U.S.
Securities and Exchange Commission
 Washington,
D.C. 20549
 
 
 
 FORM
10-K
  
 
 [X]
              Annual
      Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
      for the Fiscal Year Ended December 31,
2009
 
 [
        ]
              Transition
      Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934
      for the Transition Period from _______ to
  _______
 
 
 Commission
File Number: 001-10559
 
 
 CHINA LOGISTICS,
INC.
 (F/K/A
CHINA INTERNATIONAL TOURISM HOLDINGS, LIMITED)
  
 NEVADA
              65-1021346(State
      or other jurisdiction of
              (IRS
      Employer identification No.)incorporation
      or organization)
  Suite 910, Yi An Plaza, 33
Jian She Liu Road
 Guangzou, P.R.China
510000
 (Address
of principal executive offices)
  (8629)
8436-8561
 (Issuer's
telephone number)
 
 SecuritiesRegistered Pursuant
to Section 12(b) of the Act:
 Common
Stock
 Par
Value: 0.0001
  Indicate
by check mark if the registrant is a well-know seasoned issuer, as defined in
Rule 405 of the Securities Act.Yes [  ]No [x]
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.Yes [  ]No [x]
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 such filing requirements for the past 90
days.
 Yes
[x]                                No
[  ]
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, 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 such shorter period that the
registrant was required to submit and post such files).
 Yes
[  ]                                No
[  ]
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 if
Regulation S-K (229.405 of this Chapter) is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in definitive proxy of
information statements incorporated by reference in Part III of this Form 10-K
or any amendments to this Form 10-K.
 Yes
[  ]                                No
[x]
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
              Non-accelerated
      filer
              (Do
      not check if a smaller reporting company)Accelerated
      filer
              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]
 
 The
Registrant’s revenues for its fiscal year ended December 31, 2009 was
$11,992,260.
 
 The
aggregate market value of the voting stock on April 14, 2010 (consisting of
Common Stock, $0.0001 par value per share) held by non-affiliates was
approximately $1,968,379 based upon the most recent sales price ($.22) for such
Common Stock on said date, April 14, 2010. On April 14, 2010, there were
54,787,026 shares of our Common Stock issued and outstanding, of which
approximately 8,947,179 shares were held by non-affiliates.
 
 Number of
shares of common stock outstanding as of April 14, 2010:54,787,026
  DOCUMENTS
INCORPORATED BY REFERENCE
 
 None
 
 CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
 The
discussion contained in this 10-K under the Securities Exchange Act of 1934, as
amended, contains forward-looking statements that involve risks and
uncertainties. The issuer's actual results could differ significantly from those
discussed herein. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
Company believes," "management believes" and similar language, including those
set forth in the discussions under "Notes to Financial Statements" and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-K. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update
them. Statements contained in this Form 10-K that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
  
      TABLE OF
CONTENTS
  PART
      I:Item
      1.                  Business
                  
                  
                  3Item
      1A.               Risk
      Factors
                  
                  
                  5Item
      1B.               Unresolved
      Staff Comments
                  
                  
                  8Item
      2.                  Properties
                  
                  
                  8Item
      3.                  Legal
      Proceedings
                  
                  
                  8Item
      4.                  Submission
      of Matters to a Vote of Security Holders
                  
                  
                  8PART
      II:Item
      5.                 
      Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                  
                  
                  9Item
      6.                  Selected
      Financial Data
                  
                  
                  9Item
      7.                 
      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                  
                  
                  10Item
      7A.               Quantitative
      and Qualitative Disclosures About Market Risk
                  
                  
                  11Item
      8.                  Financial
      Statements and Supplementary Data
                  
                  
                  11Item
      9.                 
      Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                  
                  
                  24Item
      9A.               Controls
      and Procedures
                  
                  
                  24Item
      9A(T).          Controls
      and Procedures
                  
                  
                  24Item
      9B.              
      Other Information
                  
                  
                  25PART
      III:Item
      10.                Directors,
      Executive Officers and Corporate Governance
                  
                  
                  25Item
      11.                Executive
      Compensation
                  
                  
                  26Item
      12.               
      Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                  
                  
                  26Item
      13.               
      Certain
      Relationships and Related Transactions, and Director
      Independence
                  
                  
                  27Item
      14.               
      Principal
      Accounting Fees and Services
                  
                  
                  27PART
      IV:Item
      15.               
      Exhibits,
      Financial Statement Schedules
                  
                  
                  27SIGNATURES:
                  
                  
                  28
  2
 
 ITEM 1.
BUSINESS
 
 HISTORY
 
 China
Logistics Inc. (the “Company” or “CLGZ”) was incorporated in the State of
Nevada on December 23, 1988, formerly known as China International Tourism
Holdings, Ltd., Dark Dynamite, Inc., NCI Holdings, Inc., Vector Holding, Inc.,
and prior to June 26, 2002, Vector Aeromotive Corporation.
 
 On
February 17, 2009, the Company entered into a transfer & change of control
agreement with Ms. Wanwen Su (“Ms. Su”) and Mr. Ming Lei (“Mr. Lei”), pursuant
to which, Ms. Su acquired from Mr. Lei 2,636,000 shares of preferred stock of
the Company and received a “controlling interest” in the Company.
 
 On
February 18, 2009, our Board of Directors adopted a resolution approving a two
hundred to one reverse split of our issued and outstanding Common Stock. The
reverse split combined our outstanding Common Stock on the basis of 200
outstanding shares being changed to 1 outstanding share. Each shareholder’s
percentage ownership in the Company (and relative voting power) remained
essentially unchanged as a result of the reverse split. The reverse split was
effective on April 3, 2009.
 
 On
February 18, 2009, a Plan of Exchange (the “Exchange”) was executed between and
among the Company, Chengkai Logistics Co Ltd., a corporation organized under the
laws of the Peoples’ Republic of China (“Chengkai”), and the shareholders of
Chengkai (“Chengkai Shareholders”). The Exchange was consummated on May 19,
2009, pursuant to which 50,000,000 (after taking into account the Reverse Split)
shares of the Company’s common stock were issued to the stockholder of Chengkai.
Thereafter, Chengkai became the Company’s wholly-owned subsidiary.
 
 On April
23, 2009, China Logistics, Inc. (F/K/A China International Tourism Holdings,
Ltd.), entered into an Agreement (the “Agreement”) between and among the
Registrant, Shanxi Kai Da Lv You Gu Wen Xian Gong Si, a corporation organized
under the laws of the Peoples’ Republic of China (“Kai Da”), and Mr. Lei Ming,
an individual (“Buyer”).
 
 Pursuant
to the terms of the Agreement, the Buyer acquired 100% of the total assets of
$407,616 and total liabilities of $481,275 (collectively “Kai Da Assets and
Liabilities) from the Registrant for the payment of good and valuable
consideration of $100.00 (the “Purchase Price”). As a result of the transactions
consummated at the closing, the purchase and issuance gave the former president
a 'controlling interest' in Kai Da, and Kai Da was no longer a wholly-owned
subsidiary of the Company.
 
 On August
10, 2009, the Company changed its corporate name from China International
Tourism Holdings, Ltd. to China Logistics Inc. and believed that the new
corporate name would provide a more accurate description of the Company’s
current operations and be consistent with the Company’s marketing efforts in the
logistic industry. Accordingly, the ticker symbol of the Company’s Common Stock
was changed to “CLGZ”.
 
 BUSINESS DESCRIPTION OF THE
ISSUER
 
 Since the
reverse merger with Chengkai was consummated, we have continued operations of
Chengkai, a logistic company specializing in logistical services for car
manufacturers, car components, food assortments, chemicals, paper, and machinery
in China. Chengkai was incorporated in the PRC on October 19, 2004 as a limited
liability company, with registered capital of approximately $1,000,000 as of
December 31, 2009. Chengkai is located in Guangzhou City, one of the largest
commercial bases in China, and a booming transportation hub with easy access to
railroad, highway, and rivers. Chengkai has two logistic centers located in
Baiyun Airport and the Huangpu Xingang Port in Guangzhou City, Guangdong
Province, China.
 
 CLGZ and
our wholly-owned subsidiary Chengkai are hereafter referred to as the “Company”
or “we”.
 
 The
Company specializes in logistical services for car manufacturers, car
components, food assortments, chemicals, paper, and machinery in China. The
services cover various aspects of transportation management, including
logistical planning, import and export management, electronic customs
declaration systems, supply chain planning, transporting products from ports to
warehouses or vice versa, organization of transportation, and storage and
distribution of products.
 
 The
Company’s customers include international companies and domestic enterprises in
China from various industries. Their clients from the automobile industry
include Rolls Royce Automobile Accessories, Mercedes Benz Automobile
Accessories, Peugeot Automobile Accessories, BMW Automobile Accessories, and
Nissan Automobile Accessories.  Their electronic industries clients include
IBM Electronics and Creator Corporation China. The Company’s chemical industries
clients include Korean LG Chemical Engineering Company, French Rhodia Chemical
Company, Spanish Caster Rubber Company, and Korean Dongsung Chemical Co., Ltd.
The Company’s customer base has been increasing at a rapid pace, especially
within the Food Industry, Paper Industry, Mechanical Industry, Garment Industry,
Furniture Industry and Daily Commodity
Industry.
  SERVICES
  International Trade and
Import & Export Management
  Import
& export trade, domestic distribution and purchasing solutions are provided
by the Company to reach a win-win business solution. Through several years of
practice of commercial trading in China, the Company has accumulated resourceful
working experiences and gained close partnerships with financial institutions.
These financial institutions help us combine our business procedures and
financial status to provide value-added and win-win business solutions for our
clients.
  l
              Purchasing
      process
 l
              Services
      orienting towards foreign
purchasers
 l
              Services
      for domestic manufacturing
purchasers
 l
              Distribution
      process
 l
              Efficient
      import & export customs
declaration
 l
              Supply-chain
      financing service
 
 Some
international purchasers, who need to purchase their commodities and balance the
account among several districts within the country, will more or less be
restricted by the local policies such as the leverage of foreign exchange,
value-added tax, and import & export trading rights. In order to solve such
inadequacies, the Company strives to improve their clients’ working efficiency,
and help minimize costs. We minimize costs by integrating manufacturing
resources such as purchasing, R&D and manufacturers. We center on a specific
or diversified products that highlight core business. We also incorporate
management of materials, information and financing. We commit to a more reliable
and efficient supply-chain partnership with manufacturers and transnational
purchasers.
 
 3
 
 Customs
Declaration
 
 The
Company provides customs affairs trusteeship, consultations, and software
application solutions on customs network supervision.
 
 Customs
affairs have become very complicated in China given the supervision on
processing trade, factors concerning China’s policies, and the local
implementation and the conflicts that might occur within enterprises. We, as the
third party that gets involved in between the government and enterprises, strive
to keep sound relationships with governmental departments. With the support of
some relevant departments, and our experiences and specialty in dealing with
customs affairs, we can provide a comprehensive backup service for our
clients.
  Specialties:
 
 In
regards to the supervision policies on processing trade, we provide declaration
management strategies and computerized system for enterprises engaged in
processing trade, so as to improve their management level, optimize their
declaration procedures, and control their declaration risks.
 
 l
              We
      automatically collect data in the manufacturing management database.
 l
              We
      safely connect the manufacturing management system and accounting
      management system of the enterprises.
 l
              We
      develop customized planning that corresponds to each enterprise.
 l
              We
      monitors and analyzes capital flow.
 
 Warehousing and
Transportation
 
 The
Company provides diversified logistics solutions.
 
 In order
to construct an efficient logistics system, the Company has established
solutions with our co-partners, based on the needs of our clients. Through
effective integration of logistics, we provide various logistics solution for
our clients. Our experienced consultants diagnose and analyze elements that make
up of the whole supply-chain to help customize a logistic system that shortens
the time of order to the time of delivery.
 
 Specialties:
  l
              Production
      Logistics
 l
              Sales
      Logistics
 l
              International
      Logistics
 
 Production
Logistics
 
 Our
client’s competitiveness is measured through the enterprise’s capacity to
improve its production efficiency, lower its comprehensive cost and practice
expenditures, all of which are realized through the optimization and improvement
of production logistics system. In-time supply and keeping appropriate inventory
are of the most concerned by manufacturers. We, together with other enterprises,
have worked for many years in establishing an efficient logistics system in line
with our client’s needs.
 
 l
              Production
      accessories and raw material supply
 l
              Vendor
      managed inventory (VMI :Vendor Managed
  Inventory)
 l
              Land
      transportation
 l
              In-factory
      logistics
 
 Sales
Logistics
 
 The
Company provides managerial operations as well as delivery service for product
agents, dealers, and department stores.
 
 l
              National
      network transportation
 l
              Management
      and operation in the logistics
center
 l
              3C
      digital product logistics
 l
              Quality
      inspection of clothing and textile
goods
 
 International
Logistics
 
 Through
the Company’s talented staff and reliable partnerships, the Company provides
international cargo transportation that supports business expansion efforts of
clients.
 
 l
              International
      Logistics Business
 
 Below are
illustrations of our logistics procedures:
  
    
 4
  ITEM 1A. RISK
FACTORS
 
 There are
many factors that affect our business, operating results and financial
conditions, many of which are beyond its control. The following is a description
of the most significant factors that might cause the actual results of
operations in future periods to differ materially from those currently expected
or desired.
 
 Business Risk
Factors
 
 Our
auditors have expressed doubt about our ability to continue as a going concern.
If we do not generate substantial revenue from our new relationships and are
also unable to obtain capital from other resources, we will significantly
curtail our operations or halt them entirely.
 
