U.S.
Securities and Exchange Commission
 Washington,
D.C. 20549
 
 FORM
10-Q
  [X]           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
 For the Quarterly Period Ended
September 30, 2009
 
 
 [   ]            TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
 For
the Transition Period From ____to _____
 
 Commission
File Number
 001-10559
 
 CHINA
LOGISTICS, INC.
 
 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)
 
 Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 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 Date File required to be
submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes [ ] No [ ]
 
  Indicate
by check mark whether the registrant is a large accelerated 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
              þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes [  ] No [X]
 
 Number of
shares of common stock outstanding as of November 16,
2009:      54,787,026
 Number of
shares of preferred stock outstanding as of November 16,
2009:       3,295,000
 
 
 CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
 The
discussion contained in this 10-Q 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-Q. 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-Q 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
      CONTENTSPART
      I. FINANCIAL INFORMATIONITEM
      1. CONSOLIDATED FINANCIAL STATEMENTS
              2ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
              8ITEM
      3. QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              10ITEM
      4. CONTROLS AND PROCEDURES
                
                ITEM
      4T. CONTROLS AND PROCEDURES
              10
                
                10PART
      II. OTHER INFORMATIONITEM
      1. LEGAL PROCEEDINGS
              11ITEM
      1A. RISK FACTORS
              11ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
              11ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
              11ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
              11ITEM
      5. OTHER INFORMATION
              11ITEM
      6. EXHIBITS
              11SIGNATURES
              12
 
 Table of Contents
 
 ITEM 1.UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
 
 INDEX
TOCHINA LOGISTICS,
INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 
 Unaudited
Consolidated Balance
Sheets                                                                                                                                                                                                                        
3
 
 Unaudited
Consolidated Statements of
Operations                                                                                                                                                                                                      
4
 
 Unaudited
Consolidated Statements of Cash
Flows                                                                                                                                                                                                      5
 
 Notes to
Unaudited Consolidated Financial
Statements                                                                                                                                                                                              
6
  2
 Table of Contents
   CHINA
      LOGISTICS INC. AND SUBSIDIARYUnaudited
      Consolidated Balance SheetsAs
      of September 30, 2009 and December 31, 2008ASSETS
                
                September
      30, 2009
                
                
                December
      31, 2008(Unaudited)*CURRENT
      ASSETSCash
      and cash equivalents
                
                $
                660,673
                
                
                $
                531,297Accounts
      receivable, net
                
                
                6,730,371
                
                
                
                7,890,953Inventory
                
                
                388,166
                
                
                
                707,280Prepaid
      expenses
                
                
                138,446
                
                
                
                314,195Other
      receivables
                
                
                139,302
                
                
                
                113,302Short
      term investment
                
                
                512,520
                
                
                
                -TOTAL
      CURRNET ASSETS
                
                
                8,569,478
                
                
                
                9,557,027FIXED
      ASSETSProperty,
      plant, and equipment
                
                
                47,314
                
                
                
                21,927Accumulated
      depreciation
                
                
                (11,109
                )
                
                
                (8,355
                )NET
      FIXED ASSETS
                
                
                36,205
                
                
                
                13,572TOTAL
      ASSETS
                
                $
                8,605,683
                
                
                $
                9,570,599LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                
                $
                6,854,421
                
                
                $
                7,612,304Other
      payables and accured expenses
                
                
                244,208
                
                
                
                61,852Other
      payables-related party
                
                
                34,158
                
                
                
                496,928Received
      in advance
                
                
                231,610
                
                
                
                113,915Tax
      payable
                
                
                65,697
                
                
                
                114,385TOTAL
      CURRENT LIABILITIES
                
                
                7,430,094
                
                
                
                8,399,385TOTAL
      LIABILITIES
                
                $
                7,430,094
                
                
                $
                8,399,385COMMITMENTS
      AND CONTINGENCIESRedeemable
      preferred stock (par value $.01, 5,000,000 Shares
                
