the Company’s market assumptions. Unobservable
inputs require significant management judgment or estimation. In some cases, the
inputs used to measure an asset or liability may fall into different levels of
the fair value hierarchy. In those instances, the fair value measurement is
required to be classified using the lowest level of input that is significant to
the fair value measurement. Such determination requires significant management
judgment.
 
 As of
September 30, 2010, the Company had the following financial liability which is
measured at fair value (Note 6):
 Level
      1
              
              
              Level
      2
              
              
              Level
      3Derivative
      liability
              
              
              —
              
              
              $
              138,582
              
              
              
              —


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


F-8


Derivatives:





The
applicable accounting rules require that each derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value, with
changes in the derivative’s fair value recognized currently in earnings unless
specific hedge accounting criteria are met.  The Company values these
derivative securities under the fair value method at the end of each reporting
period (quarter), and their value is marked to market at the end of each
reporting period with the gain or loss recognition recorded against
earnings.  The Company continues to revalue these instruments each
quarter to reflect their current value in light of the current market price of
the Company's common stock.  The Company utilizes the Black-Scholes
option-pricing model to determine fair value.  Key assumptions of the
Black-Scholes option-pricing model include applicable volatility rates,
risk-free interest rates and the instrument’s expected remaining
life.  These assumptions require significant management
judgment.





The
Company classifies derivatives as either current or long-term in the balance
sheet based on the classification of the underlying convertible debt
instrument.





Consolidation of variable interest
entity:





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





In
connection with the adoption of the new accounting rules for VIE’s, the Company
consolidated an affiliate company, Gao Da, beginning on January 1,
2010. The Company is the sole variable interest holder of Gao Da, and it is
the primary beneficiary, as there is a service agreement between the Company and
Gao Da, in which the Company has agreed to fund all of Gao Da’s operations. Gao
Da is a development stage, PRC enterprise, with no revenue-producing
operations; at September 30, 2010, Gao Da's assets consist of license
rights with a carrying value of approximately $174,000 (Note 4) and liabilities
of approximately $436,000, which are due to China Wi-Max.  These account
balances eliminate in consolidation. Gao Da's license rights cannot be
sold or transferred without the prior approval of
the licensor.





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





Revenue
recognition:





As of
September 30, 2010, the
Company has no revenue-producing operations. At such time that
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-9





Loss per share:





Basic
loss per share of common stock is computed based on the weighted-average number
of common shares outstanding during the period. Common shares issuable upon the
conversion of stock options, warrants and debt securities (24,569,043 at September 30, 2010 and
13,497,929 at September
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.





Reclassifications:





Certain
immaterial prior year amounts were reclassified in the statement of cash flows
to conform to the current period presentation.





3.
            Property
      and equipment:





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





September30, 2010
                  
                  
                  December 31, 2009Fiber
      optic cable
                  
                  $
                  518,423
                  
                  
                  $
                  507,875Network
      equipment
                  
                  
                  41,404
                  
                  
                  
                  40,643559,827
                  
                  
                  
                  548,518Less
      accumulated depreciation
                  
                  
                  (55,653
                  )
                  
                  
                  (33,787
                  )$
                  504,174
                  
                  
                  $
                  514,731





4.
            Intangible
      assets:





Intangible
assets consist of frequency license rights of $174,428 at September 30, 2010
held by Gao Da. Prior to January 1, 2010, the Company's intangible asset,
contractual license rights ($305,678 at December 31, 2009), represented the
Company’s rights to revenue generated from Gao Da customers who contracted to
utilize the frequency licenses held by Gao Da. 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, and the
elimination of intercompany account balances between the Company and Gao Da, the
resultant intangible asset represents the frequency licenses held by Gao
Da.





The
Company does not amortize these frequency 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. As discussed below, an impairment
provision was recorded in the quarter ended September 30, 2010.


