[√]
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the Fiscal year ended December 31,
2008
|
[
]
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from __________________ to
__________________________
|
Commission
file number: 0-31497
|
CHINA LOGISTICS GROUP,
INC.
|
(Exact
name of registrant as specified in its
charter)
|
Florida
|
65-1001686
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
7300
Alondra Boulevard, Suite 108, Paramount, CA
|
90723
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Registrant's
telephone number, including area code:
|
(562)
408-3888
|
Title
of each class
|
Name
of each exchange on which registered
|
None
|
Not
applicable
|
Common
Stock
|
(Title
of class)
|
Large
accelerated filer
|
[
]
|
Accelerated
filer
|
[
]
|
Non-accelerated
filer
(Do
not check if smaller reporting company)
|
[
]
|
Smaller
reporting company
|
[√]
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Page
No.
|
||
Part
I
|
||
Item
1.
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Business.
|
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Item
1A.
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Risk
Factors
|
|
Item
1B.
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Unresolved
Staff Comments.
|
|
Item
2.
|
Properties.
|
|
Item
3.
|
Legal
Proceedings.
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders.
|
|
Part
II
|
||
Item
5.
|
Market
for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
|
|
Item
6.
|
Selected
Financial Data.
|
|
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operation.
|
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Item
7A.
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Quantative
and Qualitative Disclosures About Market Risk.
|
|
Item
8.
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Financial
Statements and Supplementary Data.
|
|
Item
9.
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Changes
In and Disagreements With Accountants on Accounting and Financial
Disclosure.
|
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Item
9A.(T)
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Controls
and Procedures.
|
|
Item
9B.
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Other
Information.
|
|
Part
III
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||
Item
10.
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Directors,
Executive Officers and Corporate Governance.
|
|
Item
11.
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Executive
Compensation.
|
|
Item
12.
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Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
|
|
Item
13.
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Certain
Relationships and Related Transactions, and Director
Independence.
|
|
Item
14.
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Principal
Accountant Fees and Services.
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Part
IV
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||
Item
15.
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Exhibits,
Financial Statement Schedules.
|
•
|
risks
from Securities and Exchange Commission litigation;
|
|
•
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risks
from liquidated damages related to warrants sold in our 2008 Unit
Offering;
|
|
•
|
the
loss of the services of any of our executive officers or the loss of
services of any of our employees responsible for the management, sales,
marketing and operations efforts of our subsidiaries;
|
|
•
|
our
ability to successfully transition the internal operations of our
subsidiary as a privately held Chinese company to a subsidiary of a
publicly-held U.S. company;
|
|
•
|
liabilities
related to prior acquisitions,
|
|
•
|
continuing
material weaknesses in our disclosure controls and procedures and internal
control over financial reporting which may lead to additional restatements
of our financial statements,
|
|
•
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difficulties
in raising capital in the future as a result of the terms of our 2008 Unit
Offering;
|
|
•
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our
ability to effectively integrate our acquisitions and manage our
growth;
|
|
•
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the
lack of various legal protections customary in certain agreements to which
we are party and which are material to our operations which are
customarily contained in similar contracts prepared in the United
States;
|
|
•
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intense
competition in the freight forwarding and logistics
industries;
|
|
•
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the
impact of economic downturn in the PRC on our revenues from our operations
in the PRC;
|
|
•
|
our
lack of significant financial reporting experience, which may lead to
delays in filing required reports with the Securities and Exchange
Commission and suspension of quotation of our securities on the OTCBB,
which will make it more difficult for you to sell your
securities;
|
|
•
|
the
impact of changes in the political and economic policies and reforms of
the Chinese government; fluctuations in the exchange rate between the U.S.
dollars and Chinese Renminbi;
|
|
•
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the
limitation on our ability to receive and use our revenue effectively as a
result of restrictions on currency exchange in China;
|
|
•
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the
impact of changes to the tax structure in the PRC;
|
|
•
|
our
inability to enforce our legal rights in China due to policies regarding
the regulation of foreign investments;
|
|
•
|
the
existence of extended payment terms which are customary in China;
and,
|
|
•
|
uncertainties
related to PRC regulations relating to acquisitions of PRC companies by
foreign entities that could restrict or limit our ability to operate, and
could negatively affect our acquisition
strategy.