 Historically,
we have been dependent on financings to fund our development and working capital
needs. For the year ended December 31, 2009, we had net loss of $1,061,366,
resulting in our accumulated deficit of $1,068,060 as of December 31, 2009.
Accordingly, if we do not develop any new projects, we would have to continue to
severely diminish our operations or halt them entirely. The opinion of our
auditors contains an explanatory paragraph regarding our ability to continue as
a going concern.
 
 Competitors
could copy our business model and erode our market share, brand recognition and
profitability.
 
 We cannot
assure you that our competitors will not attempt to copy our business model, or
portions thereof, and that this will not erode our market share and brand
recognition and impair our growth rate and profitability. In response to any
such competitors, we may be required to decrease our fees, which may reduce our
operating margins and profitability.
 
 Because
our officers and directors reside outside of the United States, it may be
difficult for you to enforce your rights against them or enforce United States
court judgments against them in China.
 
 Our
directors and our executive officers reside in the PRC and all of our assets are
located in China. It may therefore be difficult for United States investors to
enforce their legal rights, to effect service of process upon our directors or
officers or to enforce judgments of United States courts predicated upon civil
liabilities and criminal penalties of our directors and officers under federal
securities laws. Further, it is unclear if extradition treaties now in
effect between the United States and China would permit effective enforcement of
criminal penalties of the federal securities laws.
 
 Because
we may not be able to obtain business insurance in the PRC, we may not be
protected from risks that are customarily covered by insurance in the United
States.
 
 Business
insurance is not readily available in China. To the extent that we suffer a loss
of a type which would normally be covered by insurance in the United States,
such as product liability and general liability insurance, we would incur
significant expenses in both defending any action and in paying any claims that
result from a settlement or judgment.
 
 Because
our funds are held in banks which do not provide insurance, the failure of any
bank in which we deposit our funds could affect our ability to continue in
business.
 
 Banks and
other financial institutions in the PRC do not provide insurance for funds held
on deposit. As a result, in the event of a bank failure, we may not have access
to funds on deposit. Depending upon the amount of money we maintain in a bank
that fails, our inability to have access to our cash could impair our
operations, and, if we are not able to access funds to pay our suppliers,
employees and other creditors, we may be unable to continue in
business.
 
 Failure
to comply with the United States Foreign Corrupt Practices Act could subject us
to penalties and other adverse consequences.
 
 We are
subject to the United States Foreign Corrupt Practices Act, which generally
prohibits United States companies from engaging in bribery or other prohibited
payments to foreign officials for the purpose of obtaining or retaining
business. Foreign companies, including some that may compete with us, are not
subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft
and other fraudulent practices occur from time-to-time in China. We can make no
assurance, however, that our employees or other agents will not engage in such
conduct for which we might be held responsible. If our employees or other agents
are found to have engaged in such practices, we could suffer severe penalties
and other consequences that may have a material adverse effect on our business,
financial condition and results of operations.
 
 Failure
to achieve and maintain effective internal controls in accordance with Section
404 of the Sarbanes-Oxley Act could have a material adverse effect on our
business and operating results and stockholders could lose confidence in our
financial reporting.
 
 Internal
controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, our operating results could be harmed. Under the current SEC
regulations, we will be required to include an auditor’s report on internal
controls over financial reporting for the year ended December 31, 2009. Failure
to achieve and maintain an effective internal control environment, regardless of
whether we are required to maintain such controls, could also cause investors to
lose confidence in our reported financial information, which could have a
material adverse effect on our stock price. Although we are not aware of
anything that would impact our ability to maintain effective internal controls,
we have not obtained an independent audit of our internal controls, and, as a
result, we are not aware of any deficiencies which would result from such an
audit. Further, at such time as we are required to comply with the internal
controls requirements of Sarbanes Oxley, we may incur significant expenses in
having our internal controls audited and in implementing any changes which are
required.
 
 5
 
 Declining
economic conditions could negatively impact our business
 
 Our
operations are affected by local, national and worldwide economic
conditions.  Markets in the United States and elsewhere have been
experiencing extreme volatility and disruption for more than 12 months, due in
part to the financial stresses affecting the liquidity of the banking system and
the financial markets generally. This volatility and disruption has reached
unprecedented levels.  The consequences of a potential or prolonged
recession may include a lower level of economic activity and uncertainty
regarding energy prices and the capital and commodity markets. While the
ultimate outcome and impact of the current economic conditions cannot be
predicted, a lower level of economic activity might result in a decline in
overall sales.  Instability in the financial markets, as a result of
recession or otherwise, also may affect the cost of capital and our ability to
raise capital.
 
 If
China Logistics loses the services of a number of key employees, their business
could suffer.
 
 Our
success is highly dependent upon the continued services of Wanwen Su, who is
President and CEO. We do not have a written employment agreement with Ms. Su.
There can be no assurances that China Logistics would be able to replace this
executive in the event her services become unavailable. We do not have any
key-man life insurance on any of their employees.
 
 Material
Disruptions At Our Facilities Could Negatively Impact Our Financial
Results.
 
 We
operate our facilities in compliance with applicable rules and regulations and
take measures to minimize the risks of disruption at our facilities. A material
disruption at one of our facilities could prevent us from meeting customer
demand, reduce our sales and/or negatively impact our financial results. Any of
our facilities, or any of our machines within an otherwise operational facility,
could cease operations unexpectedly due to a number of events,
including:
 
 *unscheduled
maintenance outages;
 
 *prolonged
power failures;
 
 *an
equipment failure;
 
 *a
chemical spill or release;
 
 *explosion
of a boiler;
 
 *the
effect of a drought or reduced rainfall on its water supply;
 
 *labor
difficulties;
 
 *disruptions
in the transportation infrastructure, including roads, bridges, railroad tracks
and tunnels;
 
 *fires,
floods, earthquakes, hurricanes or other catastrophes;
 
 *terrorism
or threats of terrorism;
 
 *domestic
and international laws and regulations applicable to our Company and our
business partners, including joint venture partners, around the world;
and
 
 *other
operational problems.
 
 Any such
downtime or facility damage could prevent us from meeting customer demand for
our services and/or require us to make unplanned capital expenditures. If one of
these facilities were to incur significant downtime, our ability to satisfy
customer requirements could be impaired, resulting in lower sales and having a
negative effect on our financial results.
 
 China
Logistics’ business plan is based, in part, on estimates and assumptions which
may prove to be inaccurate and accordingly their business plan may not
succeed.
 
 The
discussion of the business incorporates management’s current best estimate and
analysis of the potential market, opportunities and difficulties that China
Logistics faces. There can be no assurances that the underlying assumptions
accurately reflect opportunities and potential for success. Competitive and
economic forces on marketing, distribution and pricing of products make
forecasting of sales, revenues and costs extremely difficult and
unpredictable.
 
 Adverse
changes in economic policies of the People’s Republic of China (“PRC”)
government could have a material adverse effect on the overall economic growth
of the PRC, which could reduce the demand for China Logistics’ services and
materially adversely affect its business.
 
 All of
China Logistics’ assets are located in and all of its revenue is sourced from
the PRC. Accordingly, China Logistics’ business, financial condition, results of
operations and prospects will be influenced to a significant degree by
political, economic and social conditions in the PRC generally and by continued
economic growth in the PRC as a whole.
 
 The PRC
economy differs from the economies of most developed countries in many respects,
including the amount of government involvement, level of development, growth
rate, control of foreign exchange and allocation of resources. Although the PRC
government has implemented measures since the late 1970s emphasizing the
utilization of market forces for economic reform, the reduction of state
ownership of productive assets and the establishment of improved corporate
governance in business enterprises, a substantial portion of productive assets
in the PRC is still owned by the PRC government. In addition, the PRC government
continues to play a significant role in regulating industry development by
imposing industrial policies. The PRC government also exercises significant
control over the PRC’s economic growth through the allocation of resources,
controlling payment of foreign currency-denominated obligations, setting
monetary policy and providing preferential treatment to particular industries or
companies.
 
 While the
PRC economy has experienced significant growth over the past decade, growth has
been uneven, both geographically and among various sectors of the economy. The
PRC government has implemented various measures to encourage economic growth and
guide the allocation of resources. Some of these measures benefit the overall
PRC economy, but may also have a negative effect on China Logistics. For
example, China Logistics’ operating results and financial condition may be
adversely affected by government control over capital investments or changes in
tax regulations that are applicable to it.
 
 Fluctuations
in exchange rates could adversely affect our business and the value of our
securities.
 
 The value
of our common stock will be indirectly affected by the foreign exchange rate
between U.S. dollars and RMB and between those currencies and other currencies
in which our sales may be denominated. Because substantially all of our earnings
and cash assets are denominated in RMB fluctuations in the exchange rate between
the U.S. dollar and the RMB will affect the relative purchasing power of our
monies, our balance sheet and our earnings per share in U.S. dollars. In
addition, appreciation or depreciation in the value of the RMB relative to the
U.S. dollar would affect our financial results reported in U.S. dollar terms
without giving effect to any underlying change in our business or results of
operations. Fluctuations in the exchange rate will also affect the relative
value of any dividend we issue that will be exchanged into U.S. dollars as well
as earnings from, and the value of, any U.S. dollar-denominated investments we
make in the future.
 
 Since
July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the
People’s Bank of China regularly intervenes in the foreign exchange market to
prevent significant short-term fluctuations in the exchange rate, the RMB may
appreciate or depreciate significantly in value against the U.S. dollar in the
medium to long term. Moreover, it is possible that in the future PRC authorities
may lift restrictions on fluctuations in the RMB exchange rate and lessen
intervention in the foreign exchange market.
 
 Very limited hedging transactions are
available in China to reduce our exposure to exchange rate fluctuations. To
date, we have not entered into any hedging transactions. While we may enter into
hedging transactions in the future, the availability and effectiveness of these
transactions may be limited, and we may not be able to successfully hedge our
exposure at all. In addition, our foreign currency exchange losses may be
magnified by PRC exchange control regulations that restrict our ability to
convert RMB into foreign currencies.
 
 6
 
 Industry Risk
Factors
  High
fuel prices may increase carrier prices and volatility in fuel prices may make
it more difficult to pass through this cost to our clients, which may impair our
operating results.
  Fuel
prices recently reached historically high levels and continue to be volatile and
difficult to predict. In the event fuel prices rise, carriers can be expected to
charge higher prices to cover higher operating expenses, and our gross profits
and income from operations may decrease if we are unable to continue to pass
through to our clients the full amount of these higher costs. Higher fuel costs
could also cause material shifts in the percentage of our revenue by
transportation mode, as our clients may elect to utilize alternative
transportation modes, such as inter-modal. In addition, increased volatility in
fuel prices may affect our gross profits and income from operations if we are
not able to pass through to our clients any higher costs associated with such
volatility. Any material shifts to transportation modes with respect to which we
realize lower gross profit margins could impair our operating
results.
  If
we fail to maintain and upgrade our information technology systems to meet the
demands of our customers and protect our information technology systems against
risks that we cannot control, our business may be adversely
affected.
  We
compete for customers based in part on the flexibility and sophistication of our
information technology systems. The failure of the hardware or software that
supports these systems, the loss of data contained in the systems or the
inability to access or interact with our website or connect with our customers
electronically, could significantly disrupt our operations, prevent customers
from placing orders with us or cause us to lose freight, orders or customers. If
our information technology systems are unable to handle additional volume as our
business and scope of services grow, our service levels and operating efficiency
will likely decline. In addition, we expect that our customers will continue to
demand increasingly sophisticated information technology systems from us. If we
fail to hire or retain qualified persons to implement, maintain and protect our
information technology systems, or if we fail to upgrade or replace our
information technology systems to handle increased volumes and levels of
complexity and meet the increased demands of our customers, our business may be
adversely affected.
 
 Our
information technology systems are dependent upon global communications
providers, web browsers, telephone systems and other aspects of the Internet
infrastructure that have experienced significant system failures and electrical
outages in the past. Our systems are also susceptible to outagesdue to fire, floods, power loss,
telecommunications failures and similar events. Although we have implemented
network security measures, our servers are vulnerable to computer viruses,
break-ins and similar disruptions from unauthorized tampering. The occurrence of
any of these events could disrupt or damage our information technology systems
and adversely affect our internal operations, our ability to provide services to
our customers and the ability of our customers to access our information
technology systems.
  Stock Risk
Factors
 
 Certain
shareholders control a substantial portion of our outstanding common
stock.
 
 Our chief
executive officer owns a significant portion (72.14%) of the outstanding shares
of our common stock and. Accordingly, she will be able to influence the election
of our directors and thereby influence or direct our policies.
 
 No
dividends have been paid on our common stock.
 
 To date,
we have not paid any cash dividends on our common stock and we do not expect to
declare or pay dividends on the common stock in the foreseeable future. In
addition, the payment of cash dividends may be limited or prohibited by the
terms of any future loan agreements.
 
 We
may need to issue more stock, which could dilute your stock.
 
 If China
Logistics does not have enough capital to meet future capital requirements, they
may need to conduct additional capital-raising in order to continue operations.
To the extent that additional capital is raised through the sale of equity
and/or convertible debt securities, the issuance of such securities could result
in dilution to shareholders and/or increased debt service commitments.
Accordingly, if China Logistics issues additional stock, it could reduce the
value of your stock.
 
 Our
stock may be subject to substantial price and volume fluctuations due to a
number of factors, many of which will be beyond our control and may prevent our
stockholders from reselling our common stock at a profit.
 
