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
March 31, 2010
 
 
 [  
]           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 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).
  
 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-Q
or any amendments to this Form 10-Q.
   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]
 
 Number of
shares of common stock outstanding as of May 11,
2010:        54,787,026
 Number of
shares of preferred stock outstanding as of May 11,
2010:        
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.
 
 1
  
 INDEX
      TO FORM 10-QPage No.PART
      IItem
      1.  Financial
      Statements
                3Item
      2.  Management's Discussion and Analysis of Financial Condition
      and Results of Operations
                9Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                12Item
      4. Controls and Procedures
                12Item
      4T. Controls and Procedures
                12PART
      IIItem
      1.  Legal Proceedings
                13Item
      1A. Risk Factors
                13Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                13Item
      3.  Defaults Upon Senior Securities
                13Item
      4.  Submission of Matters to a Vote of Security
      Holders
                13Item
      5.  Other Information
                13Item
      6.  Exhibits
                13
 2
 
 ITEM 1.CONSOLIDATED FINANCIAL
STATEMENTS
 
 INDEX
TOCHINA LOGISTICS,
INC. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 CHINA LOGISTICS,
INC.                                                                                                     
PAGE
 
 Unaudited
Consolidated Balance
Sheet                                                              
        4
  Unaudited
Consolidated Statement of
Operations                                                     
5
  Unaudited
Consolidated Statement of Cash
Flows                                                    
6
  Notes to
Unaudited Consolidated Financial
Statements                                           
7
 
 3
 
 China
      Logistics, Inc and SubsidiaryUnaudited
      Condensed Consolidated Balance SheetsAs
      of March 31, 2010 and December 31, 2009ASSETSMarch
      31, 2010
                
                
                December
      31, 2009(Audited)CURRENT
      ASSETSCash
      and cash equivalents
                
                $
                839,754
                
                
                $
                1,223,829Accounts
      receivable,trade
                
                
                3,619,388
                
                
                
                4,418,594Other
      receivables
                
                
                149,414
                
                
                
                146,524Inventory
                
                
                504,560
                
                
                
                3,844,655Prepaid
      expenses
                
                
                334,168
                
                
                
                290,903Prepaid
      VAT tax
                
                
                9,880
                
                
                
                483,068TOTAL
      CURRNET ASSETS
                
                $
                5,457,164
                
                
                $
                10,407,573FIXED
      ASSETSProperty,
      plant, and equipment
                
                $
                47,333
                
                
                $
                47,319Accumulated
      depreciation
                
                
                (13,542
                )
                
                
                (12,082
                )NET
      FIXED ASSETS
                
                $
                33,791
                
                
                $
                35,237TOTAL
      ASSETS
                
                $
                5,490,955
                
                
                $
                10,442,810LIABILITIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable
                
                $
                4,034,083
                
                
                $
                8,690,450Other
      payables
                
                
                50,938
                
                
                
                114,355Other
      payables-related party
                
                
                6,491
                
                
                
                36,816Received
      in advance
                
                
                179,453
                
                
                
                335,076Tax
      payable
                
                
                4,973
                
                
                
                9,422TOTAL
      CURRENT LIABILITIES
                
                $
                4,275,938
                
                
                $
                9,186,119TOTAL
      LIABILITIES
                
                $
                4,275,938
                
                
                $
                9,186,119COMMITMENTS
      AND CONTINGENCIESRedeemable
      preferred stock (par value $.01, 5,000,000 Shares
                
                $
                32,950
                
                
                $
                32,950authorized,
      3,295,000 shares issued and outstanding as ofMarch
      31, 2010 and December 31, 2009, respectivelySTOCKHOLDERS'
      EQUITYCommon
      stock (par value $.0001, 250,000,000 shares authorized,
                
                
                5,478
                
                
                
                5,47854,787,026
      shares issued and outstanding as ofMarch
      31, 2010 and December 31, 2009, respectivelyAdditional
      paid in capital
                
                
                2,146,261
                
                
                
                2,146,261Statutory
      reserves
                
                
                850
                
                
                
                850Accumulated
      other comprehensive income
                
                
                139,570
                
                
                
                139,213Retained
      earnings (deficit)
                