|
•
|
the
shipper when the merchandise departs if the trade pricing term is on a CIF
(cost, insurance and freight) or CFR (cost and freight) basis;
or
|
|
•
|
from
the recipient when merchandise arrives at destination port if the trade
pricing term is on a FOB (free on board)
basis.
|
•
|
the
prior receipt of all regulatory approvals and licenses from the necessary
governmental agencies in China related to this acquisition,
and
|
|
•
|
the
receipt of two years of audited financial statements of Shandong Jiajia
together with the interim period for the nine months ended
September 30, 2007.
|
•
|
instead
of contributing all $2,000,000 to Shandong Jiajia's registered capital, we
agreed to contribute $1,040,816 to increase the registered capital and the
remaining $959,184 will be made available to Shandong Jiajia for working
capital purposes; and
|
||
•
|
the
date by which Shandong Jiajia is required to satisfy various conditions to
the delivery of such funds was extended to April 30,
2008.
|
•
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none
of the members of our management have any experience in operating a U.S.
public company and the associated costs may adversely impact the operating
results of Shandong Jiajia, and
|
|
•
|
we
will need to upgrade the internal accounting systems at Shandong Jiajia,
as well as educating its staff as to the proper collection and recordation
of financial data to ensure that we can continue to file our annual,
quarterly and other reports with the Securities and Exchange Commission on
a timely basis.
|
•
|
up
to 4,500,000 shares of our common stock issuable upon the possible
conversion of 450,000 shares of Series B Convertible Preferred Stock
which we are obligated to issue under the terms of an
agreement;
|
|
•
|
31,676,000
shares of our common stock issuable upon the exercise of common stock
purchase warrants at an exercise price of $.35 per share to $52.00 per
share; and
|
|
•
|
2,000,000
options exercised at $0.30 per
share.
|
Location
|
Approximate
Square Feet
|
Annual
Rent
|
Additional
Charges
|
Expiration
of Lease
|
||||||
Shanghai
Branch (1)
|
7,008 |
$43,700
(RMB
300,000)
|
$20,440
(RMB
140,622)
|
May
31, 2009
|
||||||
Xiamen
Branch, Xiamen City, Fujian Province (2)
|
1,026 |
$1,459
(RMB
10,800)
|
0 |
December
31, 2009
|
||||||
Lianyuangang
Branch, Lianyuangang City, Jiangsu Province (3)
|
1,184 |
$4,054
(RMB
30,000)
|
0 |
March
15, 2010
|
||||||
Tianjin
Branch, Tianjin City (4)
|
3,014 |
$21,962
(RMB
150,000)
|
0 |
May
31, 2013
|
ITEM
5.
|
STOCKHOLDER
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
High
|
Low
|
|||||||
2007
|
||||||||
First
quarter ended March 31, 2007
|
$ | 6.80 | $ | 2.40 | ||||
Second
quarter ended June 30, 2007
|
$ | 3.60 | $ | 1.60 | ||||
Third
quarter ended September 30, 2007
|
$ | 2.80 | $ | 0.80 | ||||
Fourth
quarter ended December 31, 2007
|
$ | 2.00 | $ | 0.40 | ||||
2008
|
||||||||
First
quarter ended March 31, 2008
|
$ | 1.20 | $ | 0.40 | ||||
Second
quarter ended June 30, 2008
|
$ | 1.05 | $ | 0.50 | ||||
Third
quarter ended September 30, 2008
|
$ | 0.65 | $ | 0.35 | ||||
Fourth
quarter ended December 31, 2008
|
$ | 0.62 | $ | 0.10 |
ITEM 6.
|
SELECTED FINANCIAL
DATA.
|
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
|
• |
the
prior receipt of all regulatory approvals and licenses from the necessary
governmental agencies in China related to this acquisition,
and
|
||
•
|
the
receipt of two years of audited financial statements of Shandong Jiajia
together with the interim period for the nine months ended
September 30, 2007.
|
•
|
effective
consolidation of resources among relatively independent
affiliates;
|
|
•
|
maintaining
the balance between the collection of accounts receivable and the
extension of longer credit terms offered to our current and prospective
clients in an effort to boost sales; and
|
|
•
|
our
ability to effectively handle the increases in costs due to soaring fuel
prices and the weak U.S. dollar.