F-10


The
underlying value of the frequency licenses held by Gao Da is dependent on
numerous factors, including successful deployment of networks and connectivity,
and/or radio links. The Company considers the underlying licenses to have an
indefinite useful life under the provisions of ASC Topic 350, Goodwill and Other Intangible
Assets. These licenses are typically renewed if the licensee files a
renewal application prior to license expiration wherein the licensee
demonstrates its engagement in supplying services or related activities to
satisfy the appropriate criteria for renewal.





If at any
time the Company determines that these criteria will most likely not be met, or
if there is a change in management's future business plans or disposition of one
or more licenses underlying the contractual license rights, the Company will
first test the contractual license rights for impairment, and then the Company
will modify the life of the contractual license rights and begin amortizing the
cost over the remaining underlying license period. The Company also tests its
contractual license rights for impairment if there are any legal, regulatory,
contractual, competitive, and economic or other factors that are determined to
limit the useful lives of the licenses.





An
impairment loss of $131,250 was recorded in the quarter ended September 30,
2010, to reduce the carrying value of one of the Company’s three frequency
licenses to $0.  The decision to impair the carrying value of this
license (the Hangzhou license) was based primarily on the Company’s inability to
renew the term of the license within what management determined to be a
reasonable period of time, as well as unanticipated delays in the Company’s
implementation of planned infrastructure in Hangzhou province, PRC.





5.
            Notes
      payable:





At
September 30, 2010 and December 31, 2009, the Company had the following notes
payable outstanding:


F-11





Balance
      Outstanding as ofSeptember
      30, 2010
                    
                    
                    December
      31, 200912%,
      unsecured, convertible notes, originally due June 30, 2010; convertible at
      $0.10 per share
                    
                    [A]
                    
                    
                    $
                    40,000
                    
                    
                    $
                    -12%,
      unsecured, convertible notes, originally due June 30, 2010; convertible at
      $0.19 per share
                    
                    [A]
                    
                    
                    
                    188,500
                    
                    
                    
                    -12%,
      unsecured, convertible notes, originally due June 30, 2010; convertible at
      $0.25 per share
                    
                    [A]
                    
                    
                    
                    290,000
                    
                    
                    
                    552,40010%,
      unsecured, convertible notes, originally due December 31, 2010;
      convertible at $0.10 per share
                    
                    [B]
                    
                    
                    
                    181,000
                    
                    
                    
                    -10%,
      unsecured, convertible notes, originally due prior to and as of December
      31, 2010; convertible at $0.19 per share
                    
                    [B]
                    
                    
                    
                    1,944,924
                    
                    
                    
                    -10%,
      unsecured, convertible notes, originally due prior to and as of December
      31, 2010; convertible at $0.50 per share
                    
                    [B]
                    
                    
                    
                    917,181
                    
                    
                    
                    2,916,424Other
      unsecured notes
                    
                    [C]
                    
                    
                    
                    73,010
                    
                    
                    
                    -Totals
                    
                    
                    
                    
                    $
                    3,634,615
                    
                    
                    $
                    3,468,824




[A]





During
the nine months ended September 30, 2010, the Company agreed to reduce the
conversion rates on certain notes as an inducement to the noteholders to convert
their notes into shares of the Company’s common stock. Holders of notes for
$368,500 agreed to convert their notes at conversion rates ranging from $0.10 to
$0.25 per share.  These noteholders agreed to accept the shares of the
Company’s common stock on December 31, 2010. Because such shares have not been
issued as of September 30, 2010, the amount the noteholders agreed to convert
continues to be presented as notes payable at September 30,
2010.


F-12


As a
result of the inducements granted to certain note holders, the Company
recognized expense of approximately $65,000 in the three months ended September
30, 2010, presented in interest expense in the accompanying consolidated
financial statements.





The
remaining 12% notes for $150,000 that were due on June 30, 2010, are in default
and are due on demand.