 The
securities markets have experienced significant price and volume fluctuations in
the past. This market volatility, as well as general economic, market or
political conditions, could reduce the market price of our common stock in spite
of our operating performance. In addition, our operating results could be below
the expectations of public market analysts and investors, and in response the
market price of our common stock could decrease significantly. Investors may be
unable to resell their shares of our common stock for a profit. The decline in
the market price of our common stock and market conditions generally could
adversely affect our ability to raise additional capital, to complete future
acquisitions of or investments in other businesses and to attract and retain
qualified technical and sales and marketing personnel.
 
 There
is no trading market for our shares of common stock and you may be unable to
sell your shares.
 
 There has
never been a public trading market in our common stock and no such trading
market is expected to develop in the immediate future.  We are relying
on certain exemptions from registration under the Securities Act of 1933, which
will result in certain restrictions on the resale of our shares.  We
are not obligated to repurchase any shares at the request of any holder
thereof.  Further, we are not obligated to register our common stock
under the Securities Act of 1933 or to otherwise contact market makers to create
and maintain a market in our shares.  Our common stock is not a
suitable investment for investors who require liquidity.  There can be
no assurance that a significant public market for our securities will develop or
be sustained following this offering.  Thus, there is a risk that you
may never be able to sell your shares.
 
 7
 
 Because
we may be subject to the “penny stock” rules, you may have difficulty in selling
our common stock.
 
 Because
our stock price is less than $5.00 per share, our stock may be subject to the
SEC’s penny stock rules, which impose additional sales practice requirements and
restrictions on broker-dealers that sell our stock to persons other than
established customers and institutional accredited investors. The application of
these rules may affect the ability of broker-dealers to sell our common
stock and may affect your ability to sell any common stock you may
own.
 
 According
to the SEC, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include:
 
 ·
              Control
      of the market for the security by one or a few broker-dealers that are
      often related to the promoter or issuer;·
              Manipulation
      of prices through prearranged matching of purchases and sales and false
      and misleading press releases;·
              “Boiler
      room” practices involving high pressure sales tactics and unrealistic
      price projections by inexperienced sales persons;·
              Excessive
      and undisclosed bid-ask differentials and markups by selling
      broker-dealers; and·
              The
      wholesale dumping of the same securities by promoters and broker-dealers
      after prices have been manipulated to a desired level, along with the
      inevitable collapse of those prices with consequent investor
      losses.
 
 As
an issuer of “penny stock” the protection provided by the federal securities
laws relating to forward looking statements does not apply to us.
 
 Although
the federal securities laws provide a safe harbor for forward-looking statements
made by a public company that files reports under the federal securities laws,
this safe harbor is not available to issuers of penny stocks. As a result, if we
are a penny stock, we will not have the benefit of this safe harbor protection
in the event of any claim that the material provided by us contained a material
misstatement of fact or was misleading in any material respect because of our
failure to include any statements necessary to make the statements not
misleading.
 
 The
application of the "penny stock" rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.
 
 As long
as the trading price of our common shares is below $5 per share, the open-market
trading of our common shares will be subject to the "penny stock" rules. The
"penny stock" rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors (generally those with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received the
purchaser's written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the Securities and Exchange Commission relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common shares, and may result in decreased
liquidity for our common shares and increased transaction costs for sales and
purchases of our common shares as compared to other securities.
 
 ITEM 1B. Unresolved Staff
Comments
 
 Not
applicable.
 
 ITEM 2.
PROPERTIES
 
 Our main
office is located at Suite 910, Yi An Plaza, 33 Jian She Liu Road, Guangzhou,
People’s Republic of China, which has a total area of 750 square feet. Our
office is under a two-year lease agreement with annual rental payment of
approximately $9,600. This space is adequate for our present operations. No
other businesses operate from this office.
 
 ITEM 3.LEGAL
PROCEEDINGS
 
 We may be
subject to, from time to time, various legal proceedings relating to claims
arising out of our operations in the ordinary course of our business. We are not
currently a party to any legal proceedings, the adverse outcome of which,
individually or in the aggregate, would have a material adverse effect on the
business, financial condition, or results of operations of the
Company.
 
 ITEM 4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
 
 On June
24, 2009, we filed a Definitive Information Statement on Schedule 14C to propose
to amend the Company’s Articles of Incorporation to change the name of the
corporation from China International Tourism Holdings, Ltd. to "China Logistics,
Inc." This name change was approved by action by written consent without a
meeting of a majority of all shareholders entitled to vote on the record date
(the “Name Change Proposal”).
 
 Holders
of 40,000,000 shares of our Common Stock and 2,636,000 shares of Convertible
Preferred Stock (25 shares of our Common Stock for each share of Preferred
Stock), representing approximately 79.84% of our shares entitled to vote on this
matter have executed a written consent in favor of the Name Change
Proposal.
 
 The name
change from China International Tourism Holdings, Limited to China Logistics
Inc. took effective on August 10, 2009.
 
 8
 
 
 PART
II
 
 ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 
 Our
common stock is quoted on the Electronic Over-the-Counter Bulletin Board under
the symbol, “CLGZ.OB”. Trading in the common stock in the over-the-counter
market has been limited and sporadic and the quotations set forth below are not
necessarily indicative of actual market conditions. Furthermore, these prices
reflect inter-dealer prices without retail mark-up, mark-down, or commission,
and may not necessarily reflect actual transactions. The high and low bid prices
for the common stock for each quarter of the years ended December 31, 2009 and
2008 are as follows:
 
 Interim
Period                                                      Low                      High
 Interim
period ended March 31,
2010                                             $0.22                   $0.22
 
 Fiscal
2009                                                                                         
Low                      High
 Quarter
ended March 31,
2009                                                         $0.40                   $0.40
 Quarter
ended June 30,
2009                                                            $0.27                   $0.27
 Quarter
ended September 30,
2009                                                  $0.15                   $0.15
 Quarter
ended December 31,
2009                                                  $0.07                    $0.07
 
 Fiscal
2008                                                           
Low                      High
 Quarter
ended March 31,
2008                                                         $2.20                    $2.20
 Quarter
ended June 30,
2008                                                             $2.00                    $2.00
 Quarter
ended September 30,
2008                                                   $0.80                   $1.00
 Quarter
ended December 31,
2008                                                    $0.20                   $0.40
 
 Record
Holders
 
 The
holders of the Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of the Common
Stock have no preemptive rights and no right to convert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. We are authorized to issue 250,000,000 shares of
common stock, and 5,000,000 shares of preferred stock. There are currently 4,505
record holders of our common stock.
  Dividends
 
 We have
not declared any dividends since our inception and do not anticipate paying any
dividends in the foreseeable future. The payment of dividends is within the
discretion of the Board of Directors, and will depend on our earnings, capital
requirements, financial condition, and other relevant factors. There are no
restrictions that currently limit our ability to pay dividends on our Common
Stock, other than those generally imposed by applicable state law.
 
 Securities Authorized for
Issuance Under Equity Compensation Plans
 
 As of the
date of this Report, we have not authorized any equity compensation plan, nor
has our Board of Directors authorized the reservation or issuance of any
securities under any equity compensation plan.
 
 Recent Sales of Unregistered
Securities; Use of Proceeds from Registered Securities
 
 On July
13, 2009, the Company issued 3,800,000 shares of common stock to its consultant
for business advisory services rendered in fiscal years 2008 and 2009. The fair
value of this stock issuance was determined using the fair value of the
Company’s common stock on the grant date, at a market quoted price of
$.27.
 
 On July
13, 2009, the Company issued 742,000 shares of its common stock to settle the
loan from shareholder of $58,120 and the loan from a third party of $16,000,
which were accrued expenses in connection with the Company’s overseas consulting
and advising fees, lawyer fees, and accounting fees from period to period, paid
by the shareholder or the third party out of the bank accounts in the United
States due to the strict laws and regulations imposed by the Chinese government
on out-going foreign currency wire transfers.
 
 The loans
from the shareholder or from the third party have the option to convert within
two years into common stock of the Company at the price of $.10 per
share.
 
 The fair
value of this stock issuance was determined using the fair value of the
Company’s common stock on the grant date, at a market quoted price of $.27. The
difference between the fair market value and the conversion price of $.10 per
share was recognized as loss on extinguishment of convertible debt.
 
 Purchases of Equity
Securities by the Small Business Issuer and Affiliated
Purchasers
 
 None.
 
 Transfer
Agent
 
 Our transfer agent is Guardian Registrar
& Transfer, Inc. located at 7951 SW 6th Street, Suite 216, Plantation,
Florida 33324.
 
 ITEM 6. SELECTED FINANCIAL
DATA
  If the
registrant qualifies as a smaller reporting company as defined byRule 229.10(f)(1),
it is not required to provide the information required by this
Item.
  9
  ITEM 7.MANAGEMENT’S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION
 
 Forward
Looking Statements
 
 Certain
statements in this report, including statements of our expectations, intentions,
plans and beliefs, including those contained in or implied by "Management's
Discussion and Analysis" and the Notes to Consolidated Financial Statements, are
"forward-looking statements", within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
subject to certain events, risks and uncertainties that may be outside our
control. The words “believe”, “expect”, “anticipate”, “optimistic”, “intend”,
“will”, and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. We undertake no obligation to
update or revise any forward-looking statements. These forward-looking
statements include statements of management's plans and objectives for our
future operations and statements of future economic performance, information
regarding our expansion and possible results from expansion, our expected
growth, our capital budget and future capital requirements, the availability of
funds and our ability to meet future capital needs, the realization of our
deferred tax assets, and the assumptions described in this report underlying
such forward-looking statements. Actual results and developments could differ
materially from those expressed in or implied by such statements due to a number
of factors, including, without limitation, those described in the context of
such forward-looking statements, our expansion strategy, our ability to achieve
operating efficiencies, our dependence on distributors, capacity, suppliers,
industry pricing and industry trends, evolving industry standards, domestic and
international regulatory matters, general economic and business conditions, the
strength and financial resources of our competitors, our ability to find and
retain skilled personnel, the political and economic climate in which we conduct
operations and the risk factors described from time to time in our other
documents and reports filed with the Securities and Exchange Commission (the
"Commission"). Additional factors that could cause actual results to differ
materially from the forward-looking statements include, but are not limited to:
1) our ability to successfully develop our services; 2) our ability to compete
effectively with other companies in the same industry; 3) our ability to raise
sufficient capital in order to effectuate our business plan; and 4) our ability
to retain our key executives.
 
 RESULTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
 
 Sales
 
 We had
sales of $11,992,260 and $13,918,164 for the years ended December 31, 2009 and
2008, respectively. The decrease in 2009 was due to the slowdown in the economy.
Our revenues were derived from logistic services and import / export business.
Since the US is China’s biggest export partner and we are a logistics company
devoted to the import and export of products between China and the US, the
global financial crisis starting in 2008 had significant impact on our
business.
 
 Income /
Loss
 
 We had
net loss of $1,061,366 and $641 for the years ended December 31, 2009 and 2008,
respectively. The significant net loss during the year ended December 31, 2009
was due primarily to the increase in selling general and administrative costs by
$938,971, compared to $931,801 in selling general and administrative expenses
during 2008.
 
 In
addition, we had loss of $126,220 on extinguishment of convertible debt during
2009, as a result of the issuance of 742,000 shares of common stock to settle
the loan from shareholder of $58,120 and the loan from a third party of $16,000.
The shares were valued at the fair value of our common stock on the grant date,
or $.27 per share. The difference between the fair market value and the
conversion price of $.10 per share was recognized as loss on extinguishment of
convertible debt.
 
 Expenses
 
 We had
operating expenses of $1,870,772 and $931,801 for the years ended December 31,
2009 and 2008, respectively. The significant increase in operating expenses
during the year ended December 31, 2009 was due primarily to the non-cash
consulting expenses, which were $1,026,000 as a result of the issuance of
3,800,000 shares of common stock for the services rendered in 2008 and 2009. The
shares were not issued until the third quarter of 2009, using the fair value of
our common stock on the grant date, at a market quoted price of
$.27.
  Cost of
Sales
 
 We had
$11,014,269 and $13,020,385 in cost of sales, or 91.84% and 93.55% of sales
revenues, during the years ended December 31, 2009 and 2008, respectively. Cost
of sales as a percentage of sales was high in general determined by our business
model as a logistic services provider for import/export business. The intensive
competition in logistic industry as a result of globalization restricts the
growth in our gross margin. The cost of sales as a percentage of sales was low
during the year ended December 31, 2009 was due primarily to our most revenues
earned from service charge during this period since import / export business
decreased as a result of global financial crisis. Our services charge includes
cargo fees and agent fees, which bear lower cost than import / export
business.
 
 Impact of
Inflation
 
 We
believe that inflation has had a negligible effect on operations during this
period. We believe that we can offset inflationary increases in the cost of
sales by increasing sales and improving operating efficiencies.
 
 Liquidity and Capital
Resources
 
 We had
cash flows of $1,235,684 provided by operating activities for the year ended
December 31, 2009, compared to the cash flows of $2,404,371 used in operations
for the year ended December 31, 2008. Positive cash flows from operations during
the year ended December 31, 2009 were primarily due to effective collection in
accounts receivable in the amount of $3,464,878, plus the increase in accounts
payable by $1,083,483, and the increase in others by $321,808, partially offset
by the increase in inventory and other receivable, which were $3,136,582 and
$133,949, respectively. Negative cash flows from operation during the year ended
December 31, 2008 were primarily due to the amount increase in accounts
receivable by $5,292,420, partially offset by the increase in accounts payable
by $2,496,712 and the decrease in other receivable by $228,949.
 