                
                32,950
                
                
                
                32,950authorized,
      3,295,000 shares issued and outstanding as ofSeptember
      30, 2009 and December 31, 2008, respectivelySTOCKHOLDERS'
      EQUITYCommon
      stock (par value $.0001, 250,000,000 shares authorized,
                
                
                5,478
                
                
                
                5,02454,787,026
      and 50,245,026 shares issued and outstanding as ofSeptember
      30, 2009 and December 31, 2008, respectivelyAdditional
      paid in capital
                
                
                2,146,261
                
                
                
                999,029Statutory
      reserves
                
                
                850
                
                
                
                850Accumulated
      other comprehensive income
                
                
                134,154
                
                
                
                135,176Retained
      earnings (deficit)
                
                
                (1,144,104
                )
                
                
                (1,815
                )TOTAL
      STOCKHOLDERS' EQUITY
                
                $
                1,142,639
                
                
                $
                1,138,264TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                8,605,683
                
                
                $
                9,570,599*
      The consolidated balance sheet as of December 31, 2008 retroactively
      reflected the reverse merger with Cheng KaiThe
      accompanying notes are an integral part of these financial
      statements.
  3
 Table of Contents
   CHINA
      LOGISTICS INC. AND SUBSIDIARYUnaudited
      Consolidated Statements of OperationsFor
      the Three and Nine Months ended September 30, 2009 and
2008For
      the Three Months Ended
                
                
                For
      the Nine Months EndedSeptember
      30, 2009
                
                
                September
      30, 2008
                
                
                September
      30, 2009
                
                
                September
      30, 2008RevenuesSales
                
                $
                7,693,576
                
                
                $
                687,684
                
                
                $
                9,764,023
                
                
                $
                6,699,746Cost
      of sales
                
                
                7,330,202
                
                
                
                354,527
                
                
                
                9,127,224
                
                
                
                5,998,471Gross
      profits
                
                
                363,374
                
                
                
                333,157
                
                
                
                636,799
                
                
                
                701,275Operating
      expensesSelling
      General and Administrative
                
                
                299,240
                
                
                
                185,454
                
                
                
                582,946
                
                
                
                495,060Stock
      based compensation
                
                
                1,026,000
                
                
                
                -
                
                
                
                1,026,000
                
                
                
                -Total
      operating expenses
                
                
                1,325,240
                
                
                
                185,454
                
                
                
                1,608,946
                
                
                
                495,060Income
      (Loss) from Operations
                
                
                (961,866
                )
                
                
                147,703
                
                
                
                (972,147
                )
                
                
                206,215Other
      income (expenses)Non-operating
      income
                
                
                849
                
                
                
                -1431
                
                
                
                849
                
                
                
                (1,431
                )Interest
      income (expenses)
                
                
                (33,743
                )
                
                
                47,307
                
                
                
                (35,694
                )
                
                
                47,138(Loss)
      on extinguishment of convertible debt
                
                
                (126,220
                )
                
                
                -
                
                
                
                (126,220
                )
                
                
                -Total
      other income (loss)
                
                
                (159,114
                )
                
                
                45,876
                
                
                
                (161,065
                )
                
                
                45,707Income
      (loss) from Operations
                
                
                (1,120,980
                )
                
                
                193,579
                
                
                
                (1,133,212
                )
                
                
                251,922Income
      taxes
                
                
                7,399
                
                
                
                1,584
                
                
                
                12,821
                
                
                
                7,757Net
      Income (Loss)
                
                
                (1,128,379
                )
                
                
                191,995
                
                
                
                (1,146,033
                )
                
                
                244,165Other
      comprehensive income (loss)Foreign
      currency translation gain (loss)
                
                
                505
                
                
                
                83,571
                
                
                
                (1,022
                )
                
                
                78,934Comprehensive
      income (loss)
                
                $
                (1,127,874
                )
                