[B]During
the nine months ended September 30, 2010, the Company
issued an additional $233,500 of 10% convertible notes for cash. These notes 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 notes issued, notes for $183,500 were issued along with detachable
warrants to purchase up to 367,000 shares of common stock at $1.00 per share.
These warrants have a five-year term. The Company recorded the warrants at their
relative fair value and recorded a discount on the notes payable of
approximately $16,000.





During
the nine months ended September 30, 2010, the Company agreed to reduce the
conversion rates on certain notes as an inducement to the noteholders to convert
their notes into shares of the Company’s common stock. Holders of notes for
$1,944,924 agreed to convert their notes into shares of the Company’s common
stock at conversion rates ranging from $0.10 to $.25 per share. These
noteholders agreed to accept the shares of the Company’s common stock on
December 31, 2010. Because such shares have not been issued as of September 30,
2010, the amount the noteholders agreed to convert continues to be presented as
notes payable at September 30, 2010.





Holders
of notes for $131,000 agreed to extend the due date of their notes until
December 31, 2010 with reduced conversion rates.  Holders of notes for
$81,000 have agreed to convert their notes into shares of common stock at a
conversion rate based on the 10-day average trading price of the Company’s
common stock at the conversion date and receive a warrant for each $1.00 of note
principal outstanding at the conversion date (81,000 warrants). These warrants
are to have an exercise price of $1.00 per share and a term of 5 years. The
Company determined that these notes did not meet the definition of “conventional
convertible debt” because the number of shares which may be issued upon the
conversion of the debt is not fixed. Therefore, the conversion feature of the
debt has been bifurcated and accounted as a derivative. A discount of $81,000
has been recorded on these notes as of September 30, 2010 (Note 6).





Holders
of notes for $225,000 agreed to extend the due date of their notes to December
31, 2010, without any additional modifications to the terms of the debt. As a
result, the total of notes due at December 31, 2010, is $985,000.





Notes for
$210,000 have not been extended and are due on demand.





As a
result of the inducements granted to certain noteholders, the Company recognized
expense of approximately $900,000 in the three months ended September 30, 2010,
presented in interest expense in the accompanying consolidated financial
statements.





[C]In
July 2010, the Company issued a $50,000 convertible note, convertible into
common stock at 58% of the average market price of the Company’s common stock
during the ten days preceding the conversion date.  This note bears
interest at 8% and is due in April 2011. The Company determined that this note
did not meet the definition of “conventional convertible debt” because the
number of shares which may be issued upon the conversion of this note is not
fixed. Therefore, the conversion feature of the debt has been bifurcated and
accounted as a derivative. A discount of approximately $47,000 has been recorded
on this note as of September 30, 2010 (Note 6)


F-13


In
September 2010, the Company issued two convertible notes which total $30,010,
convertible into shares of the Company’s common stock at $0.08 per share, which
approximates the market price of the Company’s common stock at the issuance
date. The note holders agreed to convert these notes at the date of issuance;
however, the shares of the Company’s common stock have not been issued as of
September 30, 2010.





During
the nine months ended September 30, 2010, the Company
borrowed $40,000 from an existing convertible note holder in exchange for a
non-interest bearing note payable, due on demand.





6.
            Derivative
      liability:





In
accordance with ASC 815-15, Embedded Derivatives, the
Company determined that the conversion features of certain convertible notes
issued or modified during the three months ended September 30, 2010, meet the
criteria of an embedded derivative, and therefore the conversion features of
these notes, pursuant to ASC 815-40, Contracts in Entity’s Own
Equity, have been bifurcated and accounted for as a derivative. The
Company adjusts the fair value of these derivative liabilities at each reporting
date, and the resulting gain or loss is reported in the statements of
operations. The change in fair value of these derivatives was not considered
material for the three months ended September 30, 2010. The derivative liability
balance as of September 30, 2010 is $138,582.





