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 June 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.
 (F/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.)
 
 
 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 August 11, 2009:      50,245,026
 
 
 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 Contents
 
 TABLE OF CONTENTS
Page No.PART IItem 1. Financial Statements
3Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations
9Item 3.Quanitative and Qualitative Disclosures about Market  Risk
11Item 4. Controls and Procedures
11PART IIItem 1. Legal Proceedings
12Item 1A. Risk and Factors
12Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
12Item 3. Defaults Upon Senior Securities
12Item 4. Submission of Matters to a Vote of Security Holders
12Item 5. Other Information
12Item 6. Exhibits
12Signatures
13
 
  
 2
 Table of Contents
 
 ITEM 1.CONSOLIDATED FINANCIAL STATEMENTS
 
 INDEX TOCHINA LOGISTICS, INC. (F/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.) UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
 CHINA LOGISTICS, INC. (F/K/ACHINA INTERNATIONAL TOURISM HOLDINGS, LTD.)
 
 Unaudited Consolidated Balance Sheets                                                                             4
 Unaudited Consolidated Statements of Operations                                                            
5
 
 Unaudited Consolidated Statements of Cash Flows                                                           
6
 
 Notes to Unaudited Consolidated Financial Statements                                                
     7
    3
 Table of Contents
 CHINA LOGISTICS INC. AND SUBSIDIARYF/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.Unaudited Consolidated Balance SheetsAs of June 30, 2009 and December 31, 2008ASSETS

June 30, 2009


December 31, 2008(Unaudited)*CURRENT ASSETSCash and cash equivalents

$
975,828


$
531,297Accounts receivable, net


3,784,645



7,890,953Inventory


400,726



707,280Prepaid expenses


309,667



314,195Other receivables


122,502



113,302Short term investment


512,303



-TOTAL CURRNET ASSETS


6,105,671



9,557,027FIXED ASSETSProperty, plant, and equipment


21,898



21,927Accumulated depreciation


(10,050
)


(8,355
)NET FIXED ASSETS


11,848



13,572TOTAL ASSETS

$
6,117,519


$
9,570,599LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable

$
4,364,028


$
7,612,304Other payables and accured expenses


65,968



61,852Other payables-related party


99,183



496,928Received in advance


514,961



113,915Tax payable


-



114,385TOTAL CURRENT LIABILITIES


5,044,140



8,399,385TOTAL LIABILITIES

$
5,044,140


$
8,399,385COMMITMENTS AND CONTINGENCIESRedeemable preferred stock (par value $.01, 5,000,000 Shares


32,950



32,950authorized, 3,295,000 shares issued and outstandingSTOCKHOLDERS' EQUITYCommon stock (par $.0001, 250,000,000 authorized,


5,024



5,02450,245,026 shares issued and outstandingAdditional paid in capital


920,375



999,029Statutory reserves


850



850Accumulated other comprehensive income


133,649



135,176Retained earnings (deficit)


(19,469
)


(1,815
)TOTAL STOCKHOLDERS' EQUITY

$
1,040,429


$
1,138,264TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
6,117,519


$
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.
  4
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  CHINA LOGISTICS INC. AND SUBSIDIARYF/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.Unaudited Consolidated Statements of OperationsFor the Three and Six Months Ended June 30, 2009 and 2008For the Three Months Ended


For the Six Months EndedJune 30, 2009


June 30, 2008


June 30, 2009


June 30, 2008RevenuesSales

$
561,146


$
3,733,853


$
2,070,447


$
6,012,062Cost of sales


415,917



3,540,561



1,797,022



5,643,944Gross profits


145,229



193,292



273,425



368,118Operating expensesSelling General and Administrative


147,042



135,891



283,706



309,606Income (Loss) from Operations


(1,813
)


57,401



(10,281
)


58,512Other income (expenses)Interest income (expenses)


(2,121
)


113



(1,951
)


(169
)Total other income (loss)


(2,121
)


113



(1,951
)


(169
)Income (loss) from Operations


(3,934
)


57,514



(12,232
)


58,343Income taxes


862



3,822



5,422



6,173Net Income (Loss)


(4,796
)


53,692



(17,654
)