 Cash
flows used in investing activities were $25,399 and $1,446 for the years ended
December 31, 2009 and 2008, respectively, due primarily to the purchase of
property and equipment in both years.
 
 We had
cash flows of $517,659 used in financing activities for the year ended December
31, 2009 due to the repayments to a shareholder loan. Comparably, cash flows of
$377,084 for the year ended December 31, 2008 was due to proceeds from
shareholder loans.
 
 Overall,
we have funded our cash needs from inception through December 31, 2009 with a
series of debt and equity transactions, primarily with related parties. If we
are unable to receive additional cash from our related parties, we may need to
rely on financing from outside sources through debt or equity transactions. Our
related parties are under no legal obligation to provide us with capital
infusions. Failure to obtain such financing could have a material adverse effect
on operations and financial condition.
 
 We had
cash of $1,223,829 on hand and working capital of $1,221,454 as of December 31,
2009. Currently, we have enough cash to fund our operations for about nine
months. This is based on current cash flows from operating activities and
projected revenues. Also, if the projected revenues fall short of needed capital
we may not be able to sustain our capital needs. We will then need to obtain
additional capital through equity or debt financing to sustain operations for an
additional year. Our current level of operations would require capital of
approximately $700,000 per year starting in 2010. Modifications to our business
plans may require additional capital for us to operate. For example, if we are
unable to raise additional capital in the future we may need to curtail our
number of product offers or limit our marketing efforts to the most profitable
geographical areas. This may result in lower revenues and market share for us.
In addition, there can be no assurance that additional capital will be available
to us when needed or available on terms favorable to us.
 
 On a
long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, additional infusions of capital and debt
financing. However, there can be no assurance that we will be able to obtain
additional equity or debt financing in the future, if at all. If we are unable
to raise additional capital, our growth potential will be adversely affected.
Additionally, we will have to significantly modify our business
plan.
 
 Off-Balance Sheet
Arrangements
 
 We have
not entered into any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources and would be considered material to
investors. Certain officers and directors of the Company have provided personal
guarantees to our various lenders as required for the extension of credit to the
Company
 
 10
 
 ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 We do not
use derivative financial instruments in our investment portfolio and has no
foreign exchange contracts. Our financial instruments consist of cash and cash
equivalents, trade accounts receivable, accounts payable and long-term
obligations. We consider investments in highly liquid instruments purchased with
a remaining maturity of 90 days or less at the date of purchase to be cash
equivalents. However, in order to manage the foreign exchange risks, we may
engage in hedging activities to manage our financial exposure related to
currency exchange fluctuation. In these hedging activities, we might use
fixed-price, forward, futures, financial swaps and option contracts traded in
the over-the-counter markets or on exchanges, as well as long-term structured
transactions when feasible.
 
 Foreign
Exchange Rates
 
 All of
our sales are denominated in Renminbi (“RMB”). As a result, changes in the
relative values of U.S. Dollars and RMB affect our reported levels of revenues
and profitability as the results are translated into U.S. Dollars for reporting
purposes. Fluctuations in exchange rates between the U.S. dollar and RMB
affect our gross and net profit margins and could result in foreign exchange and
operating losses.
 
 Our
results of operations and cash flow are translated at average exchange rates
during the period, and assets and liabilities are translated at the unified
exchange rate as quoted by the People’s Bank of China at the end of the period.
Translation adjustments resulting from this process are included in accumulated
other comprehensive income in our statement of shareholders’ equity. We recorded
net foreign currency gains of $7,798 in fiscal 2009 and $77,251 in fiscal 2008.
We have not used any forward contracts, currency options or borrowings to hedge
our exposure to foreign currency exchange risk. We cannot predict the impact of
future exchange rate fluctuations on our results of operations and may incur net
foreign currency losses in the future.
 
 Our
financial statements are expressed in U.S. dollars but the functional
currency of our operating subsidiary is RMB. The value of your investment in our
stock will be affected by the foreign exchange rate between U.S. dollars
and RMB. To the extent we hold assets denominated in U.S. dollars,
including the net proceeds to us from this offering, any appreciation of the RMB
against the U.S. dollar could result in a change to our statement of
operations and a reduction in the value of our U.S. dollar denominated
assets. On the other hand, a decline in the value of RMB against the
U.S. dollar could reduce the U.S. dollar equivalent amounts of our
financial results, the value of your investment in our company and the dividends
we may pay in the future, if any, all of which may have a material adverse
effect on the price of our stock.
 
 The
exchange rates used to translate amounts in RMB into U.S. Dollars for the
purposes of preparing the financial statements or otherwise stated in this
MD&A were as follows:
 
 2009
              
              2008Balance
      sheet items, except for the registered and paid-up capital as of December
      31, 2009 and 2008
              USD
      0.146:RMB 1
              
              USD
      0.147:RMB 1Amounts
      included in the statement of operations, statement of changes in
      stockholders’ equity and statement of cash flows for the years ended
      December 31, 2009 and 2008
              USD
      0.146:RMB 1
              
              USD
      0.144:RMB 1
 
 ITEM 8.FINANCIAL
STATEMENTS
 
 Financial
Summary Information
 
 Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. It should be read in conjunction with
the consolidated financial statements and related notes presented in this
section.
 
 Audited
Financial Summary Information for the Years Ended December 31, 2009 and
2008
 
 Statements
      of Operations
              
              For
      the year ended December 31, 2009
              
              
              For
      the year ended December 31, 2008Sales
              
              $
              11,992,260
              
              
              $
              13,918,164Cost
      of Sales
              
              $
              11,014,269
              
              
              $
              13,020,385Gross
      profit
              
              $
              977,991
              
              
              $
              897,779Operating
      expenses
              
              $
              1,870,772
              
              
              $
              931,801(Loss)
      from operations
              
              $
              (892,781
              )
              
              $
              (34,022)Other
      income (expenses)
              
              $
              (160,781)
              
              
              $
              65,717Net
      (loss)
              
              $
              (1,061,366
              )
              
              $
              (641)Net
      loss per common share
              
              $
              .02
              
              
              
              **
 
 ** Less
than $.01
 Balance
      Sheet
              
              As
      of December 31, 2009Cash
              
              $
              1,223,829Total
      current assets
              
              $
              10,407,573Other
      assets
              
              $
              35,238Total
      Assets
              
              $
              10,442,811Current
      liabilities
              
              $
              9,186,119Commitments
      and Contingencies
              
              $
              32,950Stockholders’
      equity
              
              $
              1,223,742Total
      liabilities and stockholders’ equity
              
              $
              10,442,811
 
 11
  2009
AUDITED FINANCIALS


REPORT
      OF INDEPENDENT REGISTERED ACCOUNTING FIRM
              13CONSOLIDATED
      BALANCE SHEET
              14CONSOLIDATED
      STATEMENTS OF OPERATIONS
              15CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ EQUITY
              16CONSOLIDATED
      STATEMENTS OF CASH FLOWS
              17NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS
              18


12
   REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and
 Stockholders
of China Logistics, Inc.
 
 We have
audited the accompanying consolidated balance sheets of China Logistics, Inc.
(the “Company”) as of December 31, 2009 and 2008, and related consolidated
statements of operations, stockholders’ deficit, and cash flows for the years
ending December 31, 2009 and 2008. These financial statements are the
responsibility of the company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of China Logistics, Inc. as of
December 31, 2009 and 2008 and the results of its operations and its cash flows
for years ended December 31, 2009 and 2008 in conformity with accounting
principles generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note 10, the Company has suffered
recurring losses and accumulated deficit that raises substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
 
 /s/Lake
& Associates CPA’s LLC
 Lake
& Associates CPA’s LLC
 April 12,
2010
 13
 China
      Logistics, Inc., and SubsidiaryAudited
      Consolidated Balance SheetAs
      of December 31, 2009 and 2008ASSETS
                  
                  31/Dec/2009
                  
                  
                  31/Dec/2008CURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  1,223,829
                  
                  
                  $
                  531,297Accounts
      receivable,trade
                  
                  
                  4,418,594
                  
                  
                  
                  7,890,953Other
      receivables
                  
                  
                  146,524
                  
                  
                  
                  113,302Inventory
                  
                  
                  3,844,655
                  
                  
                  
                  707,280Prepaid
      expenses
                  
                  
                  290,903
                  
                  
                  
                  314,196Prepaid
      VAT tax
                  
                  
                  483,068
                  
                  
                  
                  -TOTAL
      CURRNET ASSETS
                  
                  $
                  10,407,573
                  
                  
                  $
                  9,557,027FIXED
      ASSETSProperty,
      plant, and equipment
                  
                  $
                  47,319
                  
                  
                  $
                  21,927Accumulated
      depreciation
                  
                  
                  (12,082
                  )
                  
                  
                  (8,355
                  )NET
      FIXED ASSETS
                  
                  $
                  35,238
                  
                  
                  $
                  13,572TOTAL
      ASSETS
                  
                  $
                  10,442,811
                  
                  
                  $
                  9,570,599LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                  
                  $
                  8,690,450
                  
                  
                  $
                  7,612,304Other
      payables
                  
                  
                  114,355
                  
                  
                  
                  87,281Other
      payables-related party
                  
                  
                  36,816
                  
                  
                  
                  555,048Received
      in advance
                  
                  
                  335,076
                  
                  
                  
                  113,915Tax
      payable
                  
                  
                  9,422
                  
                  
                  
                  114,385TOTAL
      CURRENT LIABILITIES
                  
                  $
                  9,186,119
                  
                  
                  $
                  8,482,934TOTAL
      LIABILITIES
                  
                  $
                  9,186,119
                  
                  
                  $
                  8,482,934COMMITMENTS
      AND CONTINGENCIESRedeemable
      preferred stock (par value $.01, 5,000,000 Shares
                  
                  $
                  32,950
                  
                  
                  $
                  32,950authorized,
      3,295,000 shares issued and outstanding as ofDecember
      31, 2009 and 2008STOCKHOLDERS'
      EQUITYCommon
      stock (par value $.0001, 250,000,000 shares authorized,
                  
                  
                  5,478
                  
                  
                  
                  5,02454,787,026
      shares issued and outstanding as ofDecember
      31, 2009 and 2008, respectivelyAdditional
      paid in capital
                  
                  
                  2,146,261
                  
                  
                  
                  920,375Statutory
      reserves
                  
                  
                  850
                  
                  
                  
                  850Accumulated
      other comprehensive income
                  
                  
                  139,213
                  
                  
                  
                  135,160Retained
      earnings (deficit)
                  
                  
                  (1,068,060
                  )
                  
                  
                  (6,694
                  )TOTAL
      STOCKHOLDERS' EQUITY
                  
                  $
                  1,223,742
                  
                  
                  $
                  1,054,715TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                  
                  $
                  10,442,811
                  
                  
                  $
                  9,570,599The
      accompanying notes are an integral part of these financial
      statements.
 
 14
 China
      Logistics, Inc., and SubsidiaryAudited
      Consolidated Statement of OperationsFor
      the years ended December 31, 2009 and 2008For
      the year endedDecember
      31, 2009
                  
                  
                  December
      31, 2008RevenuesSales
                  
                  $
                  11,992,260
                  
                  
                  $
                  13,918,164Cost
      of sales
                  
                  
                  11,014,269
                  
                  
                  
                  13,020,385Gross
      profits
                  
                  
                  977,991
                  
                  
                  
                  897,779Operating
      expensesSelling
      General and Administrative
                  
                  
                  1,870,772
                  
                  
                  
                  931,801Income
      (Loss) from Operations
                  
                  
                  (892,781
                  )
                  
                  
                  (34,022
                  )Other
      income (expenses)Finance
      income (costs)
                  
                  $
                  (35,409
                  )
                  
                  $
                  67,156Loss
      on extinguishment of convertible debt
                  
                  
                  (126,220
                  )Non-operating
      income (expense)
                  
                  
                  849
                  
                  
                  
                  (1,439
                  )Total
      other income (loss)
                  
                  
                  (160,781
                  )
                  
                  
                  65,717Income
      (loss) from Operations
                  
                  
                  (1,053,562
                  )
                  
                  
                  31,695Income
      taxes
                  
                  
                  7,805
                  
                  
                  
                  32,336Net
      Income (Loss)
                  
                  
                  (1,061,366
                  )
                  
                  
                  (641
                  )Other
      comprehensive income (loss)Foreign
      currency translation gain (loss)
                  
                  
                  4,053
                  
                  
                  
                  77,251Comprehensive
      income (loss)
                  
                  $
                  (1,057,313
                  )
                  
                  $
                  76,610Weighted
      average common shares outstandingBasic
      & diluted
                  
                  $
                  52,402,476
                  
                  
                  $
                  50,245,026Net
      loss per common shareBasic
      & diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.00
                  )The
      accompanying notes are an integral part of the financial
      statements
 
 15
  China
      Logistics, Inc., and SubsidiaryAudited
      Consolidated Statements of Cash FlowsFor
      the years ended December 31, 2009 and 20082009
                    
                    
                    2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                    
                    $
                    (1,061,366
                    )
                    
                    $
                    (641
                    )Stock
      issuance for service & loan settlement
                    
                    
                    1,226,340Adjustments
      to reconcile net income (loss) to
                    
                    
                    -net
      cash (used in) operating activities:
                    
                    
                    -Depreciation
                    
                    
                    3,731
                    
                    
                    