|
|
•
|
When
merchandise departs the shipper’s location when the trade pricing terms
are CIF (cost, insurance and freight),
|
|
•
|
When
merchandise departs the shipper’s location when the trade pricing terms
are CFR (cost and freight cost), or
|
|
•
|
When
the merchandise arrives at the destination port if the trade pricing terms
are FOB (free on board)
destination.”
|
Year
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Numerator:
|
Restated
|
|||||||
Net
income (loss) applicable to common stockholders (A)
|
$
|
(2,086,618
|
)
|
$
|
275,630
|
|||
Denominator:
|
||||||||
Denominator
for basic earnings per share
|
||||||||
Weighted
average shares outstanding (B)
|
26,823,216
|
3,442,152
|
||||||
Denominator
for diluted earnings per share
|
||||||||
Treasury
Stock method
|
||||||||
Options
|
-
|
5,127
|
||||||
Series
A and B Convertible Preferred Stock
|
-
|
42,329
|
||||||
Adjusted
weighted average shares outstanding (C)
|
26,823,216
|
3,489,608
|
||||||
Basic
and Diluted (Loss) Earnings Per Common Share:
|
||||||||
Earnings
per share- basic (A)/(B)
|
$
|
(0.08
|
)
|
$
|
0.08
|
|||
Earnings
per share- diluted (A)/(C)
|
$
|
(0.08
|
)
|
$
|
0.08
|
Year
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
Options
|
2,000,000
|
-
|
||||||
Warrants
|
117,500
|
117,500
|
||||||
Class
A and B Warrants
|
31,558,500
|
-
|
||||||
Series
B Convertible Preferred Stock
|
4,500,000
|
-
|
||||||
38,176,000
|
117,500
|
Year
ended December 31, 2008
|
Year
ended December 31, 2007
|
$
Change
|
%
Change
|
|||||||||||||
Sales
|
$ | 35,561,833 | 35,298,453 | $ | 263,380 | 1 | % | |||||||||
Cost
of Sales
|
34,552,938 | 34,036,196 | 516,742 | 2 | % | |||||||||||
Gross
Profit
|
1,008,896 | 1,262,257 | (253,361 | ) | 20 | % | ||||||||||
Total
Operating Expenses
|
1,003,330 | 678,177 | 325,153 | 48 | % | |||||||||||
Income
(Loss) from Operations
|
5,566 | 584,080 | (578,514 | ) | 99 | % | ||||||||||
Total
Other Income (Loss)
|
(1,666,094 | ) | 13,575 | (1,679,669 | ) | N/M | ||||||||||
Net
Income (Loss)
|
(2,086,618 | ) | $ | 275,630 | $ | (2,362,248 | ) | 857 | % | |||||||
Comprehensive
income (loss)
|
$ | (2,047,723 | ) | $ | 46,654 | $ | (2,094,377 | ) | 4489 | % |
December
31, 2008
|
December
31, 2007
|
Increase/
Decrease
|
||||||||||||||||||
($)
|
($)
|
($)
|
%
Change
|
|||||||||||||||||
Restated
|
||||||||||||||||||||
Cash
|
$ | 3,156,362 | $ | 1,121,605 | $ | 2,034,757 | 181 | % | ||||||||||||
Accounts
receivable, net
|
2,739,173 | 3,131,831 | (392,658 | ) | (13 | %) | ||||||||||||||
Accounts
receivable - related party
|
- | 7,000 | (7,000 | ) | (100 | %) | ||||||||||||||
Due
from related parties
|
518,433 | 511,435 | 6,998 | 1 | % | |||||||||||||||
Prepayments
and other current assets
|
327,951 | 328,065 | (114 | ) | N/M | |||||||||||||||
Total
current assets
|
$ | 6,741,920 | $ | 5,099,936 | $ | $ | 1,641,984 | 32 | % | |||||||||||
Cash
overdraft
|
$ | - | $ | 12,633 | $ | (12,633 | ) | (100 | %) | |||||||||||
Accounts
payable - trade
|
1,752,862 | 3,608,885 | (1,856,023 | ) | (51 | %) | ||||||||||||||
Accrued
compensation - related party
|
- | 446,985 | (446,985 | ) | (100 | %) | ||||||||||||||
Other
accruals and current liabilities
|
1,743,953 | 485,101 | 1,258,852 | 260 | % | |||||||||||||||
Convertible
note payable/related party
|
- | 2,373,179 | (2,373,179 | ) | (100 | %) | ||||||||||||||
Advances
from customers
|
1,133,283 | 683,436 | 449,847 | 66 | % | |||||||||||||||
Due
to related parties
|
378,697 | 229,252 | 149,445 | 65 | % | |||||||||||||||
Foreign
tax payable
|
34,897 | 36,117 | (1,219 | ) | (3 | %) | ||||||||||||||
Total
current liabilities
|
$ | 5,043,693 | $ | 7,875,588 | $ | (2,831,895 | ) | -36 | % |
December
31, 2008
|
December
31, 2007
|
|||||||||||||||
United
States
|
$ | 201,605 | 6 | % | $ | 215 | 0.02 | % | ||||||||
China
|
2,954,757 | 94 | % | 1,121,390 | 99.98 | % | ||||||||||
$ | 3,156,362 | 100 | % | $ | 1,121,605 | 100 | % |
•
|
satisfied
$448,985 of accrued compensation due our then president and CEO, Mr.