52,170Other comprehensive income (loss)Foreign currency translation gain (loss)


683



(49,146
)


(1,527
)


(4,637
)Comprehensive income (loss)

$
(4,113
)

$
4,546


$
(19,181
)

$
47,533The accompanying notes are an integral part of the financial statements
  5
 Table of Contents
  CHINA LOGISTICS INC. AND SUBSIDIARYF/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.Unaudited Consolidated Statements of Cash FlowsFor the Six Months Ended June 30, 2009 and 2008For the Six Months EndedJune 30, 2009


June 30, 2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)

$
(17,654
)

$
52,171Adjustments to reconcile net income (loss) to


-



-net cash (used in) operating activities:


-



-Depreciation


1,706



1,853Accounts receivable ,trade


4,095,489



(1,970,187
)Other receivable


(109,976
)


154,137Prepaid expense


4,118



66,646Inventory


305,592



247,684Accounts payable


(3,237,933
)


(991,723
)Tax payable


(117,711
)


82,979Other payable


(20,439
)


(7,282
)Others


509,350



(12,071
)NET CASH (USED IN) OPERATING ACTIVITIES


1,412,543



(2,375,794
)CASH FLOWS FROM INVESTING ACTIVITIES:Short-term investment


(512,235
)


-NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES


(512,235
)


-CASH FLOWS FROM FINANCING ACTIVITIES:Due (from) to shareholders


(455,157
)


216,957NET CASH PROVIDED BY FINANCING ACTIVITIES


(455,157
)


216,957FOREIGN CURRENCY TRANSLATION ADJUSTMENT


(619
)


98,377-NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS


444,531



(2,060,461
)-CASH AND CASH EQUIVALENTS:






-Beginning of period


531,297



2,482,779End of period

$
975,828


$
422,318The accompanying notes are an integral part of these financial statements.
  
 6
 Table of Contents
 
 CHINA LOGISTICS INC. AND SUBSIDIARY
F/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.
Notes to Unaudited Consolidated Financial Statements
For the Three and Six Months Ended June 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 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 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.
 
 
 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
 
 In January 2009, the FASB issued FSP EITF 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No. 99-20, and EITF Issue No. 99-20, Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets”. FSP EITF 99-20-1 changes the impairment model included within
EITF 99-20 to be more consistent with the impairment model of SFAS 115. FSP EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to remove its exclusive reliance on “market participant” estimates of future cash flows used in determining fair value. Changing the cash flows used to analyze other-than-temporary impairment from the “market participant” view to a holder’s estimate of whether there has been a “probable” adverse change in estimated cash
flows allows companies to apply reasonable judgment in assessing whether an other-than-temporary impairment has occurred. The adoption of FSP EITF 99-20-1, which is effective for annual reporting periods ending after December 15, 2008, did not have a material impact on our consolidated financial statements.
 
 In April 2009, the FASB issued FSP SFAS 157-4,  “Determining Whether a Market Is Not Active and a Transaction Is Not Distressed, ” (“FSP FAS 157-4”). FSP FAS 157-4 provides guidelines for making fair value measurements more consistent with the principles presented in SFAS 157. FSP FAS 157-4 provides additional
authoritative guidance in determining whether a market is active or inactive, and whether a transaction is distressed, is applicable to all assets and liabilities (i.e. financial and nonfinancial) and will require enhanced disclosures. This standard is effective for periods ending after June 15, 2009. The Company is evaluating the impact that this standard will have on the Company’s financial position and results of operations.
 
 In April 2009, the FASB issued FSP SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” (“FSP FAS 107-1 and APB 28-1”). FSP FAS 107-1 and APB 28-1 amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value
of financial instruments in interim as well as in annual financial statements. FSP FAS 107-1 and APB 28-1 also amend APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in all interim financial statements. This standard is effective for periods ending after June 15, 2009. The Company is evaluating the impact that this standard will have on the Company’s financial position and results of operations.
 
  5.
SUPPLEMENTAL CASH FLOW INFORMATION
 
 Supplemental disclosures of cash flow information for the six months ended June 30, 2009 and 2008 are summarized as follows:
 
 Cash paid during the six months ended June 30, 2009 and 2008 for interest and income taxes:
 
 2009                       2008
 Income Taxes                                                     $-0-                      
$ -0-
 Interest                                                          
    $-0-                       $ -0-


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 $39,601 and $39,653 are required as of June 30, 2009 and December 31, 2008, respectively.