The
Company utilized the Black-Scholes pricing model to calculate the fair value of
the derivative liability. Key assumptions used to apply this model were as
follows:





Expected
      term
                  
                  4
      to 9 monthsVolatility
                  
                  
                  110
                  %Risk-free
      interest rate
                  
                  
                  0.19%-0.38
                  %Dividend
      yield
                  
                  
                  0
                  %





7.
            Income
      taxes:





Based on
the U.S. statutory income tax rates, the Company's expected income tax benefit
was approximately $1,451,000 and $747,000 for the nine-months ended September 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.





8.
            Shareholders’
      deficit:





Stock options:





During
the nine months ended September 30, 2010, the Company
recorded stock-based compensation of approximately $938,000 for options that
vested during the period, which is included in general and administrative
expense.  As of September 30, 2010, the fair
value of 600,000 unvested stock options was approximately $54,000 which is
expected to be recognized over a weighted-average period of approximately 1.5
years.


F-14





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 nine-months ended September 30, 2010, was $0.22
per share. The assumptions utilized to determine the fair value of options
granted through September
30, 2010, are provided in the following table:





September30, 2010
                  
                  
                  September30, 2009Risk
      free interest rates
                  
                  
                  2.38%-2.44
                  %
                  
                  
                  1.34%
      - 2.75
                  %Expected
      volatility
                  
                  
                  181%-185
                  %
                  
                  
                  135%
      - 145
                  %Expected
      term in years
                  
                  
                  5
                  
                  
                  
                  2-3Expected
      dividend yield
                  
                  
                  -
                  
                  
                  
                  -





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





WeightedAverage
                
                
                
                
                
                WeightedNumber
      of
                
                
                Exercise
                
                
                
                
                
                AverageOptions
                
                
                Price
                
                
                Exercisable
                
                
                Fair
      ValueOutstanding,
      January 1, 2010
                
                
                5,350,000
                
                
                $
                0.35
                
                
                
                2,050,000
                
                
                $
                0.18Granted/vested
      during period
                
                
                4,350,000
                
                
                $
                0.28
                
                
                
                4,050,000
                
                
                $
                0.22Outstanding,
      September
      30, 2010
                
                
                9,700,000
                
                
                $
                0.32
                
                
                
                6,100,000
                
                
                $
                0.21





WeightedNumber
      of
                                
                                
                                AverageOptions
                                
                                
                                Fair
      ValueNonvested
      AtJanuary 1, 2010
                                
                                
                                3,300,000
                                
                                
                                $
                                0.18Granted
                                
                                
                                300,000
                                
                                
                                $
                                0.22Nonvested
      at September
      30, 2010
                                
                                
                                3,600,000
                                
                                
                                $
                                0.18





As of
September 30, 2010, the
Company has 3,600,000 unvested stock options, of which the vesting of 3,000,000
stock options 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 September 30, 2010. There was no
intrinsic value attributable to outstanding or vested options at September 30, 2010.





Common stock issuances:





During
the nine-months ended September 30, 2010, the Company
issued 4,350,551 shares of its common stock to individuals as employee
compensation and payments for services performed for the Company, valued at
approximately $740,000 (based on the market price of the Company’s common stock
at the date of the respective issuances). This amount includes 1,853,051 shares
valued at approximately $206,000 that were issued to AGS as a fee incurred in
conjunction with the AGS financing agreement.


F-15


During
the nine-month period ended September 30, 2009, the Company
issued 1,860,000 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 $465,000 ($0.25 per share).





9.
            Lease
      commitment:





Through
October 2010, the Company leased 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
      events:





On
October 28, 2010, the Company’s board of directors elected Eric Hager as
Executive Vice President. Mr. Hager has served on the Board of Advisors of the
Company since March 2009. On October 28, 2010, Mr. Hager was granted 750,000
shares of common stock valued at approximately $30,000, and compensation of
$10,000 per month.




In
addition, the board of directors also granted 750,000 shares of common stock,
valued at approximately $30,000, to the Company’s CFO on October 28, 2010, and
increased his monthly salary to $10,000 per month.