                
                (1,110,092
                )
                
                
                (1,068,060
                )TOTAL
      STOCKHOLDERS' EQUITY
                
                $
                1,182,067
                
                
                $
                1,223,742TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                5,490,955
                
                
                $
                10,442,810The
      accompanying notes are an integral part of these financial
      statements.
 4
  China
      Logistics, Inc and SubsidiaryUnaudited
      Condensed Consolidated Statements of OperationsFor
      the Three Months ended March 31, 2010 and 2009For
      the Three months endedMarch
      31, 2010
                
                
                March
      31, 2009RevenuesSales
                
                $
                4,274,119
                
                
                $
                1,509,301Cost
      of sales
                
                
                3,946,694
                
                
                
                1,381,105Gross
      profits
                
                
                327,425
                
                
                
                128,196Operating
      expensesSelling
      General and Administrative
                
                
                323,394
                
                
                
                136,664Income
      (Loss) from Operations
                
                
                4,031
                
                
                
                (8,468
                )Other
      income (expenses)Finance
      income (costs)
                
                
                (42,585
                )
                
                
                170Total
      other income (loss)
                
                
                (42,585
                )
                
                
                170Income
      (loss) from Operations
                
                
                (38,554
                )
                
                
                (8,298
                )Income
      taxes
                
                
                3,478
                
                
                
                4,560Net
      Income (Loss)
                
                
                (42,032
                )
                
                
                (12,858
                )Other
      comprehensive income (loss)Foreign
      currency translation gain (loss)
                
                
                357
                
                
                
                (2,210
                )Comprehensive
      income (loss)
                
                $
                (41,675
                )
                
                $
                (15,068
                )Weighted
      average common shares outstandingBasic
      & diluted
                
                $
                54,787,026
                
                
                $
                50,245,026Net
      loss per common shareBasic
      & diluted
                
                $
                (0.00
                )
                
                $
                (0.00
                )The
      accompanying notes are an integral part of the financial
      statements
 5
 
 
 China
      Logistics, Inc and SubsidiaryUnaudited
      Condensed Consolidated Statements of Cash FlowsFor
      the Three Months ended March 31, 2010 and 2009For
      the Three months endedMarch
      31, 2010
                
                
                March
      31, 2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      income (loss)
                
                $
                (42,032
                )
                
                $
                (12,858
                )Adjustments
      to reconcile net income (loss) tonet
      cash (used in) operating activities:Depreciation
                
                
                1,457
                
                
                
                852Accounts
      receivable ,trade
                
                
                800,366
                
                
                
                785,124Other
      receivable
                
                
                (2,849
                )
                
                
                (3,734
                )Prepaid
      expense
                
                
                (43,180
                )
                
                
                313,350Inventory
                
                
                3,340,872
                
                
                
                344,345Accounts
      payable
                
                
                (4,658,376
                )
                
                
                641,527Tax
      payable
                
                
                468,829
                
                
                
                (106,027
                )Other
      payable
                
                
                (63,434
                )
                
                
                (9,341
                )Others
                
                
                (155,703
                )
                
                
                82,346NET
      CASH (USED IN) OPERATING ACTIVITIES
                
                
                (354,049
                )
                
                
                2,035,584CASH
      FLOWS FROM INVESTING ACTIVITIES:Short-term
      investment
                
                
                -
                
                
                
                (511,995
                )NET
      CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
                
                
                -
                
                
                
                (511,995
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Increase
      (decrease) of due to shareholders'
                
                
                (30,332
                )
                
                
                (442,735
                )NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                (30,332
                )
                
                
                (442,735
                )FOREIGN
      CURRENCY TRANSLATION ADJUSTMENT
                
                
                307
                
                
                
                (987
                )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                (384,075
                )
                
                
                1,079,867CASH
      AND CASH EQUIVALENTS:Beginning
      of period
                
                
                1,223,829
                
                
                
                531,297End
      of period
                
                $
                839,754
                
                
                $
                1,611,164The
      accompanying notes are an integral part of these financial
      statements.
 6
 
 CHINA
LOGISTICS, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2010 (UNAUDITED)
  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 the Company’s annual audited
consolidated financial statements for the preceding fiscal year. Accordingly,
these unaudited condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the related
notes for the three months ended March 31, 2010 and 2009 thereto contained in
the Annual Report on Form 10-K for the year ended December 31,
2009.
 