June 30,
2009


December 31, 2008Accounts receivable, gross

$
3,824,246


$
7,930,606Less: allowance for doubtful accounts


(39,601
)


(39,653
)Accounts receivable, net

$
3,784,645


$
7,890,953





7.
INVENTORIES




June 30,
2009


December 31, 2008Inventories

$
400,726


$
707,280





There was no provision for obsolete inventories recorded by the Company as of June 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 $512,000, to a non-related company. The investment will be returned in the next six months with annual interest rate of 5%.











9.
REVERSE STOCK SPLIT





On February 18, 2009, the Board of Directors of the Company adopted a resolution approving a two hundred to one reverse split of our Common Stock. The reverse split combines the Company’s outstanding Common Stock on the basis of 200 outstanding shares being changed to 1 outstanding share. Each shareholder’s percentage ownership
in the Company (and relative voting power) will remain essentially unchanged as a result of the reverse split. The reverse split took effective on April 3, 2009.





The statement of equity and the earnings per share numbers in the financial statements have been restated per FASB 128 paragraph 134.





10.
COMMON STOCK





On April 29, 2009, the Company issued 50,000,000 shares of its common stock to the stockholders of Chengkai to consummate the Exchange (see Note 2).





The Company’s issued and outstanding number of common stock immediately prior to the Exchange was 245,026 (after taking into account the Reverse Split) shares, which had been accounted for at its net book value at the time of the Exchange.





11.                   CONCENTRATION AND RISK





(a) Major customers





For the six months ended June 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 66% and 72% of net revenue for the six months ended June 30, 2009 and the year ended December 31, 2008, respectively.





As of June 30, 2009




Customers


Revenues






Accounts
ReceivableCustomer A


$
1,373,438



66
%


$
3,607,005Total:

$
1,373,438



66
%
Total:

$
3,607,005





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





(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.








12.                   SUBSEQUENT EVENTS







On July 13, 2009, the Company issued 3,800,000 shares of common stock to its consultant for business advisory services rendered. The fair value of this stock issuance was determined using the fair value of the Company’s common stock on the grant date, at a market quoted price of $.27.




On July 13, 2009, the Company issued 742,000 shares of its common stock to settle 2 promissory notes. 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.




8
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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, and the ticker symbol of our Common Stock was changed to “CLGZ” accordingly.





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, theBuyer acquired 100% of the total assets of $407,616 and total liabilities of $481,275 (collectively “Kai DaAssets
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





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.





RESULTS OF OPERATIONS - THREE AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008 (UNAUDITED)





Revenues





We had revenues of $561,146 and $3,733,853 for the three months ended June 30, 2009 and 2008, respectively, derived from logistic services and import / export business. The decrease by $3,172,707 was due primarily to the impact from the economic downturn in the US which relates directly to our exporting business.  Since the US
is China’s biggest export partner and we are a Chinese logistics company involved in the import and export of products to/from the US, we are greatly affected by the current economic climate.





We had revenues of $2,070,447 and $6,012,062 for the six months ended June 30, 2009 and 2008, respectively, derived from logistic services and import / export business. The decrease by $3,941,615 was due primarily to the impact from the economic downturn in the US which relates directly to our exporting business.  Since the US
is China’s biggest export partner and we are a Chinese logistics company involved in the import and export of products to/from the US, we are greatly affected by the current economic climate.





9
 Table of Contents








Income / Loss





Net income (loss) for the three months ended June 30, 2009 and 2008 were $(4,796) and $53,692, respectively. The net loss during the second quarter of 2009 was due primarily to a decrease in sales revenue. As a result, the gross profit was insufficient to cover operating expenses. The net income during the comparable period in 2008 was
due primarily to the larger amount of sales.