Jeffrey Harrell, through the issuance of 581,247 shares of our common
stock, and
|
|
•
|
converted
a $2,521,379 note payable due a principal shareholder of our company, Mr.
David Aubel, into 2,864,606 shares of our common
stock.
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
|
Name
|
Age
|
Positions
|
Wei
Chen
|
39
|
Chairman
of the Board, Chief Executive Officer, President, Secretary and
Treasurer
|
Hui
Liu
|
47
|
Director,
Chief Executive Officer of Shandong
Jiajia
|
•
|
compliance
with laws, rules and regulations,
|
|
•
|
conflicts
of interest,
|
|
•
|
insider
trading,
|
|
•
|
corporate
opportunities,
|
|
•
|
competition
and fair dealing,
|
|
•
|
discrimination
and harassment,
|
|
•
|
health
and safety,
|
|
•
|
record
keeping,
|
|
•
|
confidentiality,
|
|
•
|
protection
and proper use of company assets,
|
|
•
|
payments
to government personnel,
|
|
•
|
waivers
of the Code of Business Conduct and Ethics,
|
|
•
|
reporting
any illegal or unethical behavior, and
|
|
•
|
compliance
procedures.
|
•
|
disclosures
made in our filings with the Securities and Exchange
Commission,
|
|
•
|
deficiencies
in internal controls or fraud involving management or other employees who
have a significant role in our financial reporting, disclosure or internal
controls,
|
|
•
|
conflicts
of interests, and
|
|
•
|
knowledge
of material violations of securities or other laws, rules or regulations
to which we are subject.
|
•
|
understands
generally accepted accounting principles and financial
statements,
|
|
•
|
is
able to assess the general application of such principles in connection
with accounting for estimates, accruals and reserves,
|
|
•
|
has
experience preparing, auditing, analyzing or evaluating financial
statements comparable to the breadth and complexity to our financial
statements,
|
|
•
|
understands
internal controls over financial reporting, and
|
|
•
|
understands
audit committee functions.
|
•
|
our
principal executive officer or other individual serving in a similar
capacity,
|
|
•
|
our
two most highly compensated executive officers other than our principal
executive officer who were serving as executive officers at December 31,
2008 as that term is defined under Rule 3b-7 of the Securities Exchange
Act of 1934, and
|
|
•
|
up
to two additional individuals for whom disclosure would have been required
but for the fact that the individual was not serving as an executive
officer at December 31, 2008.
|
NAME
AND PRINCIPAL POSITION
(A)
|
YEAR
(B)
|
SALARY
($)
(C)
|
BONUS
($)
(D)
|
STOCK
AWARDS
($)
(E)
|
OPTION
AWARDS
($)
(F)
|
NON-EQUITY
INCENTIVE
PLAN
COMPENSATION
($)
(G)
|
NONQUALIFIED
DEFERRED
COMPENSATION
EARNINGS
($)
(H)
|
ALL
OTHER
COMPENSATION
($)
(I)
|
TOTAL
($)
(J)
|
||||||||||||||||||||||||
V.