                    4,027Accounts
      receivable ,trade
                    
                    
                    3,464,878
                    
                    
                    
                    (5,292,420
                    )Other
      receivable
                    
                    
                    (133,949
                    )
                    
                    
                    228,949Prepaid
      expense
                    
                    
                    23,043
                    
                    
                    
                    169,181Inventory
                    
                    
                    (3,136,582
                    )
                    
                    
                    (45,046
                    )Accounts
      payable
                    
                    
                    1,083,483
                    
                    
                    
                    2,496,712Tax
      payable
                    
                    
                    (587,694
                    )
                    
                    
                    200,250Other
      payable
                    
                    
                    31,991
                    
                    
                    
                    (30,096
                    )Others
                    
                    
                    321,808
                    
                    
                    
                    (135,289
                    )NET
      CASH (USED IN) OPERATING ACTIVITIES
                    
                    
                    1,235,684
                    
                    
                    
                    (2,404,371
                    )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchase
      of property, plant, and equipment
                    
                    
                    (25,399
                    )
                    
                    
                    (1,446
                    )NET
      CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
                    
                    
                    (25,399
                    )
                    
                    
                    (1,446
                    )CASH
      FLOWS FROM FINANCING ACTIVITIES:Increase
      (decrease) of due to shareholders'
                    
                    
                    (517,659
                    )
                    
                    
                    377,084NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                    
                    
                    (517,659
                    )
                    
                    
                    377,084FOREIGN
      CURRENCY TRANSLATION ADJUSTMENT
                    
                    
                    (94
                    )
                    
                    
                    77,251NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                    
                    
                    692,532
                    
                    
                    
                    (1,951,482
                    )CASH
      AND CASH EQUIVALENTS:Beginning
      of period
                    
                    
                    531,297
                    
                    
                    
                    2,482,779End
      of period
                    
                    $
                    1,223,829
                    
                    
                    $
                    531,297The
      accompanying notes are an integral part of these financial
      statements.
 16
 China Logistics, Inc., and
      SubsidiaryAudited
      Consolidated Statement of Stockholders' EquityFor
      the year ended December 31, 2009AccumulatedCommon
      Stock
                    Retained
                    Statutory
                    Additional
                    OtherShares
                    Amount
                    Earnings
                    Reserve
                    paid-in
                    ComprehensiveCapital
                    Income
      (loss)
                    TotalBalances,
      January 1, 2008
                    50,245,026
                    $     5,024
                    $           (6,053)
                    $               850
                    $         920,375
                    $           57,909
                    $        978,105Net
      Income(Loss) for the period
                    
                    
                    (641)
                    
                    
                    
                    (641)Other
      comprehensive income
                    
                    
                    
                    
                    
                    77,251
                    77,251Balances,
      December 31, 2008
                    50,245,026
                    $     5,024
                    $           (6,694)
                    $               850
                    $         920,375
                    $         135,160
                    $     1,054,715Stock
      issued for service
                    3,800,000
                    380
                    
                    
                    1,025,620
                    
                    1,026,000Stock
      issued for loan settlement
                    742,000
                    74
                    
                    
                    200,266
                    
                    200,340Net
      Income(Loss) for the period
                    
                    
                    (1,061,366)
                    
                    
                    
                    (1,061,366)Other
      comprehensive income
                    
                    
                    
                    
                    
                    4,053
                    4,053Balances,
      December 31, 2009
                    54,787,026
                    $     5,478
                    $    (1,068,060)
                    $               850
                    $      2,146,261
                    $         139,213
                    $     1,223,742
 17
  CHINA
LOGISTIC INC., AND SUBSIDIARY
 Notes
to Audited Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 1.
                ORGANIZATION
      AND BUSINESS BACKGROUND
 
 China
Logistics Inc. (the “Company” or “CLGZ”) was incorporated in the State of
Nevada on December 23, 1988, formerly known as China International Tourism
Holdings, Limited, Dark Dynamite, Inc., NCI Holdings, Inc., Vector Holding,
Inc., and prior to June 26, 2002, Vector Aeromotive Corporation. The name change
from China International Tourism Holdings, Limited to China Logistics Inc. took
effective on August 10, 2009.
 
 On
February 18, 2009, a Plan of Exchange (the “Exchange”) was executed between and
among the Company, Chengkai Logistics Co Ltd., a corporation organized under the
laws of the Peoples’ Republic of China (“Chengkai”), and the shareholders of
Chengkai (“Chengkai Shareholders”). The Exchange was consummated on May 19,
2009, pursuant to which 50,000,000 (after taking into account the Reverse Split)
shares of the Company’s common stock were issued to the stockholder of
Chengkai.  Thereafter, Chengkai became the Company’s wholly-owned
subsidiary.
 
 Simultaneously,
pursuant to a Purchase Agreement, the former president of the Company tendered a
cash purchase price of $100 and assumed certain liabilities in exchange for all
outstanding shares of Shanxi Kai Da Lv You Gu Wen Xian Gong Si, the Company’s
wholly-owned subsidiary organized under the laws of the Peoples’ Republic of
China ("Kai Da"). As a result of the transactions consummated at the closing,
the purchase and issuance gave the former president a 'controlling interest' in
Kai Da, and Kai Da was no longer a wholly-owned subsidiary of the
Company.
 
 The
Exchange between the Company and Chengkai have been respectively accounted for
as reverse acquisition and recapitalization of the Company and Chengkai whereby
Chengkai is deemed to be the accounting acquirer (legal acquiree) and the
Company to be the accounting acquiree (legal acquirer) under the Exchange. The
condensed consolidated financial statements are in substance those of Chengkai,
with the assets and liabilities, and revenues and expenses, of the Company being
included effective from the respective consummation dates of the
Exchange.
 
 CLGZ and
its wholly-owned subsidiary Chengkai are hereafter referred to as (the
“Company”).
 
 The
Company is a logistic company specializing in logistical services for car
manufacturers, car components, food assortments, chemicals, paper, and machinery
in China. The services cover various aspects of transportation management,
including logistical planning, import and export management, electronic customs
declaration systems, supply chain planning, transporting products from ports to
warehouses or vice versa, organization of transportation, and storage and
distribution of products.
 
 The
Company’s customers include international companies and domestic enterprises in
China from various industries. Chengkai’s customer base has been increasing at a
rapid pace, especially within the Food Industry, Paper Industry, Mechanical
Industry, Garment Industry, Furniture Industry and Daily Commodity
Industry.
 
 
 2.
                SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of
Presentation
 
 The
accompanying consolidated financial statements have been prepared in accordance
with generally accepted accounting principles in the United States of
America.
  Management’s Use of
Estimates
 
 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 disclosures of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenues and expenses during
the reporting period.  Such estimates include but are not limited to
depreciation, taxes, and contingencies.  Actual results could differ
from those estimates.  The financial statements above reflect all of
the costs of doing business.
 
 Principles of
Consolidation
 
 The
consolidated financial statements include the financial statements of the
Company and its subsidiary, Chengkai.
 
 All
significant inter-company balances and transactions within the Company have been
eliminated upon consolidation.
 
 Cash and cash
equivalents
 
 Cash and
cash equivalents are carried at cost and represent cash on hand, demand deposits
placed with banks or other financial institutions and all highly liquid
investments with an original maturity of three months or less as of the purchase
date of such investments.
 
 Allowance for doubtful
accounts
 
 The
Company establishes an allowance for doubtful accounts based on management’s
assessment of the collectibility of trade receivables.  A considerable
amount of judgment is required in assessing the amount of the
allowance.  The Company considers the historical level of credit
losses and applies percentages to aged receivables categories.  The
Company makes judgments about the creditworthiness of each customer based on
ongoing credit evaluations, and monitors current economic trends that might
impact the level of credit losses in the future.  If the financial
condition of the customers were to deteriorate, resulting in their inability to
make payments, a larger allowance may be required.
 
 Based on
the above assessment, during the reporting periods, the management establishes
the general provisioning policy to make allowance equivalent to 0.5% of gross
amount of trade receivables due less than 1 year, 5% of gross amount of trade
receivables due from 1 to 2 years, 10% of gross amount of trade receivables due
from 2 to 3 years. The management completely writes off the gross amount of
trade receivables due over 3 years.  Additional specific provision is
made against trade receivables to the extent which they are considered to be
doubtful.
 
 Bad debts
are written off when identified.  The Company does not accrue interest
on trade receivables.
 
 Historically,
losses from uncollectible accounts have not significantly deviated from the
general allowance estimated by the management and no significant additional bad
debts have been written off directly to the profit and loss. This general
provisioning policy has not changed in the past since establishment and the
management considers that the aforementioned general provisioning policy is
adequate and not too excessive and does not expect to change this established
policy in the near future.
 
 18
 
 CHINA
LOGISTIC INC., AND SUBSIDIARY
 Notes
to Audited Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 
 2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
 
 Inventories
 
 Inventories
are stated at the lower of cost or market.  Cost is determined on a
first in first out basis and includes all expenditures incurred in bringing the
goods to the point of sale and putting them in a saleable
condition.  In case of manufacturing inventories, cost includes an
appropriate share of production overheads based on normal operating
capacity.  In assessing the ultimate realization of inventories, the
management makes judgments as to future demand requirements compared to current
or committed inventory levels.  The Company estimates the demand
requirements based on market conditions, forecasts prepared by its customers,
sales contracts and orders in hand.
 
 In
addition, the Company estimates net realizable value based on intended use,
current market value and inventory ageing analyses.  The Company
writes down the inventories for estimated obsolescence or unmarketable
inventories equal to the difference between the cost of inventories and the
estimated market value based upon assumptions about future demand and market
conditions.
 
 Property, plant and
equipment
 
 Property,
plant and equipment are stated at cost less accumulated depreciation. Cost
represents the purchase price of the asset and other costs incurred to bring the
asset into its existing use.
 
 Depreciation
is calculated on the straight-line basis over the following expected useful
lives from the date on which they become fully operational and after taking into
account their estimated residual values:
 
 Depreciable life
                
                Residual valueBuilding
                20
      years
                
                5%Machinery
      and equipment
                10
      years
                
                5%Furniture
      and fixture
                5
      years
                
                5%
 
 Maintenance
or repairs are charged to expense as incurred.  Upon sale or
disposition, the applicable amounts of asset cost and accumulated depreciation
are removed from the accounts and the net amount less proceeds from disposal is
charged or credited to income.
 
 Impairment of long-lived
assets
 
 In
accordance with SFAS No.144, “Accounting for the Impairment or Disposal of
Long-lived Assets”, the Company assesses long-lived assets, such as property and
equipment and intangible assets subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset group may not be fully recoverable. Recoverability
of asset groups to be held and used in measured by a comparison of the carrying
amount of an asset group to estimated undiscounted future cash flows expected to
be generated by the asset group.  If the carrying amount exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of an asset group exceeds the fair value of the asset
group. The Company evaluated its long-lived assets and no impairment charges
were recorded for any of the periods presented.
 
 Revenue
recognition
 
 Revenue
from sales of the Company’s products is recognized when the significant risks
and rewards of ownership have been transferred to the customers at the time when
the products are delivered to and accepted by them, the sales price is fixed or
determinable and collection is reasonably assured.
 
 Cost of
sales
 
 Cost of
sales consists primarily of material costs, direct labor, depreciation and
overheads, which are directly attributable to the products and the provision of
services.
 
 Selling
expenses
 
 Selling
expenses mainly consist of advertising, entertainment, salaries, shipping and
handling cost and traveling expense which are incurred during the selling
activities.
 
 General and administrative
expenses
 
 General
and administrative expenses consist of rent paid, office expenses, depreciation,
staff welfare, utilities, labor protection and salaries which are incurred at
the administrative level.
 
 Income
taxes
 
 The
Company accounts for income tax using SFAS No. 109 “Accounting for Income
Taxes”, which requires the asset and liability approach for financial
accounting and reporting for income taxes. Under this approach, deferred income
taxes are provided for the estimated future tax effects attributable to
temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, and for the expected future tax
benefits from loss carry-forwards and provisions, if any. Deferred tax assets
and liabilities are measured using the enacted tax rates expected in the years
of recovery or reversal and the effect from a change in tax rates is recognized
in the statement of operations and comprehensive income in the period of
enactment. A valuation allowance is provided to reduce the amount of deferred
tax assets if it is considered more likely than not that some portion of, or all
of the deferred tax assets will not be realized.
 
 Concentrations of credit
risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and cash equivalents, and trade and
other receivables.  As of December 31, 2009 and 2008, substantially
all of the Company’s cash and cash equivalents were held by major financial
institutions located in the PRC, which management believes are of high credit
quality.  With respect to trade receivables, the Company extends
credit based on an evaluation of the customer’s financial
condition.  The Company generally does not require collateral for
trade and other receivables and maintains an allowance for doubtful accounts of
trade and other receivables.
 
 Foreign currencies
translation
 
 The
reporting currency of the Company is the United States dollar (“U.S.
dollars”).  Transactions denominated in currencies other than U.S.
dollar are calculated at the average rate for the period.  Monetary
assets and liabilities denominated in currencies other than U.S. dollar are
translated into U.S. dollar at the rates of exchange ruling at the balance sheet
date.  The resulting exchange differences are recorded in the other
expenses in the statement of operations and comprehensive income.
  Foreign currencies
translation (cont’d)
 
 The
Company’s subsidiary maintains its books and records in its local currency, the
Renminbi Yuan (“RMB”), which is functional currency as being the primary
currency of the economic environment in which its operations are
conducted.  In general, for consolidation purposes, the Company
translates the subsidiary’s assets and liabilities into U.S. dollars using the
applicable exchange rates prevailing at the balance sheet date, and the
statement of operations is translated at average exchange rates during the
reporting period.  Adjustments resulting from the translation of the
subsidiary’s financial statements are recorded as accumulated other
comprehensive income.
 