                $
                275,566
                
                
                $
                (1,147,055
                )
                
                $
                323,099Earnings
      (loss) per shareBasic
                
                $
                (0.02
                )
                
                $
                0.01
                
                
                $
                (0.04
                )
                
                $
                0.01Weighted
      average number of shares outstandingBasic
                
                
                54,130,959
                
                
                
                50,245,026
                
                
                
                29,503,300
                
                
                
                50,245,026The
      accompanying notes are an integral part of the financial
      statements
  4
 Table of Contents
   CHINA
      LOGISTICS INC. AND SUBSIDIARYUnaudited
      Consolidated Statements of Cash FlowsFor
      the Nine Months ended September 30, 2009 and 2008For
      the Nine Months EndedSeptember
      30, 2009
                
                
                September
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                
                $
                (1,146,033
                )
                
                $
                244,164Common
      stock issued for services rendered and expensed
                
                
                1,026,000
                
                
                
                -Common
      stock issued for extinguishment of debt
                
                
                126,220
                
                
                
                -Adjustments
      to reconcile net income (loss) tonet
      cash (used in) operating activities:Depreciation
                
                
                2,760
                
                
                
                2,787Accounts
      receivable ,trade
                
                
                1,153,105
                
                
                
                160,658Other
      receivable
                
                
                (126,725
                )
                
                
                106,526Prepaid
      expense
                
                
                175,391
                
                
                
                21,341Inventory
                
                
                318,342
                
                
                
                263,764Accounts
      payable
                
                
                (750,840
                )
                
                
                (3,285,054
                )Tax
      payable
                
                
                (44,821
                )
                
                
                73,874Other
      payable
                
                
                129,043
                
                
                
                1,482Others
                
                
                267,114
                
                
                
                138,103NET
      CASH (USED IN) OPERATING ACTIVITIES
                
                
                1,129,554
                
                
                
                (2,272,356
                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Short-term
      investment
                
                
                (512,278
                )
                
                
                -Purchase
      of property, plant, and equipment
                
                
                (25,394
                )
                
                
                -NET
      CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
                
                
                (537,672
                )
                
                
                -CASH
      FLOWS FROM FINANCING ACTIVITIES:(Repayment)
      due to Shareholders
                
                
                (462,116
                )
                
                
                63,035NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                (462,116
                )
                
                
                63,035FOREIGN
      CURRENCY TRANSLATION ADJUSTMENT
                
                
                (406
                )
                
                
                121,341NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                129,360
                
                
                
                (2,087,980
                )CASH
      AND CASH EQUIVALENTS:Beginning
      of period
                
                
                531,313
                
                
                
                2,482,779End
      of period
                
                $
                660,673
                
                
                $
                394,799Supplemental
      disclosure of cash flow information:Cash
      paid for income taxes
                
                $
                6,739
                
                
                $
                7,887Cash
      paid for interest
                
                $
                -
                
                
                $
                -Non-cash
      transactions during the period:Common
      stock issued for services rendered and expensed
                
                $
                1,026,000
                
                
                $
                -Common
      stock issued for extinguishment of debt
                
                $
                126,220
                
                
                $
                -The
      accompanying notes are an integral part of these financial
      statements.
  5
 Table of Contents
 CHINA
LOGISTICS INC. AND SUBSIDIARY
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three and Nine Months Ended September 30, 2009 and 2008
 (Stated
in US Dollars)
  1.
      BASIS
      OF PRESENTATION
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with both generally accepted accounting principles for
interim financial information, and the instructions to Form 10-Q and Article 8
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The accompanying unaudited condensed consolidated
financial statements reflect all adjustments (consisting of normal recurring
accruals) that are, in the opinion of management, considered necessary for a
fair presentation of the results for the interim periods presented. Interim
results are not necessarily indicative of results for a full year.
 