Jeffrey Harrell (1)
|
2008
|
61,500 | — | — | — | — | — | — | 61,500 | ||||||||||||||||||||||||
2007
|
200,000 | — | — | — | — | — | — | 200,000 | |||||||||||||||||||||||||
Hui
Liu (2)
|
2008
|
25,854 | — | — | — | — | — | — | 25,854 | ||||||||||||||||||||||||
2007
|
3,732 | 14,785 | — | — | — | — | 11,500 | 30,017 | |||||||||||||||||||||||||
Wei
Chen
|
2008
|
25,854 | -— | — | — | — | — | — | 25,854 | ||||||||||||||||||||||||
2007
|
26,642 | — | — | — | — | — | — | 26,642 |
|
(1)
|
Mr.
Harrell served as our Chief Executive Officer from 1999 until July
2008. During 2007 Mr. Harrell converted $193,500 of accrued but
unpaid compensation into 135,000 shares of our common stock. At December
31, 2007 we owned Mr. Harrell an aggregate of approximately $419,000 of
accrued but unpaid compensation. As contemplated by the acquisition
agreement for Shandong Jiajia, in March 2008 he converted all amounts due
him into 581,247 shares of our common stock in full satisfaction of those
obligations.
|
(2)
|
In
2007 Mr. Liu received a $14,785 bonus. All other compensation included
$10,958 for travel allowance and $542 for a car
allowance
|
OPTION
AWARDS
|
STOCK
AWARDS
|
|||||||||||||||||||||||||||||||||||
Name
(a)
|
Number
of securities underlying unexercised options
(#)
exercisable
(b)
|
Number
of
Securities
Underlying
Unexercised
options
(#)
unexercisable
(c)
|
Equity
Incentive
plan
awards:
Number
of
Securities
Underlying
Unexercised
Unearned
options
(#)
(d)
|
Option
Exercise
price
($)
(e)
|
Option
Expiration
date
(f)
|
Number
of
shares
or
units
of
stock
that
have
not vested
(#)
(g)
|
Market
value of shares or units of stock that have not vested ($)
(h)
|
Equity
incentive plan awards: Number of unearned shares, units or other rights
that have not vested (#)
(i)
|
Equity
incentive plan awards: Market or payout value of unearned shares, units or
other rights that have not vested (#)
(j)
|
|||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||
V.
Jeffrey Harrell
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Hiu
Liu
|
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Wei
Chen
|
2,000,000 | (1) | — | — | $ | 0.30 |
January
1, 2011
|
— | — | — | — |
(1)
|
Options
were issued in connection with the January 28, 2008 amendment to the
December 31, 2007 acquisition agreement between us and Shandong Jiajia as
additional consideration Mr. Chen in connection with such
acquisition.
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
•
|
each
person known by us to be the beneficial owner of more than 5% of our
common stock;
|
|
•
|
each
of our directors;
|
|
•
|
each
of our named executive officers; and
|
|
•
|
our
named executive officers, directors and director nominees as a
group.
|
Amount
and Nature of Beneficial Ownership (1)
|
||||||||
Name
|
#
of Shares
|
%
of Class
|
||||||
Wei
Chen (2)
|
4,762,500 | 13.0 | % | |||||
Hui
Liu
|
312,500 | * | ||||||
All
named executive officers and directors as a group (two persons)
(2)
|
5,075,000 | 13.9 | % | |||||
China
Direct, Inc. (3)
|
9,512,500 | 24.3 | % |
|
*
|
represents
less than 1%
|
|
(1)
The inclusion of any shares as deemed beneficially owned does not
constitute an admission of beneficial ownership by the named
shareholder.
|
|
(2)
The number of shares beneficially owned by Mr. Chen includes 2,000,000
shares of our common stock issuable upon the exercise of warrants with an
exercise price of $0.30 per share.
|
|
(3)
The shares of our common stock shown beneficially owned by China Direct,
Inc. includes:
|
•
|
4,750,000
shares of common stock held of record by Capital One Resource Co., Ltd., a
wholly owned subsidiary of CDI China, Inc., which is in turn a wholly
owned subsidiary of China Direct, Inc.,
|
|
•
|
62,500
shares of common stock held of record by China Direct Investments, Inc., a
wholly owned subsidiary of China Direct, Inc.,
|
|
•
|
200,000
shares of our common stock underlying Class A warrants;
and
|
|
•
|
450,000
shares of Series B Convertible Preferred Stock held of record by
China Direct Investments, Inc. which has no voting rights but is
convertible at the option of the holder into 4,500,000 shares of common
stock.