Subsequent
to September 30, 2010, the Company issued two additional unsecured, 10%
convertible notes, convertible into shares of common stock at $0.07 per
share.  These two notes were then converted into shares of the
Company’s common stock


Subsequent
to September 30, 2010, the Company issued 216,000 shares of its common stock as
payment for consulting services, valued at approximately
$8,700.


F-16


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.


3


RESULTS
OF OPERATIONS





Results
of Operations for the Three-months Ended September 30, 2010 Compared to the
Three-months Ended September 30, 2009




During
the three-months ended September 30, 2010, China Wi-Max incurred general and
administrative expenses of approximately $746,000 compared to approximately
$467,000 for the three-months ended September 30, 2009. The $279,000 increase
was a result of an increase in the Company's consulting and legal fees expense
related to marketing the Company and assistance with attracting additional
capital and an impairment loss of $131,250 on the Hangzhou license.





An
impairment loss of $131,250 was recorded in the three-month period ended
September 30, 2010 to reduce the net carrying value of one of the Company’s
three licenses to $0.  The decision to impair the carrying value of
this contractual license right was based primarily on the Company’s inability to
renew the license within what management determined to be a reasonable period of
time, as well as unanticipated delays in the Company’s implementation of planned
infrastructure in Hangzhou.





During
the three-months ended September 30, 2010, China Wi-Max recognized a net loss of
approximately $1,761, 000 compared to a net loss of approximately $546,000
during the three-months ended September 30, 2009. The $1,215,000 increase in net
loss was primarily a result of the approximately $279,000 increase in general
and administrative expenses, discussed above combined with the approximately
$936,000 increase in interest expense as a result of the inducement to convert
the convertible promissory notes discussed in note 5.





China
Wi-Max's basic loss per share was $0.09 during the three-months ended September
30, 2010 versus a net loss of $0.04 per share during the three-months ended
September 30, 2009.





Results
of Operations for the Nine-months Ended September 30, 2010 Compared to the
Nine-months Ended September 30, 2009





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





During
the nine-months ended September 30, 2010, China Wi-Max incurred general and
administrative expenses of approximately $2,873,000 compared to approximately
$1,921,000 for the nine-months ended September 30, 2009. The $952,000 increase
was a result of an increase in the Company's operational activities compared to
the prior period. During the nine-months ended September 30, 2010, there was an
increase of approximately $315,000 in salary and wages, expenses for operations
in China decreased by approximately $80,000, consulting and professional fees
increased by approximately $623,000 , an impairment loss of $131,250 incurred in
September 30, 2010 and travel and other items decreased by approximately $37,000
over the prior period ended September 30, 2009.




During
the nine-months ended September 30, 2010, China Wi-Max issued 4,350,551 shares
of its common stock to individuals as employment compensation and payments for
services performed for China Wi-Max, valued at approximately $740,000. This
amount includes 1,857,051 shares issued to a third party as part of a debt
financing agreement. During the nine-months ended September 30, 2009, China
Wi-Max issued 1,860,000 shares of its common stock to individuals as employment
signing bonuses and payments for services performed for China Wi-Max, valued at
approximately $465,000.
 
 During
the nine-months ended September 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 nine-months ended September 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 $938,000 of
non-cash stock option expense during the nine-months ended September 30,
2010.
  During
the nine-months ended September 30, 2009, China Wi-Max issued stock options
exercisable for 3,175,000 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 nine-months ended September 30, 2009,
options exercisable for 1,063,000 shares were vested.  These options
were valued using the Black-Scholes model, and the Company has recorded
approximately $192,000 of stock based compensation expense during the
nine-months ended September 30, 2009.




During
the nine-months ended September 30, 2010, China Wi-Max recognized a net loss of
approximately $4,147,000 compared to a net loss of approximately $2,134,000
during the nine-months ended September 30, 2009. The $2,013,000 increase in net
loss was primarily a result of the approximately $952,000 increase in general
and administrative expenses, discussed above combined with the approximately
$1,061,000 increase in interest expense as a result of the issuance of
convertible promissory notes discussed below.