 The
unaudited condensed consolidated financial statements and related disclosures
have been prepared with the presumption that users of the interim financial
information have read or have access to our annual audited consolidated
financial statements for the preceding fiscal year. Accordingly, these unaudited
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and the related notes thereto contained in
the Annual Report on Form 10-K for the year ended December 31,
2008.
 
 2.
      ORGANIZATION
      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.
 
 2.ORGANIZATION
      BACKGROUND (cont’d)
 
 CLGZ and
its wholly-owned subsidiary Chengkai are hereafter referred to as (the
“Company”).
 
 3.
      DESCRIPTION
      OF BUSINESS
 
 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.
 
 4.
      RECENTLY
      ISSUED ACCOUNTING STANDARS
 
 The
Company has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
  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 quarter
ended September 30, 2009.
  As a
result of the Company’s implementation of the Codification during the quarter
ended September 30, 2009, previous references to new accounting standards and
literature are no longer applicable. In the current quarter 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
  6
 Table of Contents
  CHINA
LOGISTICS INC. AND SUBSIDIARY
 Notes
to Unaudited Consolidated Financial Statements
 For
the Three and Nine Months Ended September 30, 2009 and 2008
 (Stated
in US Dollars)
  4.
      RECENTLY
      ISSUED ACCOUNTING STANDARS (cont’d)
 
 Noncontrolling
Interests (cont’d)
  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.
 
 
 5.
      SUPPLEMENTAL
      CASH FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the nine months ended September 30,
2009 and 2008 are summarized as follows:
 
 (a)
                Cash
      paid during the nine months ended September 30, 2009 and 2008 for interest
      and income taxes:
 
 2009                      
2008
 Income
Taxes                                            $6,739                   $7,887
 Interest                                                      $     -0-                  $    -0-
 
 
 (b)
                Non-cash
      transactions during the nine months ended September 30, 2009 and
      2008
 2009
                
                
                2008Common
      stock issued for services rendered and expensed
                
                $
                1,026,000
                
                
                $
                -Common
      stock issued for extinguishment of debt
                
                $
                126,220
                
                
                $
                -
  
 6.
      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 $39,618 and $39,653 are required as of
September 30, 2009 and December 31, 2008, respectively.
  September
      30,
                  2009
                
                
                December
      31, 2008Accounts
      receivable, gross
                
                $
                6,769,989
                
                
                $
                7,930,606Less:
      allowance for doubtful accounts
                
                
                (39,618
                )
                
                
                (39,653
                )Accounts
      receivable, net
                
                $
                6,730,371
                
                
                $
                7,890,953
 
 7.
      INVENTORIES
 
 September
      30,
                
                
                
                December
      31, 2008Inventories
                
                $
                388,166
                
                
                $
                707,280
 
 There was
no provision for obsolete inventories recorded by the Company as of September
30, 2009 and December 31, 2008, respectively.
 
 8.
      SHORT-TERM
      INVESTMENT
 
 The
Company had a short-term investment of RMB 3,500,000, equivalent to
approximately $512,520, to a non-related company. The investment will be
returned in the next six months with annual interest rate of 5%.
 
 9.
      COMMON
      STOCK
 
 (a)
                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.
  (b)
                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.
  10. CONCENTRATION AND
RISK
 
 (a)
      Major
      customers
 
 For the
nine months ended September 30, 2009 and the year ended December 31, 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 86% and 72% of net revenue
for the nine months ended September 30, 2009 and the year ended December 31,
2008, respectively.
 