 
 2.
              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. 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.
 
 3.
              RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS
 
 Fair Value Measurements and
Disclosures
 
 (Accounting
Standards Update (“ASU”) 2010-06)
  In
January 2010, the FASB issued ASU No. 2010-06, “Fair Value Measurements and
Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements.”
ASU 2010-06 requires new disclosures regarding transfers in and out of the Level
1 and 2 and activity within Level 3 fair value measurements and clarifies
existing disclosures of inputs and valuation techniques for Level 2 and 3 fair
value measurements. ASU 2010-06 also includes conforming amendments to
employers’ disclosures about postretirement benefit plan assets. The new
disclosures and clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15, 2009, except for
the disclosure of activity within Level 3 fair value measurements, which is
effective for fiscal years beginning after December 15, 2010, and for
interim periods within those years. The adoption of this statement is not
expected to have a material impact on our consolidated financial position or
results of operation.
 
 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 period
ended March 31, 2010.   As a result of the Company’s
implementation of the Codification during the period ended March 31, 2010,
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.
 7
 
 CHINA
LOGISTICS, INC.
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 MARCH 31,
2010 (UNAUDITED)
 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.
  4.
              SUPPLEMENTAL
      CASH FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the three months ended March 31, 2010
and 2009 are summarized as follows:
 
 Cash paid
during the three months ended March 31, 2010 and 2009 for interest and income
taxes:
  For the
three months ended March 31,
 2010                  
        2009
 Income
Taxes                                   $5,210                      
$24,843
 Interest                                             $     -0-                      
$      -0-
 
 
 5.
              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 $22,210 and $22,204 are required as of
March 31, 2010 and December 31, 2009, respectively.
 
 March 31,
                2010
              
              
              December 31, 2009Accounts
      receivable, gross
              
              $
              3,641,598
              
              
              $
              4,440,798Less:
      allowance for doubtful accounts
              
              
              (22,210
              )
              
              
              (22,204
              )Accounts
      receivable, net
              
              $
              3,619,388
              
              
              $
              4,418,594
  6.
              INVENTORIES
 
 March 31,
                2010
              
              
              December 31, 2009Inventories
              
              $
              504,560
              
              
              $
              3,844,655
 
 There was
no provision for obsolete inventories recorded by the Company as of March 31,
2010 and December 31, 2009, respectively.
  7.
              RECEIVED
      IN ADVANCE
 
 As of
March 31, 2010, the Company had customer deposits of $179,453, representing
payments received for orders not yet shipped. The Company expects to ship these
orders in the second quarter of 2010.
 
 8.
              CONCENTRATION
      AND RISK
 
 (a)
              Major
      customers
 
 For the
three months ended March 31, 2010 and for the year ended December 31, 2009, 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 96% and 84% of net revenue
for the three months ended March 31, 2010 and for the year ended December 31,
2009, respectively.
 
 As of March 31,
2010
 Customers
              
              
              Revenues
              
              
              
              
              
              
              Accounts
                ReceivableCustomer
      A
              
              
              $
              4,104,792
              
              
              
              96
              %
              
              
              $
              3,563,952Total:
              
              $
              4,104,792
              
              
              
              96
              %
              Total:
              
              $
              3,563,952
 
 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
 
 (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.
 
 9.
              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
March 31, 2010, the Company had an accumulated deficit of $1,110,092. 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 March 31, 2010.  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.
 
 10.
              SUBSEQUENT
      EVENTS
 
 We
evaluated subsequent events through the date and time our financial statements
were issued on May 10, 2010. There are no subsequent events through May 10,
2010.
 
 
 8
 
 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
 
 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 $1,200,000 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.
 
 9
 
 CHENGKAI
SERVICES
  International Trade and
Import & Export Management
  Import
& export trade, domestic distribution and purchasing solutions are provided
by Chengkai to reach a win-win business solution. Through several years of
practice of commercial trading in China, Chengkai 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, Chengkai 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.
 