 Comprehensive income
(loss)
 
 SFAS
No. 130, “Reporting
Comprehensive Income”, establishes standards for reporting and display of
comprehensive income, its components and accumulated
balances.  Comprehensive income as defined includes all changes in
equity during the year from non-owner sources. Accumulated comprehensive income,
as presented in the accompanying statement of stockholders’ equity consists of
changes in unrealized gains and losses on foreign currency
translation.  This comprehensive income is not included in the
computation of income tax expense or benefit.
 
 Fair value of financial
instruments
 
 The
Company values its financial instruments as required by SFAS No. 107, “Disclosures about Fair Value of
Financial Instruments”.  The estimated fair value amounts have
been determined by the Company, using available market information and
appropriate valuation methodologies.
 
 The
estimates presented herein are not necessarily indicative of amounts that the
Company could realize in a current market exchange.
 
 The
Company’s financial instruments primarily include cash and cash equivalents,
accounts receivable, inventories, prepayment, accounts payable, other payables
and accrued liabilities.
 
 As of the
balance sheet date, the estimated fair values of financial instruments were not
materially different from their carrying values as presented due to short
maturities of these instruments.
 
 Recently issued accounting
pronouncements
 
 FASB Accounting Standards
Codification
 (Accounting
Standards Update (“ASU”) 2009-01)
  In
June 2009, FASB approved the FASB Accounting Standards Codification (“the
Codification”) as the single source of authoritative nongovernmental GAAP. All
existing accounting standard documents, such as FASB, American Institute of
Certified Public Accountants, Emerging Issues Task Force and other related
literature, excluding guidance from the Securities and Exchange Commission
(“SEC”), have been superseded by the Codification. All other non-grandfathered,
non-SEC accounting literature not included in the Codification has become
nonauthoritative. The Codification did not change GAAP, but instead introduced a
new structure that combines all authoritative standards into a comprehensive,
topically organized online database. The Codification is effective for interim
or annual periods ending after September 15, 2009, and impacts the
Company’s financial statements as all future references to authoritative
accounting literature will be referenced in accordance with the Codification.
There have been no changes to the content of the Company’s financial statements
or disclosures as a result of implementing the Codification during the year
ended December 31, 2009.   As a result of the
Company’s
  19
 CHINA
LOGISTIC INC., AND SUBSIDIARY
 Notes
to Audited Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 
 2.           SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
 
 Recently issued accounting
pronouncements (cont’d)
 implementation
of the Codification during the year ended December 31, 2009, previous references
to new accounting standards and literature are no longer applicable. In the
current annual financial statements, the Company will provide reference to both
new and old guidance to assist in understanding the impacts of recently adopted
accounting literature, particularly for guidance adopted since the beginning of
the current fiscal year but prior to the Codification.
  Subsequent
Events
  (Included
in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously
SFAS No. 165 “Subsequent Events”)
  SFAS
No. 165 established general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before the financial
statements are issued or available to be issued (“subsequent events”). An entity
is required to disclose the date through which subsequent events have been
evaluated and the basis for that date. For public entities, this is the date the
financial statements are issued. SFAS No. 165 does not apply to subsequent
events or transactions that are within the scope of other GAAP and did not
result in significant changes in the subsequent events reported by the Company.
SFAS No. 165 became effective for interim or annual periods ending after
June 15, 2009 and did not impact the Company’s financial statements. The
Company evaluated for subsequent events through the issuance date of the
Company’s financial statements. No recognized or non-recognized subsequent
events were noted.
  Determination of the Useful
Life of Intangible Assets
  (Included
in ASC 350 “Intangibles – Goodwill and Other”, previously FSP SFAS No. 142-3
“Determination of the Useful Lives of Intangible Assets”)
  FSP SFAS
No. 142-3 amended the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under previously issued goodwill and intangible
assets topics. This change was intended to improve the consistency between the
useful life of a recognized intangible asset and the period of expected cash
flows used to measure the fair value of the asset under topics related to
business combinations and other GAAP. The requirement for determining useful
lives must be applied prospectively to intangible assets acquired after the
effective date and the disclosure requirements must be applied prospectively to
all intangible assets recognized as of, and subsequent to, the effective date.
FSP SFAS No. 142-3 became effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the
Company’s financial statements.
  Noncontrolling
Interests
  (Included
in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB No. 51”)
  SFAS
No. 160 changed the accounting and reporting for minority interests such
that they will be recharacterized as noncontrolling interests and classified as
a component of equity. SFAS No. 160 became effective for fiscal years
beginning after December 15, 2008 with early application prohibited. The
Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer
records an intangible asset when the purchase price of a noncontrolling interest
exceeds the book value at the time of buyout. Any excess or shortfall for
buyouts of noncontrolling interests in mature restaurants is recognized as an
adjustment to additional paid-in capital in stockholders’ equity. Any shortfall
resulting from the early buyout of noncontrolling interests will continue to be
recognized as a benefit in partner investment expense up to the initial amount
recognized at the time of buy-in. Additionally, operating losses can be
allocated to noncontrolling interests even when such
allocation results in a deficit balance (i.e., book value can go
negative).  The Company presents noncontrolling interests (previously
shown as minority interest) as a component of equity on its consolidated balance
sheets. Minority interest expense is no longer separately reported as a
reduction to net income on the consolidated income statement, but is instead
shown below net income under the heading “net income attributable to
noncontrolling interests.” The adoption of SFAS No. 160 did not have any
other material impact on the Company’s financial statements.
 
 Consolidation of Variable
Interest Entities – Amended
  (To be
included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB
Interpretation No. 46(R)”)
  SFAS
No. 167 amends FASB Interpretation No. 46(R) “Consolidation of
Variable Interest Entities regarding certain guidance for determining whether an
entity is a variable interest entity and modifies the methods allowed for
determining the primary beneficiary of a variable interest entity. The
amendments include: (1) the elimination of the exemption for qualifying
special purpose entities, (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is
necessary to reassess who should consolidate a variable-interest entity. SFAS
No. 167 is effective for the first annual reporting period beginning after
November 15, 2009, with earlier adoption prohibited. The Company will adopt
SFAS No. 167 in fiscal 2010 and does not anticipate any material impact on
the Company’s financial statements.
  Management
does not believe that any other recently issued, but not yet effective,
accounting standards or pronouncements, if currently adopted, would have a
material effect on the Company’s financial statements.
  3.
                SUPPLEMENTAL
      CASH FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the year ended December 31, 2009 and
2008 are summarized as follows:
 
 Cash paid
during the year ended December 31, 2009 and 2008 for interest and income
taxes:
 
 2009                      
2008
 Income
Taxes                                   $37,387                  
$ -0-
 Interest                                              $     
-0-                  
 $ -0-
  4.
                ACCOUNTS
      RECEIVABLE, NET
 
 The
majority of the Company’s sales are on open credit terms and in accordance with
terms specified in the contracts governing the relevant transactions. The
Company evaluates the need of an allowance for doubtful accounts based on
specifically identified amounts that management believes to be uncollectible. If
actual collections experience changes, revisions to the allowance may be
required. Based upon the aforementioned criteria, management has determined that
the allowances for doubtful accounts of $22,204 and $39,653 are required as of
December 31, 2009 and 2008, respectively.
 
 20
  CHINA
LOGISTIC INC., AND SUBSIDIARY
 Notes
to Audited Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 
 4.              ACCOUNTS
RECEIVABLE, NET (CON’T)
 
 
 December 31,
                  2009
                
                
                December 31, 2008Accounts
      receivable, gross
                
                $
                4,440,798
                
                
                $
                7,930,606Less:
      allowance for doubtful accounts
                
                
                (22,204
                )
                
                
                (39,653
                )Accounts
      receivable, net
                
                $
                4,418,594
                
                
                $
                7,890,953
 
 
 5.
                INVENTORIES
 
 December 31,
                  2009
                
                
                December 31, 2008Inventories
                
                $
                3,844,655
                
                
                $
                707,280
  There was
no provision for obsolete inventories recorded by the Company as of December 31,
2009 and 2008, respectively.
 
 6.
                SHORT-TERM
      INVESTMENT
 
 The
Company had a short-term investment of RMB 3,500,000, equivalent to
approximately $512,000, to a non-related company in March, 2009. The investment
was returned during the 4th
quarter of 2009.
 
 7.
                REVERSE
      STOCK SPLIT
 
 On
February 18, 2009, the Board of Directors of the Company adopted a resolution
approving a two hundred to one reverse split of our Common Stock. The reverse
split combines the Company’s outstanding Common Stock on the basis of 200
outstanding shares being changed to 1 outstanding share. Each shareholder’s
percentage ownership in the Company (and relative voting power) will remain
essentially unchanged as a result of the reverse split. The reverse split took
effect on April 3, 2009.
 
 The
statement of equity and the earnings per share numbers in the financial
statements have been restated per FASB 128 paragraph 134.
 
 8.
                COMMON
      STOCK
 
 (a)
                Common
      stock issued for the Exchange
 
 On April
29, 2009, the Company issued 50,000,000 shares of its common stock to the
stockholders of Chengkai to consummate the Exchange (see Note 1).
 
 The
Company’s issued and outstanding number of common stock immediately prior to the
Exchange was 245,026 (after taking into account the Reverse Split) shares, which
had been accounted for at its net book value at the time of the
Exchange.
 (b)
                Common
      stock issued for previous service
rendered
 
 On July
13, 2009, the Company issued 3,800,000 shares of common stock to its consultant
for business advisory services rendered in fiscal years 2008 and 2009. The fair
value of this stock issuance was determined using the fair value of the
Company’s common stock on the grant date, at a market quoted price of
$.27.
 
 (c)
                Common
      stock issued to settle loan from
shareholder
 
 On July
13, 2009, the Company issued 742,000 shares of its common stock to settle the
loan from shareholder of $58,120 and the loan from a third party of $16,000,
which were accrued expenses in connection with the Company’s overseas consulting
and advising fees, lawyer fees, and accounting fees from period to period, paid
by the shareholder or the third party out of the bank accounts in the United
States due to the strict laws and regulations imposed by the Chinese government
on out-going foreign currency wire transfers.
 
 The loans
from the shareholder or from the third party have the option to convert within
two years into common stock of the Company at the price of $.10 per
share.
 
 The fair
value of this stock issuance was determined using the fair value of the
Company’s common stock on the grant date, at a market quoted price of $.27. The
difference between the fair market value and the conversion price of $.10 per
share was recognized as loss on extinguishment of convertible debt.
 
 9.
                CONCENTRATION
      AND RISK
 
 (a)
                Major
      customers
 
 For the
year ended December 31, 2009 and 2008, 100% of the Company’s assets were located
in the PRC and 100% of the Company’s revenues and purchases were derived from
customers and vendors located in the PRC.
 
 The
Company had one customer that individually comprised 84% and 82% of net revenue
for the year ended December 31, 2009 and 2008, respectively.
 
 As of December 31,
2009
 Customers
                
                
                Revenues
                
                
                
                
                
                
                Accounts
                  ReceivableCustomer
      A
                
                
                $
                10,265,199
                
                
                
                84
                %
                
                
                $
                4,329,289Total:
                
                $
                10,265,199
                
                
                
                84
                %
                Total:
                
                $
                4,329,289
 
 As of December 31,
2008
 Customers
                
                
                Revenues
                
                
                
                
                
                
                Accounts
                  ReceivableCustomer
      A
                
                
                $
                13,365,290
                
                
                
                82
                %
                
                
                $
                7,785,309Total:
                
                $
                13,365,290
                
                
                
                82
                %
                Total:
                
                $
                7,785,309
 
  (b)   Credit
risk
 
 Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist principally of cash and trade accounts receivable. The
Company performs ongoing credit evaluations of its customers' financial
condition, but does not require collateral to support such
receivables.
 21
 
 CHINA
LOGISTIC INC., AND SUBSIDIARY
 Notes
to Audited Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 
 10.        GOING
CONCERN UNCERTAINTIES
  These
consolidated financial statements have been prepared assuming that Company will
continue as a going concern, which contemplates the realization of assets and
the discharge of liabilities in the normal course of business for the
foreseeable future.
 
 As of
December 31, 2009, the Company had an accumulated deficit of $1,068,060.  Management
has taken certain action and continues to implement changes designed to improve
the Company’s financial results and operating cash flows.  The actions
involve certain cost-saving initiatives and growing strategies, including (a)
reductions in headcount and corporate overhead expenses; and (b) expansion into
new market.  Management believes that these actions will enable the
Company to improve future profitability and cash flow in its continuing
operations through December 31, 2009.  As a result, the financial
statements do not include any adjustments to reflect the possible future effects
on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of the Company’s
ability to continue as a going concern.
 11.         INCOME
TAXES
 
 
 The
Company conducts all its operating business through its subsidiary in China. The
subsidiary is governed by the income tax laws of the PRC and do not have any
deferred tax assets or deferred tax liabilities under the income tax laws of the
PRC because there are no temporary differences between financial statement
carrying amounts and the tax bases of existing assets and liabilities. The
Company by itself does not have any business operating activities in the United
States and is therefore not subject to United States income tax.
 