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
|
•
|
for
the first and second quarters of 2005 at $0.01 per
share;
|
|
•
|
for
the third quarter 2005 at 20% of the closing price on the date of
conversion; and
|
|
•
|
for
the fourth quarter 2005 and beyond at 40% of the closing price on the date
of conversion.
|
Funds
|
Intrinsic
|
|||||||
Advanced
|
Value
|
|||||||
2005
|
$
|
160,000
|
$
|
240,000
|
||||
2006
|
1,730,168
|
2,595,251
|
||||||
2007
|
874,164
|
1,311,246
|
||||||
2008
|
148,200
|
223,300
|
||||||
Totals
|
$
|
2,912,532
|
$
|
4,368,797
|
Year
|
Number
of Shares Converted
|
Amount
of Note Reduction
|
Intrinsic
Value
|
|||||||||
2005
|
802,500
|
$
|
698,000
|
$
|
14,829,000
|
|||||||
2006
|
592,500
|
1,442,000
|
2,319,000
|
|||||||||
2007
|
1,795,000
|
1,751,720
|
2,821,280
|
|||||||||
2008
|
2,864,606
|
2,521,379
|
659,432
|
|||||||||
6,054,606
|
$
|
6,416,100
|
$
|
20,628,712
|
2008
|
2007
|
|||||||
Restated
|
||||||||
Audit
Fees
|
$ | 72,000 | $ | 65,000 | ||||
Audit-Related
Fees
|
- | - | ||||||
Tax
Fees
|
- | - | ||||||
All
Other Fees
|
- | 18,000 | ||||||
Total
|
$ | 72,000 | $ | 83,000 |
Exhibit No.
|
Description
|
||
3.1 |
Articles
of Incorporation (1)
|
||
3.2 |
Articles
of Amendment (1)
|
||
3.3 |
Articles
of Amendment (5)
|
||
3.4 |
Articles
of Amendment (2)
|
||
3.5 |
Form
of Articles of Amendment (10)
|
||
3.6 |
Bylaws
(1)
|
||
4.1 |
Trilogy
Capital Partners, Inc. Warrant Agreement dated June 1,
2006(3)
|
||
4.2 |
Form
of common stock purchase warrant issued to Mr. Chen
(12)
|
||
4.3 |
Form
of common stock purchase warrant issued in the 2008 Unit Offering
(13)
|
||
10.1 |
Debt
Conversion Agreement with David Aubel dated December 3, 2005
(4)
|
||
10.2 |
Amendment
to Debt Conversion Agreement with David Aubel dated May 15, 2006
(6)
|
||
10.3 |
Consulting
and Management Agreement dated May 22, 2007 with China Direct Investments,
Inc. (7)
|
||
10.4 |
Consulting
and Management Agreement dated September 5, 2007 with Capital One Resource
Co., Ltd (8)
|
||
10.5 |
Acquisition
Agreement dated as of December 31, 2007 between MediaREADY, Inc., Shandong
Jiajia International Freight & Forwarding (Logistics Co.) Ltd., and
Messrs. Hui Liu and Wei Chen (2)
|
||
10.6 |
Finder's
Agreement dated as of December 31, 2007 between MediaREADY, Inc. and
Dragon Venture (Shanghai) Capital Management Co., Ltd.
(2)
|
||
10.7 |
Consulting
Agreement dated as of December 31, 2007 between MediaREADY, Inc. and China
Direct, Inc. (2)
|
||
10.8 |
Form
of Amendment to Acquisition Agreement dated as of January 28, 2008 between
MediaREADY, Inc., Shandong Jiajia International Freight & Forwarding
Co., Ltd., and Messrs. Hui Liu and Wei Chen (9)
|
||
10.9 |
Form
of Amendment to Finder's Agreement dated as of January 28, 2008 between
MediaREADY, Inc. and Dragon Venture (Shanghai) Capital Management Co.,
Ltd. (9)
|
||
10.10 |
Form
of Amendment to Acquisition Agreement dated as of March 13, 2008 between
MediaREADY, Inc., Shandong Jiajia International Freight & Forwarding
Co., Ltd., and Messrs. Hui Liu and Wei Chen (11)
|
||
10.11 |
Lease
Agreement between China Logistics Group, Inc. and ETI International, Inc.