 As
of September 30, 2009
  Customers
                
                
                Revenues
                
                
                
                
                
                
                Accounts
                  ReceivableCustomer
      A
                
                
                $
                8,422,291
                
                
                
                86
                %
                
                
                $
                6,564,431Total:
                
                $
                8,422,291
                
                
                
                86
                %
                Total:
                
                $
                6,564,431
 
 As of
December 31, 2008
  Customers
                
                
                Revenues
                
                
                
                
                
                
                Accounts
                  ReceivableCustomer
      A
                
                
                $
                4,317,662
                
                
                
                72
                %
                
                
                $
                4,714,156Total:
                
                $
                4,317,662
                
                
                
                72
                %
                Total:
                
                $
                4,714,156
 
 10. CONCENTRATION AND
RISK  (cont’d)
 
 (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.
 7
 Table of Contents
 
 
 ITEM 2.  
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Management’s
Discussion and Analysis contains various “forward looking statements” within
regarding future events or the future financial performance of the Company that
involve risks and uncertainties. Certain statements included in this 10-Q,
including, without limitation, statements related to anticipated cash flow
sources and uses, and words including but not limited to “anticipates”,
“believes”, “plans”, “expects”, “future” and similar statements or expressions,
identify forward looking statements. Any forward-looking statements herein are
subject to certain risks and uncertainties in the Company’s business, including
but not limited to, reliance on key customers and competition in its markets,
market demand, product performance, technological developments, maintenance of
relationships with key suppliers, difficulties of hiring or retaining key
personnel and any changes in current accounting rules, all of which may be
beyond the control of the Company. Management will elect additional changes to
revenue recognition to comply with the most conservative SEC recognition on a
forward going accrual basis as the model is replicated with other similar
markets (i.e. SBDC). The Company’s actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth therein.
 
 Management’s
Discussion and Analysis of Results of Financial Condition and Results of
Operations (“MD&A”) should be read in conjunction with the financial
statements included herein.
 
 HISTORY
 
 As used
in this Quarterly Report, the terms "we", "us", "our," the “Registrant,” “CLGZ”
and the "Company" means, China Logistics, Inc., a Nevada corporation, 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. These terms also refer to our subsidiary corporation,
Chengkai Logistics Co Ltd., a corporation organized under the laws of the
Peoples’ Republic of China (“Chengkai”) acquired in February 2009.
 
 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”.
 
 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 $1,200,000 as of December 31, 2007.
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.
 
 Chengkai
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.
 
 Chengkai’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. Chengkai’s chemical industries clients include
Korean LG Chemical Engineering Company, French Rhodia Chemical Company, Spanish
Caster Rubber Company, and Korean Dongsung Chemical Co., Ltd. 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.
 
 8
 Table of Contents
 
 RESULTS OF OPERATIONS -
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(UNAUDITED)
 
 Revenues
 
 We had
revenues of $7,693,576 and $9,764,023 for the three and nine months ended
September 30, 2009, respectively, increased by $7,005,892 and $3,064,277,
compared to the revenues of $687,684 and $6,699,746 for the same periods ended
September 30, 2008, respectively. The significant increase in the third quarter
of 2009 compared to the same period in 2008 was due primarily to the increasing
orders from one of our major customers, from which the revenue earned was
approximately 86% of our total revenue during the nine months ended September
30, 2009. 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 in 2008 had significant impact on our
business.
 
 Income /
Loss
 
 We had
net loss of $1,128,379 and $1,146,033 for the three and nine months ended
September 30, 2009, respectively, compared to the net income of $191,995 and
$244,165 for the same periods ended September 30, 2008, respectively. The
significant net losses during the three and nine months ended September 30, 2009
were 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.
 
 The net losses during the three and
nine months ended September 30, 2009 were also attributable to theloss
of $126,220 on extinguishment of convertible debt, 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.
 
 The net
incomes for the three and nine months ended September 30, 2008, respectively,
were primarily attributable to sufficient gross profits to cover the operating
expenses in these periods, even though we suffered significant decrease in our
sale revenues in 2008 due to global financial crisis.
 
 Expenses
 
 We had
operating expenses of $1,325,240 and $1,608,946 for the three and nine months
ended September 30, 2009, respectively, compared to the operating expenses of
$185,454 and $495,060 for the same periods ended September 30, 2008,
respectively. The significant increase in operating expenses during the three
and nine months ended September 30, 2009 were 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
$7,330,202 and $354,527 in cost of sales, or 95.28% and 51.55% of sales
revenues, during the three months ended September 30, 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 three months ended September 30, 2008 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.
 