 The
Company’s subsidiaries are governed by the Income Tax Law of the People’s
Republic of China (“PRC”) concerning Foreign Investment Enterprises and Foreign
Enterprises and various local income tax laws (the “Income Tax Laws”).
 Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law has
replaced the previous laws for Domestic Enterprises (“DEs”) and Foreign Invested
Enterprises (“FIEs”). The new standard EIT rate of 25% has replaced the 33% rate
previously applicable to both DEs and FIEs.
 
 Prior to
2008, under the Chinese Income Tax Laws, FIEs generally were subject to an
income tax at an effective rate of 33% (30% state income taxes plus 3% local
income taxes) on income as reported in their statutory financial statements
after appropriate tax adjustments unless the enterprise was located in specially
designated regions for which more favorable effective tax rates
apply.  Beginning January 1, 2008, China has unified the corporate
income tax rate on foreign invested enterprises and domestic enterprises. The
unified corporate income tax rate is 25%.
 
 Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amount used for federal and state income tax purposes.
 
 Utilization
of the net operating losses may be subject to certain annual limitations due to
changes in control. This may result in the expiration of net operating losses
before full utilization.
 
 The
Company is subject to income taxes on an entity basis, on income arising in, or
derived from the tax jurisdiction in which it is domiciled and operates. The
corporate accrued income taxes as of December 31, 2009 and 2008 were $7,805 and
$32,336, respectively.
 
 The
Company applies SFAS 109, “Accounting for Income Taxes”, which requires
recognition of deferred income tax liabilities and assets for the expected
future tax consequences of temporary differences between the income tax basis
and financial reporting basis of assets and liabilities. The provision for
income taxes consist of taxes currently due plus deferred taxes. Because the
Company has no operations within the United States, there is no provision for US
income taxes and there are no deferred tax amounts as of December 31, 2009 and
2008.
 
 The
charge for taxation is based on the results for the year as adjusted for items
that are non-assessable or disallowed. It is calculated using tax rates that
have been enacted or substantively enacted by the balance sheet date. Deferred
taxes are accounted for using the balance sheet liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the financial statements and the corresponding tax
basis used in the computation of assessable tax profit.  In principle,
deferred tax liabilities are recognized for all taxable temporary differences,
and deferred tax assets are recognized to the extent that it is probable that
taxable profit will be available against which deductible temporary differences
can be utilized.
 
 Deferred
taxes are calculated at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled.  Deferred
taxes are charged or credited in the income statement, except when they relate
to items credited or charged directly to equity, in which case the deferred
taxes are also recorded in equity. Deferred tax assets and liabilities are
offset when they relate to income taxes levied by the same taxation authority
and the Company intends to settle its current tax assets and liabilities on a
net basis.
 
 The
Company adopted FASB Interpretation 48, “Accounting for Uncertainty in Income
Taxes” (“FIN 48”), as of January 1, 2007. A tax position is recognized as a
benefit only if it is “more likely than not” that the tax position would be
sustained in a tax examination, with a tax examination being presumed to occur.
The amount recognized is the largest amount of tax benefit that is greater than
50% likely of being realized on examination. For tax positions not meeting the
“more likely than not” test, no tax benefit is recorded. The adoption of FIN 48
had no affect on the Company’s financial statements.
 
 Value
added tax (“VAT”)
 
 Enterprises
or individuals who sell commodities, engage in repair and maintenance or import
or export goods in the PRC are subject to a value added tax in accordance with
the PRC laws. The value added tax standard rate is 17% of the gross sales price.
A credit is available whereby VAT paid on the purchases of semi-finished
products or raw materials used in the production of the Company’s products can
be used to offset the VAT due on the sales of the products.
 22
 
 CHINA
LOGISTIC INC., AND SUBSIDIARY
 Notes
to Audited Consolidated Financial Statements
 For
the Years Ended December 31, 2009 and 2008
 (Stated
in US Dollars)
 
 12.         
SUBSEQUENT
EVENTS
  We evaluated subsequent events through
the date and time our financial statements were issued onApril 12, 2010.There are no subsequent
events through April 12, 2010.
    23
 
 ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
 
 None.
 
 ITEM 9A. CONTROLS AND
PROCEDURES
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our Chief Executive Officer and its Chief Financial
Officer (collectively, the “Certifying Officers”) are responsible for
maintaining our disclosure controls and procedures. The controls and procedures
established by us are designed to provide reasonable assurance that information
required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms.
 
 As of the
end of the period covered by this report, the Certifying Officers evaluated the
effectiveness of our disclosure controls and procedures. Based on the
evaluation, the Certifying Officers concluded that our disclosure controls and
procedures were effective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the applicable rules and forms, and that it is accumulated
and communicated to our management, including the Certifying Officers, as
appropriate to allow timely decisions regarding required
disclosure.
 
 The
Certifying Officers have also concluded, based on their evaluation of our
controls and procedures that as of December 31, 2009, our internal controls over
financial reporting are effective and provide a reasonable assurance of
achieving their objective.
 
 The
Certifying Officers have also concluded that there was no change in our internal
controls over financial reporting identified in connection with the evaluation
that occurred during our fourth fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
 
 ITEM
9A(T).CONTROLS
AND PROCEDURES
 
 (a) Conclusions
regarding disclosure controls and procedures. Disclosure controls and
procedures are the Company’s controls and other procedures that are designed to
ensure that information required to be disclosed by the Company in the reports
that the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
under the Exchange Act is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting.
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Exchange Act as of December 31, 2009,
and, based on their evaluation, as of the end of such period, the our disclosure
controls and procedures were effective as of the end of the period covered by
the Annual Report,
 
 (b) Management’s
Report On Internal Control Over Financial Reporting. It is management’s
responsibilities to establish and maintain adequate internal controls over the
Company’s financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a
process designed by, or under the supervision of, the issuer’s principal
executive and principal financial officers and effected by the issuer’s
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
 
 •           Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the issuer;
and
 
 •           Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the issuer are being
made only in accordance with authorizations of management of the issuer;
and
 
 •           Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the issuer’s assets that could have a
material effect on the financial statements.
 
 As of the
end of the period covered by the Annual Report, an evaluation was carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our internal control over financial reporting.
 
 Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework.
 
 Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, internal controls over financial
reporting were effective as of the end of the period covered by the
Report.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Because of the inherent
limitations of internal control, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
 
 This
Annual Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Annual
Report.
 
 (c) Changes in
internal control over financial reporting. There were no changes in our
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 24
 
 ITEM 9B. OTHER
INFORMATION
 
 None.
  PART
III
 
 ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT
 
 Directors
and Executive Officers
 
 Identification of Directors
and Executive Officers and Significant Employees
 
 The
following table identifies all of our current executive officers, directors and
significant employees. The officers and directors will serve until the next
annual meeting of the stockholders, or until their successors are elected or
appointed and qualified, or they resign or are terminated.
 
 Name
              Age
              Position
              CommencedWanwen
      Su
              37
              CEO,
      President
              2/17/2009*Weiheng
      Cai
              37
              Independent
      Director
              2/17/2009Yanfen
      Su
              59
              Independent
      Director
              2/26/2009
 
 All
executive officers are elected by the Board and hold office until the next
Annual Meeting of stockholders and until their successors are elected and
qualify.
 
 * Ms.
Wanwen Su was appointed to the board effective as of February 17, 2009, the
effective date of the resignation of Mr. Ming Lei as former President and
CEO.
 
 Business Experience and
Personal Background
 
 Ms.
Wanwen Su graduated from Guangzhou Jinan University with a degree in Accounting.
She previously worked as a manager of Burberry Guangzhou. She founded Guangzhou
Chengkai Logistics Co. Ltd in 2005. She has experience in marketing and sales of
luxury goods and has established herself well in the logistics
business
 
 Mr.
Weiheng Cai,age
37, has worked as a technical consultant for the past 5 years both independently
and for Conceptual Management, Inc., his wholly-owned company. Mr. Cai primarily
performs his services from the Peoples Republic of China where he resides. Mr.
Cai performs website development services for emerging companies. He has a BS in
Business Administration from the University of North Carolina.
 
 Ms.
Yanfen Su, 59 years old, graduated from Zhongshan University with a degree in
Journalism. She has decades of management experience, and previously worked
at Guangzhou Pearl River Group as an Administrative Manager. Ms.Su is
currently retired.
 
 Promoters
and Control Persons
 
 These
directors may be considered control persons of us within the meaning of the
rules promulgated under the Securities Act of 1933, as amended, by virtue of his
and her share ownership, his and her ability to influence our activities, and
his positions as our officers and directors.
 
 Family
Relationships
 
 Ms.
Yanfen Su is the mother of Ms. Wanwen Su.
 
 Legal
Proceedings
 
 No
officer, director, or persons nominated for such positions and no promoter or
significant employee of ours has been involved in legal proceedings that would
be material to an evaluation of our management.
 
 Audit
Committee
 
 We do not
have a separately designated standing audit committee. Pursuant to Section
3(a)(58)(B) of the Exchange Act, the entire Board of Directors acts as an audit
committee for the purpose of overseeing the accounting and financial reporting
processes, and audits of our financial statements. The Commission recently
adopted new regulations relating to audit committee composition and functions,
including disclosure requirements relating to the presence of an "audit
committee financial expert" serving on its audit committee. In connection with
these new requirements, our Board of Directors examined the Commission's
definition of "audit committee financial expert" and concluded that we do not
currently have a person that qualifies as such an expert. We have had minimal
operations for the past two (2) years. Presently, there are only three (3)
directors serving on our Board, and us are not in a position at this time to
attract, retain and compensate additional directors in order to acquire a
director who qualifies as an "audit committee financial expert", but we intend
to retain an additional director who will qualify as such an expert, as soon as
reasonably practicable. While neither of our current directors meets the
qualifications of an "audit committee financial expert", each of our directors,
by virtue of his past employment experience, has considerable knowledge of
financial statements, finance, and accounting, and has significant employment
experience involving financial oversight responsibilities. Accordingly, we
believe that our current directors capably fulfill the duties and
responsibilities of an audit committee in the absence of such an
expert.
 
 Code
of Ethics
 
 We have
adopted a code of ethic (the "Code of Ethics") that applies to our principal
chief executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions. A draft of the
Code of Ethics is in Exhibit 14.1 hereto. The Code of Ethics is being designed
with the intent to deter wrongdoing, and to promote the following:
 
 •                      Honest
and ethical conduct, including the ethical handling of actual or apparent conflicts
of interest between personal and professional relationships
 •                      Full,
fair, accurate, timely and understandable disclosure in reports and documents
that a small business issuer files with, or submits to, the Commission and in
other public communications made by the small business issuer
 •                      Compliance
with applicable governmental laws, rules and regulations
 •                      The
prompt internal reporting of violations of the code to an appropriate person or persons
identified in the code
 •                      Accountability
for adherence to the code
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each
person who is the beneficial owner of more than 10% of the common stock of a
company that files reports pursuant to Section 12 of the Exchange Act, are
required to report the ownership of such common stock, options, and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have
been established, and we are required to report, in this Form 10-K, any failure
to comply therewith. We believe that all of these filing requirements were
satisfied by our executive officers, directors and by the beneficial owners of
more than 10% of our common stock. In making this statement, hawse have relied
solely on copies of any reporting forms received by it, and upon any written
representations received from reporting persons that no Form 5 (Annual Statement
of Changes in Beneficial Ownership) was required to be filed under applicable
rules of the Commission.
 
 25
 
 ITEM 11. EXECUTIVE
COMPENSATION
 
 The
following table sets forth certain information regarding the annual and
long-term compensation for services in all capacities to us for the prior fiscal
years ended December 31, 2009, 2008, and 2007, of those persons who were either
the chief executive officer during the last completed fiscal year or any other
compensated executive officers as of the end of the last completed fiscal year,
and whose compensation exceeded $100,000 for those fiscal periods.
  SUMMARY COMPENSATION
TABLE
 Annual
      CompensationAwards
              
              PayoutsName
      and Principal
                Position
              Year
              
              Salary
                ($)
              
              
              Bonus
                ($)
              
              Other
      Annual Compensation
                ($)
              Restricted
      Stock Award(s)
                ($)
              
              Securities
      Underlying Options
                SARs(#)
              
              LTIP
      payouts
                ($)
              
              All
      Other Compensation
                ($)Wanwen
      Su, President, CEO & CFO
              2009
              
              
              ---
              
              
              
              ---
              
              ---
              ---
              
              
              ---
              
              ---
              
              
              ---
              
              ---Ming
      Lei, Former President
              2008
                2007
                2006
              
              
              ---
              
              
              
              ---
              
              ---
              ---
              
              
              ---
              
              ---
              
              
              ---
              
              ---Wang,
      Xiao Jun, Former CFO
              2008
                2007
                2006
              
              
              ---
              
              
              
              ---
              
              ---
              ---
              
              
              ---
              
              ---
              
              
              ---
              
              ---Yanfen Su, Independent
      Director
              2009
              
              
              ---
              
              
              
              ---
              
              ---
              ---
              
              
              ---
              
              ---
              
              
              ---
              
              ---Weiheng
      Cai, Independent Director
              2009
              
              
              ---
              
              
              
              ---
              
              ---
              ---
              
              
              ---
              
              ---
              
              
              ---
              
              ---
  ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER
MATTERS.
 