(17)
|
||
10.12 |
Form
of Subscription Agreement for 2008 Unit Offering (13)
|
||
10.13 |
Lease
Agreement between Wei Chen and Shandong Jiajia International Freight &
Forwarding Co., Ltd.(14)
|
||
10.14 |
Lease
Agreement dated December 31, 2008 between Shandong Jiajia International
& Freight Forwarding Co., Ltd. and Shandong Import & Export Co.,
Ltd. (17)
|
||
10.15 |
Assumption
Agreement dated December 31, 2007 between David Aubel and MediaReady, Inc.
(17)
|
||
10.16 |
Conversion
Agreement dated March 20, 2008 between V. Jeffrey Harrell and China
Logistics Group, Inc. (16)
|
||
10.17 |
Conversion
Agreement dated March 20, 2008 between David Aubel and China Logistics
Group, Inc. (16)
|
||
10.18 |
Form
of promissory note in the principal amount of $561,517.27 dated January 1,
2003 issued by Video Without Boundaries, Inc. to Mr. David Aubel
(15)
|
||
10.19 |
Form
of Security Agreement dated May 23, 2001 between Valusales.com, Inc. and
Mr. David Aubel (15)
|
||
14.1 |
Code
of Business Conduct and Ethics (12)
|
||
21.1 |
Subsidiaries
of the Registrant (12)
|
||
31.1 |
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 *
|
||
31.2 |
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 *
|
||
32.1 |
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 *
|
(1 | ) |
Incorporated
by reference to the registration statement on Form 10-SB, SEC File No.
0-31497 as filed with the Securities and Exchange Commission on September
11, 2000, as amended.
|
|
(2 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on January 7,
2008.
|
|
(3 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on June 2,
2006.
|
|
(4 | ) |
Incorporated
by reference to the Annual Report on Form 10-KSB for the year ended
December 31, 2004.
|
|
(5 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on September 27,
2006.
|
|
(6 | ) |
Incorporated
by reference to the Quarterly Report on Form 10-QSB for the period ended
September 30, 2006.
|
|
(7 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on May 23,
2007.
|
|
(8 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on September 10,
2007.
|
|
(9 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on January 31,
2008.
|
|
(10 | ) |
Incorporated
by reference to the definitive information statement on Schedule 14C as
filed on February 14, 2008.
|
|
(11 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on March 18,
2008.
|
|
(12 | ) |
Incorporated
by reference to the Annual Report on Form 10-K for the year ended December
31, 2007.
|
|
(13 | ) |
Incorporated
by reference to the Current Report on Form 8-K as filed on April 24,
2008.
|
|
(14 | ) |
Incorporated
by reference to the Quarterly Report on Form 10-Q/A (Amendment No. 1) for
the period ended June 30, 2008.
|
|
(15 | ) |
Incorporated
by reference to the Quarterly Report on Form 10-Q for the period ended
September 30, 2008.
|
|
(16 | ) |
Incorporated
by reference to the Quarterly Report on Form 10-Q/A (Amendment No. 1) for
the period ended March 31, 2008.
|
|
(17 | ) |
Incorporated
by reference to the registration statement on Form S-1, SEC File No.
333-151783, as amended.