 Customs
Declaration
 
 Chengkai
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
 
 Chengkai
provides diversified logistics solutions.
 
 In order
to construct an efficient logistics system, Chengkai 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
 
 Chengkai
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
our talented staff and reliable partnerships, Chengkai provides international
cargo transportation that supports business expansion efforts of
clients.
 
 l
              International
      Logistics Business
  10
 
 RESULTS OF OPERATIONS -
THREE MONTHS ENDED MARCH 31, 2010 and 2009 (UNAUDITED)
 
 Sales
 
 We had
sales of $4,274,119 and $1,509,301 for the three months ended March 31, 2010 and
2009, respectively. The increase in sales by $2,764,818 during the first quarter
of 2010 was due to the
recovery from global financial crisis, which had significant impact on our
revenues in 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 starting in 2008 had significant
impact on our business in 2009.
 
 Income /
Loss
 
 We had
net loss of $42,032 and $12,858 for the three months ended March 31, 2010 and
2009, respectively, due primarily to the selling general and administrative
costs, which were $323,394 in 2010 and $136,664 in 2009. Our gross profits in
both periods were not sufficient to cover such expenses. In addition, we
had the costs of $42,585 for finance during the three months ended March
31, 2010, resulting in the increase in net loss by $19,174 in the first quarter
of 2010, compared to the same period in 2009.
 
 Expenses
 
 We had
operating expenses of $323,394 and $136,664 for the three months ended March 31,
2010 and 2009, respectively. The significant increase in operating expenses
during the three months ended March 31, 2010 was due primarily to the the
increase in transportation cost as a results of significant increase in sale
during the first quarter of 2010.
 
 Cost of
Sales
 
 We had
$3,946,694 and $1,381,105 in cost of sales, or 92.34% and 91.51% of sales
revenues, during the three months ended March 31, 2010 and 2009, 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.
 
 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 (used in) provided by operating activities were $(354,049) and $2,035,584
for the three months ended March 31, 2010 and 2009, respectively. Negative cash
flows from operations during the three months ended March 31, 2010 were due
primarily to the decrease in accounts payable in the amount of $(4,658,376),
partially offset by the decrease in inventory in the amount of $3,340,872.
Positive cash flows from operation during the three months ended March 31, 2009
were primarily due to the effective collection of accounts receivable in the
amount of $785,124, the increase in accounts payable in the amount of $641,527,
and the decrease in prepaid expense and inventory in the amount of
$313,350  and $344,345, respectively.
 
 We had no
cash flows from investing activities during the three months ended March 31,
2010. Cash flows (used in) investing activities were $(511,995) for the three
months ended March 31, 2009, due primarily to a short term
investment.
 
 Cash
flows (used in) financing activities were $(30,332) and $(442,735) for the three
months ended March 31, 2010 and 2009, respectively. The negative cash flows in
both periods were due to the repayments to a shareholder loan.
 Overall,
we have funded our cash needs from inception through March 31, 2010 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 $839,754 on hand as of March 31, 2010. 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
 
 11
 
 ITEM 3.  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK
 
 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 $357 for the three months ended March 31, 2019,
$4,053 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:
 
 2010
              
              2009Balance
      sheet items, except for the registered and paid-up capital as of March 31,
      2010 and 2009
              USD
      0.146:RMB 1
              
              USD
      0.146:RMB 1Amounts
      included in the statement of operations, statement of changes in
      stockholders’ equity and statement of cash flows for the three months
      ended March 31, 2010 and 2009
              USD
      0.146:RMB 1
              
              USD
      0.146:RMB 1
 
 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 March 31, 2010, 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 March 31, 2010,
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 March 31, 2010. 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.
 
 12
 
 PART II.  OTHER
INFORMATION
 
 ITEM
1.      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
1A. RISK FACTORS
 
 The
information to be reported under this item has not changed since the previously
filed 10K, for the year ended December 31, 2009.
 ITEM
2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
 
 We have
not had any unregistered sales of equity securities.
 
 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 submissions 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
 
 13
 
 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:
      May 11, 2010
              By:Wanwen
      Su
                President,
      Chief Executive Officer, and
                Chief
      Financial Officer