Net income (loss) for the six months ended June 30, 2009 and 2008 were $(17,654) and $52,170, respectively. The net loss during the six months ended June 30, 2009 was due primarily to a decrease in sales revenue. As a result, the gross profit was insufficient to cover operating expenses. The net income during the comparable period in 2008
was due primarily to the larger amount of sales. The net income decreased by $69,824 in the six months ended June 30, 2009, compared to the same period in 2008, primarily due to the decrease in sales revenues in 2009.





Expenses





Selling, general and administrative expenses for the three months ended June 30, 2009 and 2008 were $147,042 and $135,891, respectively.





Selling, general and administrative expenses for the six months ended June 30, 2009 and 2008 were $283,706 and $309,606, respectively.





Cost of Sales





We had $415,917 and $3,540,561 in cost of sales, or 74.12% and 94.8% of sales revenues, during the three months ended June 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. The gross margin in our import / export business was small due to intensive
competition as a result of globalization.





We had $1,797,022 and $5,643,944 in cost of sales, or 86.79% and 93.8% of sales revenues, during the six months ended June 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. The gross margin in our import / export business was small due to intensive
competition as a result of globalization. .





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 $1,412,543 for the six months ended June 30, 2009, compared to cash flows of $2,375,794 used in operating activities for the six months ended June 30, 2008. Positive cash flows from operations during the six months ended June 30, 2009 were primarily due to effective collection in accounts
receivable in the amount of $4,095,489, the decrease in inventory by $305,592, plus the increase in others by $509,350, partially offset by the increase in other receivable by $109,976 and the decrease in accounts payable by $3,237,933. Negative cash flows from operation during the six months ended June 30, 2008 were primarily due to the amount increased in accounts receivable by $1,970,187 and accounts payable decreased by the amount of $991,723.





Cash flows used in investing activities were $512,235 for the six months ended June 30, 2009, due primarily to a short-term investment in a non-related company. The investment will be returned in the next six months with an annual interest rate of 5%. We had no cash flow from investing activities for the six months ended June 30, 2008.





Cash flows used in financing activities were $455,157 for the six months ended June 30, 2009 due to the repayments to a shareholder loan, compared to cash flows of $216,957 provided by financing activities for the six months ended June 30, 2008 due to the proceeds from shareholder loans.





Overall, we have funded our cash needs from inception through June 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 $975,828 on hand as of June 30, 2009. Currently, we have enough cash to fund our operations for about six 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





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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 June 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 June 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 June 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.





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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





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





On June 24, 2009, we filed a Definitive Information Statement on Schedule 14C to propose to amend the Company’s Articles of Incorporation to change the name of the corporation from China International Tourism Holdings, Ltd. to "China Logistics, Inc." This name change was approved by action by written consent without a meeting of a
majority of all shareholders entitled to vote on the record date (the “Name Change Proposal”).





Holders of 40,000,000 shares of our Common Stock and 2,636,000 shares of Convertible Preferred Stock (25 shares of our Common Stock for each share of Preferred Stock), representing approximately 79.84% of our shares entitled to vote on this matter have executed a written consent in favor of the Name Change Proposal.





The name change from China International Tourism Holdings, Limited to China Logistics Inc. took effective on August 10, 2009.





ITEM 5.      OTHER INFORMATION





Subsequent Events





On July 13, 2009, the Company issued 3,800,000 shares of common stock to its consultant for business advisory services rendered. The fair value of this stock issuance was determined using the fair value of the Company’s common stock on the grant date, at a market quoted price of $.27.





On July 13, 2009, the Company issued 742,000 shares of its common stock to settle 2 promissory notes. 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.





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





(1)  On May 22, 2009, we filed an amendment to current report in Form 8-K/A to amend the current report in Form 8-K filed on April 17, 2009. We also announced that on April 23, 2009, the Company entered into an Agreement between and among the Registrant, Shanxi Kai Da Lv You Gu Wen Xian Gong Si, a corporation organized under the
laws of the Peoples’ Republic of China (“Kai Da”), and Mr. Lei Ming, an Chinese citizen, pursuant to which Kai Da was no longer a wholly-owned subsidiary of the Company.





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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. (F/K/A CHINA INTERNATIONAL TOURISM HOLDINGS, LTD.)
(Registrant)Date: August 12, 2009
By:
/s/ Wanwen SuWanwen Su
President, Chief Executive Officer, and
Chief Financial Officer