4


China
Wi-Max's basic loss per share was $0.25 during the nine-months ended September
30, 2010 versus a net loss of $0.17 per share during the nine-months ended
September 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 September 30, 2010, the
Company had total current assets of approximately $45,000, consisting of cash of
approximately $13,000 and prepaid expenses of approximately $32,000. At
September 30, 2010, the Company had total current liabilities of approximately
$6,344,000. Total current liabilities consisted of accounts payable of
approximately $1,005,000, accrued interest of approximately $1,566,000, current
notes payable of approximately $3,635,000 and derivative liabilities of
approximately $138,000. At September 30, 2010, the Company had a working capital
deficit of approximately $6,300,000.





During
the nine-months ended September 30, 2010, China Wi-Max used approximately
$376,000 in its operating activities. The net loss of approximately $4,147,000
was adjusted for approximately $740,000 of services paid for by the issuance of
common stock, approximately $938,000 in non-cash option expenses and
approximately $21,000 in depreciation and amortization costs. During the
nine-months ended September 30, 2010, there was an approximate $23,000 decrease
in prepaid expenses, an approximate $647,000 increase in accounts payable, and
an approximate $1,178,000 increase in accrued interest.





During
the nine-months ended September 30, 2009, China Wi-Max used approximately
$1,084,000 in its operating activities.  The net loss of approximately
$2,134,000 was adjusted for approximately $465,000 of services paid for by the
issuance of common stock, approximately $192,000 in non-cash stock option
expense and approximately $36,000 in depreciation and amortization expenses.
During the nine months ended September 30, 2009, there was an approximate
$30,000 increase in prepaid expenses, an approximate $147,000 increase in
accounts payable, an approximate $140,000 increase in accrued interest, and an
approximate $27,000 decrease in other assets.





During
the nine-months ended September 30, 2010, China Wi-Max did not have any
investing activities. During the nine-months ended September 30, 2009, China
Wi-Max used approximately $14,000 in its investing activities for the purchase
of property and equipment.





During
the nine-months ended September 30, 2010, China Wi-Max received approximately
$354,000 from its financing activities.  During the nine-months ended
September 30, 2009, China Wi-Max received approximately $1,322,000 from its
financing activities.





5




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 various conditions and restrictions.
In connection with the REF, we also entered into a registration rights agreement
with AGS, dated July 14,2010. The Company‘s ability to require AGS to purchase
its common stock is subject to various restrictive limitations. The maximum
amount of each advance (as defined in the agreement) is limited to 100% of the
average daily trading volume of the Company stock for the five days immediately
preceding the advance. The Company also must meet additional conditions which
includes but is not limited to the Company filing a Registration Statement with
the SEC.  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. The total shares of stock issued to AGS in
consideration of signing the agreement is 1,857,051.


CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





There are
several accounting policies that involve management’s judgments and estimates
and are critical to understanding our historical and future performance, as
these policies and estimates affect the reported amounts of revenue and other
significant areas in our reported financial statements.





Please
refer to the “Management’s Discussion and Analysis of Financial Condition and
Results of Operation” located within our 10-K for the year ended December 31,
2009, for further discussion of our  “Critical Accounting
Policies”.




As
discussed in the notes to the interim financial statements, beginning in the
third quarter of 2010, we entered into certain promissory notes which contain
embedded conversion features, which are accounted for as
derivatives.  The following is our critical accounting policy
regarding the Company's accounting for such derivatives:





Derivatives





Our
derivative instruments (including certain derivative instruments embedded in
other contracts) are recorded in the balance sheet as either an asset or
liability measured at its fair value, with changes in the derivative’s fair
value recognized currently in earnings unless specific hedge accounting criteria
are met.  We value these derivative securities under the fair value
method at the end of each reporting period (quarter), and their value is marked
to market at the end of each reporting period with the gain or loss recorded
against earnings.  We continue to revalue these instruments each
quarter to reflect their current value in light of the current market price of
our common stock.  We utilize the Black-Scholes option-pricing model
to estimate fair value.  Key assumptions of the Black-Scholes
option-pricing model include applicable volatility rates, risk-free interest
rates and the instrument’s expected remaining life.  These assumptions
require significant management judgment.