 The
following tables set forth the ownership, as of April 14, 2010, of our common
stock (a) by each person known by us to be the beneficial owner of more than 5%
of our outstanding common stock, and (b) by each of our directors, by all
executive officers and our directors as a group. To the best of our knowledge,
all persons named have sole voting and investment power with respect to such
shares, except as otherwise noted.
  Security
Ownership of Certain Beneficial Owners
  Name
      and Address of Beneficial Owner(1)
              
              Amount
      and
                Nature
      of
                Beneficial
                Ownership
              
              Percentage
      of
                Preferred
      Stock(2)Ms.
      Wanwen Su
                Rm
      910 Yi An Guang Chang
                N0
      33 Jian She Liu Ma Lu
                Guangzhou,
      China
              
              
              2,636,000
              
              
              
              80%Mr.
      Ming Lei
                E
      Pang Gong Site,
                44
      Hong Guang Road
                Xi
      An, P.R. China 710068659,000
              
              
              
              20%All
      directors and executive officers as a group (1 person)
              
              
              2,636,000
              
              
              
              80%
 
 (1)           Unless
otherwise indicated in the footnotes to the table, each shareholder shown on the
table has sole voting and investment power with respect to the shares
beneficially owned by him or it.
 
 (2)           Based
on 3,295,000 shares of Preferred Stock issued and outstanding.
 
 Name
      and Address of Beneficial Owner(1)
              
              Amount
      and
                Nature
      of
                Beneficial
                Ownership
              
              Percentage
      of
                Common
      Stock(2)Ms.
      Wanwen Su
                Rm
      910 Yi An Guang Chang
                N0
      33 Jian She Liu Ma Lu
                Guangzhou,
      China
              
              
              98,942,000(4)
              
              
              
              72.14%Yanxiong
      Ma
                Rm
      204,C1 Jin Gui Yuan, No.1000 Jie
                Fang
      Bei Road
                Guangzhou,
      P.R. China
              
              
              10,000,000
              
              
              
              7.29%Mr.
      Ming Lei
                E
      Pang Gong Site,
                44
      Hong Guang Road
                Xi
      An, P.R. China 710068
              
              
              16,487,405(4)
              
              
              
              12.02%All
      directors and executive officers as a group (1 person)
              
              
              98,942,000
              
              
              
              72.14%
 (1)           Unless
otherwise indicated in the footnotes to the table, each shareholder shown on the
table has sole voting and investment power with respect to the shares
beneficially owned by him or it.
 
 (2)           Based
on 3,295,000 shares of Preferred Stock outstanding with a conversion ratio of 1
for 25 and based on 137,162,026 shares of common stock issued and outstanding
after the preferred stock is converted.
 
 (3)           Based
on 2,636,000 shares of preferred stock with a conversion ratio of 1 for 25 and
33,042,000 shares of common stock already issued and outstanding for Ms. Wanwen
Su.
 
 (4)           Based
on 659,000 shares of preferred stock with a conversion ratio of 1 for 25 and
12,405 shares of common stock already issued and outstanding for Mr. Ming
Lei.
 Change in
Control Arrangements
 
 On
February 17, 2009, the Company entered into a transfer & change of control
agreement with Ms. Wanwen Su (“Ms. Su”) and Mr. Ming Lei (“Mr. Lei”), pursuant
to which, Ms. Su acquired from Mr. Lei 2,636,000 shares of preferred stock of
the Company and received a “controlling interest” in the Company.
 
 On
February 18, 2009, our Board of Directors adopted a resolution approving a two
hundred to one reverse split of our issued and outstanding Common Stock. The
reverse split combined our outstanding Common Stock on the basis of 200
outstanding shares being changed to 1 outstanding share. Each shareholder’s
percentage ownership in the Company (and relative voting power) remained
essentially unchanged as a result of the reverse split. The reverse split was
effective on April 3, 2009.
 
 On
February 18, 2009, a Plan of Exchange (the “Exchange”) was executed between and
among the Company, Chengkai Logistics Co Ltd., a corporation organized under the
laws of the Peoples’ Republic of China (“Chengkai”), and the shareholders of
Chengkai (“Chengkai Shareholders”). The Exchange was consummated on May 19,
2009, pursuant to which 50,000,000 (after taking into account the Reverse Split)
shares of the Company’s common stock were issued to the stockholder of Chengkai.
Thereafter, Chengkai became the Company’s wholly-owned subsidiary.
 
 On April
23, 2009, China Logistics, Inc. (F/K/A China International Tourism Holdings,
Ltd.), entered into an Agreement (the “Agreement”) between and among the
Registrant, Shanxi Kai Da Lv You Gu Wen Xian Gong Si, a corporation organized
under the laws of the Peoples’ Republic of China (“Kai Da”), and Mr. Lei Ming,
an individual (“Buyer”).
 
 Pursuant
to the terms of the Agreement, the Buyer acquired 100% of the total assets of
$407,616 and total liabilities of $481,275 (collectively “Kai Da Assets and
Liabilities) from the Registrant for the payment of good and valuable
consideration of $100.00 (the “Purchase Price”). As a result of the transactions
consummated at the closing, the purchase and issuance gave the former president
a 'controlling interest' in Kai Da, and Kai Da was no longer a wholly-owned
subsidiary of the Company.
 
 On August
10, 2009, the Company changed its corporate name from China International
Tourism Holdings, Limited to China Logistics Inc. and believed that the new
corporate name would provide a more accurate description of the Company’s
current operations and be consistent with the Company’s marketing efforts in the
logistic industry. Accordingly, the ticker symbol of the Company’s Common Stock
was changed to “CLGZ”.
 
 26
 
 
 ITEM 13.CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
 Other than as disclosed below, none of
our present directors, officers or principal shareholders, nor any family member
of the foregoing, nor, to the best of our information and belief, any of our
former directors, senior officers or principal shareholders, nor any family
member of such former directors, officers or principal shareholders, has or had
any material interest, direct or indirect, in any transaction, or in any
proposed transaction which has materially affected or will materially affect
us.
 
 ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES
 
 The
following table represents the aggregate fees billed for professional audit
services rendered to the independent auditor, Lake & Associates CPA’s LLC
(“Lake”) for our audit of the annual financial statements for the years ended
December 31, 2009 and 2008. Audit fees and other fees of auditors are listed as
follows:
 
 Year Ended December 31
              
              2009
              
              
              
              2008Lake
              
              
              
              LakeAudit
      Fees (1)
              
              $
              27,500
              
              (2)
              
              $
              19,000
              
              (3)Audit-Related
      Fees (4)
              
              
              --
              
              
              
              
              --Tax
      Fees (5)
              
              
              --
              
              
              
              
              --All
      Other Fees (6)
              
              
              --
              
              
              
              
              --Total
      Accounting Fees and Services
              
              $
              27,500
              
              
              
              $
              19,000
 
 (1)
              Audit Fees. These are
      fees for professional services for the audit of our annual financial
      statements, and for the review of the financial statements included in our
      filings on Form 10-Q, and for services that are normally provided in
      connection with statutory and regulatory filings or
      engagements.
 
 (2)
              The
      amounts shown in 2009 relate to (i) the audit of our annual financial
      statements for the fiscal year ended December 31, 2009, and (ii) the
      review of the financial statements included in our filings on Form 10-Q
      for the quarters of 2010.
 
 (3)
              The
      amounts shown in 2008 relate to (i) the audit of our annual financial
      statements for the fiscal year ended December 31, 2008, and (ii) the
      review of the financial statements included in our filings on Form 10-Q
      for the quarters of 2009.
 
 (4)
              Audit-Related Fees.
      These are fees for the assurance and related services reasonably related
      to the performance of the audit or the review of our financial
      statements.
 
 (5)
              Tax Fees. These are
      fees for professional services with respect to tax compliance, tax advice,
      and tax planning.
 
 (6)
              All Other Fees. These
      are fees for permissible work that does not fall within any of the other
      fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax
      Fees.
 
 
 Pre-Approval
Policy for Audit and Non-Audit Services
 
 We do not
have a standing audit committee, and the full Board performs all functions of an
audit committee, including the pre-approval of all audit and non-audit services
before we engage an accountant. All of the services rendered by Lake &
Associates CPA’s LLC were pre-approved by our Board of Directors.
 
 We are
presently working with its legal counsel to establish formal pre-approval
policies and procedures for future engagements of our accountants. The new
policies and procedures will be detailed as to the particular service, will
require that the Board or an audit committee thereof be informed of each
service, and will prohibit the delegation of pre-approval responsibilities to
management. It is currently anticipated that our new policy will provide (i) for
an annual pre-approval, by the Board or audit committee, of all audit,
audit-related and non-audit services proposed to be rendered by the independent
auditor for the fiscal year, as specifically described in the auditor's
engagement letter, and (ii) that additional engagements of the auditor, which
were not approved in the annual pre-approval process, and engagements that are
anticipated to exceed previously approved thresholds, will be presented on a
case-by-case basis, by the President or Controller, for pre-approval by the
Board or audit committee, before management engages the auditors for any such
purposes. The new policy and procedures may authorize the Board or audit
committee to delegate, to one or more of its members, the authority to
pre-approve certain permitted services, provided that the estimated
fee for any such service does not exceed a specified dollar amount (to be
determined). All pre-approvals shall be contingent on a finding, by the Board,
audit committee, or delegate, as the case may be, that the provision of the
proposed services is compatible with the maintenance of the auditor's
independence in the conduct of its auditing functions. In no event shall any
non-audit related service be approved that would result in the independent
auditor no longer being considered independent under the applicable rules and
regulations of the Securities and Exchange Commission.
 
 (a) On
December 31, 2009, our Chief Executive Officer and Chief Financial Officer made
an evaluation of our disclosure controls and procedures. In our opinion, the
disclosure controls and procedures are adequate because the systems of controls
and procedures are designed to assure, among other items, that 1) recorded
transactions are valid; 2) valid transactions are recorded; and 3) transactions
are recorded in the proper period in a timely manner to produce financial
statements which present fairly the financial condition, results of operations
and cash flows for the respective periods being presented. Moreover, the
evaluation did not reveal any significant deficiencies or material weaknesses in
our disclosure controls and procedures.
 
 (b) There
have been no significant changes in our internal controls or in other factors
that could significantly affect these controls since the last
evaluation.
 
 PART
IV
 
 ITEM 15.EXHIBITS, FINANCIAL
STATEMENT SCHEDULES
 
 (a)
              Financial
      Statements
 
 1. The
following financial statements of China International Tourism Holdings, Ltd. are
included in Part II, Item 8:
 
 Report of
Independent Registered Public Accounting Firm Balance Sheet at December 31,
2009
 Statements
of Operations - for the years endedDecember 31, 2009 and
2008
 Statements
of Cash Flows - for the years ended December 31, 2009 and 2008
 Statements of Stockholders’ Equity -
for the years ended December 31, 2009 and
2008
 Notes to Financial
Statements
 
 2.
Exhibits
 
 14.1.   Code
of Ethics
 31.1.   Rule
13a-14(a)/15d-14(a) Certifications of Chief Executive Officer and Chief
Financial Officer
 32.1.   Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
 
 (b)
              Reports
      on Form 8-K
 
 (1)           On
May 20, 2009, we filed an amendment on Form 8-K/A to amend the current report on
Form 8-K filed on April 17, 2009. We also announced that on April 23, 2009, the
Company entered into an Agreement between and among the Registrant, Shanxi Kai
Da Lv You Gu Wen Xian Gong Si, a corporation organized under the laws of the
Peoples’ Republic of China (“Kai Da”), and Mr. Lei Ming, an individual, pursuant
to which Kai Da was no longer a wholly-owned subsidiary of the
Company.
 
 (2)   On
April 17, 2009, we filed a current report on Form 8-K to announce that the
Company entered into a Plan of Exchange (the “Agreement”) between and among the
Company, Chengkai Logistics Co Ltd., a corporation organized under the laws of
the Peoples’ Republic of China (“Chengkai”), the shareholders of Chengkai
(“Chengkai Shareholders”) and Ms. Wanwen Su, our President and Director (“Ms.
Su”), pursuant to which Chengkai became a wholly-owned subsidiary of the
Company.
 
 (3)           On
March 4, 2009, we filed a current report on Form 8-K to announce the appointment
of Ms. Yanfen Su as an Independent Director to the Board of
Directors.
 
 (4)           On
March 3, 2009, we filed a current report on Form 8-K to announce
that  the Board of Directors of the Company adopted a resolution
approving a two hundred to one reverse split of our issued and outstanding
Common Stock. The reverse split combines our outstanding Common Stock on the
basis of 200 outstanding shares being changed to 1 outstanding share. Each
shareholder’s percentage ownership in the Company (and relative voting power)
will remain essentially unchanged as a result of the reverse split.
 
 (5)   On
February 17, 2009, we filed a current report on Form 8-K to announce the Company
entered into a transfer & change of control agreement with Ms. Wanwen Su
(the “Buyer”) and Mr. Ming Lei (the “Seller). Pursuant to the terms and
conditions of the Agreement, the Buyer acquired from the Seller 2,636,000 shares
of preferred stock of the Registrant. We also announced the appointment of Ms.
Wanwen Su as President and Chairman of the Board, and Mr. Weiheng Cai as an
Independent Director to the Board of Directors.
  27
 
 SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned majority of the Board of Directors, thereunto duly
authorized.
 
 CHINA LOGISTICS
      INC.Date:
      April 14, 2010
              
              /s/
      Wanwen SuWanwen
      SuPresident,
      Chief Executive Officer, Chief Financial Officer and
    Director
 
 Exhibits
 
 14.1.   Code
of Ethics
 31.1.   Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive
Officer and Chief Financial Officer
 32.1.   Section 1350 Certifications of Chief Executive Officer and
Chief Financial Officer