 We had
$9,127,224 and $5,998,471 in cost of sales, or 93.48% and 89.53% of sales
revenues, during the nine months ended September 30, 2009 and 2008,
respectively. Cost of sales as a percentage of sales was high during both
periods, which was 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.
 
 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
 
 Cash
flows provided by operating activities were $1,129,554 for the nine months ended
September 30, 2009, compared to cash flows of $2,272,356 used in operating
activities for the nine months ended September 30, 2008. Positive cash flows
from operations during the nine months ended September 30, 2009 were primarily
due to effective collection in accounts receivable in the amount of $1,153,105,
the decrease in inventory by $318,342, plus the increase in other payable by
$129,043, and the increase in others by $267,114, partially offset by the
increase in other receivable by $126,725 and the decrease in accounts payable by
$750,840. Negative cash flows from operation during the nine months ended
September 30, 2008 were primarily due to the amount decreased in accounts
payable by $3,285,054, partially offset by the net income of $244,164 and the
decrease in inventory by $263,764.
 
 Cash
flows used in investing activities were $537,672 for the nine months ended
September 30, 2009, due primarily to the purchase of property and equipment of
$25,394 and a short-term investment of $512,278 in a non-related company. The
investment will be returned in the next nine months with an annual interest rate
of 5%. We had no cash flow from investing activities for the nine months ended
September 30, 2008.
 
 Cash
flows used in financing activities were $462,116 for the nine months ended
September 30, 2009 due to the repayments to a shareholder loan, compared to cash
flows of $63,035 provided by financing activities for the nine months ended
September 30, 2008 due to the proceeds from shareholder loans.
 
 Overall,
we have funded our cash needs from inception through September 30, 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 $660,673 on hand as of September 30, 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
2009. 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
 
 9
 Table of Contents
 
 ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK
 
 The information to be reported under this item is
not required of smaller reporting companies.
 
 ITEM 4. 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 September 30, 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 4T. 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 September 30,
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 Quarterly 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 Quarterly 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 September 30, 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
Quarterly 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 Quarterly
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.
 
 10
 Table of Contents
 
 PART II.  OTHER
INFORMATION
 
 ITEM
1.      LEGAL PROCEEDINGS
 
 We have
not had any legal proceedings.
 
 ITEM
1A.    RISK FACTORS
 
 Information
regarding risk factors appears in Part I, “Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations” under the
captions “General Description of Business” and “Cautionary Note Regarding
Forward-Looking Statements” contained in this Quarterly Report on Form 10-Q and
in “Item 1A. RISK FACTORS” of our 2008 Annual Report on Form 10-K. There
have been no material changes from the risk factors previously disclosed in our
2008 Annual Report on Form 10-K.
 
 ITEM
2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
 
 (a)
              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.
 
 (b)
              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.
  ITEM
3.      DEFAULTS UPON SENIOR SECURITIES
 
 We have
not had any default upon senior securities.
 
 ITEM
4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 We have
not had any submission of matters to a vote of security holders.
 
 ITEM
5.      OTHER INFORMATION
 
 We do not
have any other information to report.
 
 ITEM
6.      EXHIBITS
 
 31.1 CEO Certification Pursuant to Section 302
 31.2 CFO
Certification Pursuant to Section 302 (included in Exhibit 31.1)
 32.1 CEO Certification Pursuant to Section
906
 32.2 CFO
Certification Pursuant to Section 906 (included in Exhibit 32.1)
 
 Reports on Form8-K
 
 None
 
 11
 Table of Contents
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 CHINA
      LOGISTICS, INC.
                (Registrant)Date:
      November 16, 2009
              By:  /s/
              Wanwen
      SuWanwen
      Su
                President,
      Chief Executive Officer, and
                Chief
      Financial Officer