6





ITEM
3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Not
Applicable





ITEM
4. CONTROLS AND PROCEDURES





Disclosure
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 and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures pursuant to
Exchange Act Rule 15d-14 as of the end of the period covered by this report.
Based on the foregoing evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are
ineffective in alerting them timely to material information required to be
included in our periodic SEC filings and to ensure that information required to
be disclosed in our periodic SEC filings is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required
disclosure.


7


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 September 30, 2010.





DATE OF SALE
                                            
                                            TITLE OF SECURITIES
                                            
                                            NO. OF SHARES
                                            
                                            CONSIDERATION
                                            
                                            CLASS OF PURCHASER1/5/2010
                                            
                                            Common
      stock
                                            
                                            20,000
                                            
                                            $10,000
      Convertible Promissory Note
                                            
                                            Business
      Associate1/15/2010
                                            
                                            Common
      stock
                                            
                                            80,000
                                            
                                            $40,000
      Convertible Promissory Note
                                            
                                            Business
      Associate2/22/2010
                                            
                                            Common
      stock
                                            
                                            20,000
                                            
                                            $10,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/5/2010
                                            
                                            Common
      stock
                                            
                                            50,000
                                            
                                            $25,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/8/2010
                                            
                                            Common
      stock
                                            
                                            12,000
                                            
                                            $6,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/15/2010
                                            
                                            Common
      stock
                                            
                                            20,000
                                            
                                            $10,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/15/2010
                                            
                                            Common
      stock
                                            
                                            50,000
                                            
                                            $25,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/15/2010
                                            
                                            Common
      stock
                                            
                                            20,000
                                            
                                            $10,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/18/2010
                                            
                                            Common
      stock
                                            
                                            10,000
                                            
                                            $5,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/18/2010
                                            
                                            Common
      stock
                                            
                                            10,000
                                            
                                            $5,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/18/2010
                                            
                                            Common
      stock
                                            
                                            30,000
                                            
                                            $15,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/22/2010
                                            
                                            Common
      stock
                                            
                                            4,000
                                            
                                            $2,000
      Convertible Promissory Note
                                            
                                            Business
      Associate3/24/2010
                                            
                                            Common
      stock
                                            
                                            31,000
                                            
                                            $15,500
      Convertible Promissory Note
                                            
                                            Business
      Associate3/24/2010
                                            
                                            Common
      stock
                                            
                                            40,000
                                            
                                            $20,000
      Convertible Promissory Note
                                            
                                            Business
      Associate4/2/2010
                                            
                                            Common
      stock
                                            
                                            20,000
                                            
                                            $10,000
      Convertible Promissory Note
                                            
                                            Business
      Associate4/9/2010
                                            
                                            Common
      stock
                                            
                                            20,000
                                            
                                            $10,000
      Convertible Promissory Note
                                            
                                            Business
      Associate4/9/2010
                                            
                                            Common
      stock
                                            
                                            10,000
                                            
                                            $5,000
      Convertible Promissory Note
                                            
                                            Business
      Associate4/22/2010
                                            
                                            Common
      stock
                                            
                                            10,000
                                            
                                            $5,000
      Convertible Promissory Note
                                            
                                            Business
      Associate


8


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.


9


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





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





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





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





SIGNATURES





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





CHINA
      WI-MAX COMMUNICATIONS, INC.(Registrant)Dated:
      November 22, 2010
                      By:
                      /s/
      Steve T. BermanSteven
      BermanPresidentDated:
      November 22, 2010
                      By:
                      /s/
      Frank VenturaFrank
      Ventura,Chief
      Financial
Officer


10