|
December
31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
|
$ | 3,156,362 | $ | 1,121,605 | ||||
Accounts
receivable, net
|
2,739,173 | 3,131,831 | ||||||
Accounts
receivable - related party
|
- | 7,000 | ||||||
Due
from related parties
|
518,433 | 511,435 | ||||||
Prepaid
expense and other current assets
|
327,952 | 328,065 | ||||||
Total
current assets
|
6,741,920 | 5,099,936 | ||||||
Property
and equipment, net
|
44,144 | 42,336 | ||||||
Total
assets
|
$ | 6,786,064 | $ | 5,142,272 | ||||
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Cash
overdraft
|
$ | - | $ | 12,633 | ||||
Accounts
payable - trade
|
1,752,862 | 3,608,885 | ||||||
Accrued
compensation - related party
|
- | 446,985 | ||||||
Accrued
registration rights penalty
|
1,597,000 | - | ||||||
Other
accruals and current liabilities
|
146,953 | 485,101 | ||||||
Convertible
note payable/related party
|
- | 2,373,179 | ||||||
Advances
from customers
|
1,133,283 | 683,436 | ||||||
Due
to related parties
|
378,697 | 229,252 | ||||||
Foreign
tax payable
|
34,898 | 36,117 | ||||||
Total
current liabilities
|
5,043,693 | 7,875,588 | ||||||
Minority
interest
|
794,886 | 601,028 | ||||||
Shareholders'
deficit:
|
||||||||
Preferred
stock - $0.001 par value, 10,000,000 shares authorized
|
||||||||
Series
A Convertible Preferred Stock - 1,000,000 shares issued
|
||||||||
and
oustanding at December 2007
|
- | 1,000 | ||||||
Series
B Convertible Preferred Stock - 450,000 and 1,295,000
shares
|
||||||||
issued
and oustanding at December 31, 2008 and 2007, respectively
|
450 | 1,295 | ||||||
Common
stock, $.001 par value, 500,000,000 shares authorized;
|
||||||||
34,508,203
shares and 4,999,350 shares issued and outstanding
|
||||||||
at
December 31, 2008 and 2007, respectively
|
34,508 | 4,999 | ||||||
Additional
paid-in capital
|
3,572,042 | (2,729,846 | ) | |||||
Accumulated
deficit
|
(2,472,020 | ) | (385,402 | ) | ||||
Accumulated
other comprehensive loss
|
(187,495 | ) | (226,390 | ) | ||||
Total
shareholders' equity (deficit)
|
947,485 | (3,334,344 | ) | |||||
Total
liabilities and shareholders' equity
|
$ | 6,786,064 | $ | 5,142,272 |
For
the Years Ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
Sales
|
$ | 35,561,833 | $ | 35,298,453 | ||||
Cost
of sales
|
34,552,938 | 34,036,196 | ||||||
Gross
profit
|
1,008,895 | 1,262,257 | ||||||
Operating
expenses:
|
||||||||
Selling
expenses
|
- | 37,546 | ||||||
General
and administrative
|
1,333,769 | 640,631 | ||||||
Recovery
of bad debt
|
(330,439 | ) | - | |||||
Total
operating expenses
|
1,003,330 | 678,177 | ||||||
Income
from operations
|
5,565 | 584,080 | ||||||
Other
income (expenses):
|
||||||||
Other
income
|
15,218 | 13,575 | ||||||
Registration
rights penalty
|
(1,597,000 | ) | - | |||||
Non-operating
bad debt expense
|
(85,844 | ) | - | |||||
Interest
income
|
1,532 | - | ||||||
Total
other income (expenses)
|
(1,666,094 | ) | 13,575 | |||||
Income
(loss) before income taxes and minority interest
|
(1,660,529 | ) | 597,655 | |||||
Foreign
taxes
|
269,600 | 57,205 | ||||||
Income
(loss) before minority interest
|
(1,930,129 | ) | 540,450 | |||||
Minority
interest in income of subsidiary
|
156,489 | 264,820 | ||||||
Net
income (loss)
|
(2,086,618 | ) | 275,630 | |||||
Other
comprehensive income (loss):
|
||||||||
Foreign
currency translation adjustments
|
38,895 | (228,976 | ) | |||||
Comprehensive
(loss) income
|
$ | (2,047,723 | ) | $ | 46,654 | |||
Basic
and diluted (loss) income per common share:
|
||||||||
Net
loss per common share
|
$ | (0.08 | ) | $ | 0.08 | |||
Weighted
average number of shares outstanding:
|
||||||||
Basic
|
26,823,216 | 3,442,152 | ||||||
Diluted
|
26,823,216 | 3,489,608 |
Accumulated
|
||||||||||||||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||||||||||||||
Preferred
A Stock
|
Preferred
B Stock
|
Common
Stock
|
Paid-In
|
Accumulated
|
Comprehensive
|
|||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income/Loss
|
Total
|
|||||||||||||||||||||||||||||||
Balance
December 31, 2006
|
1,000,000 | $ | 1,000 | 120,000 | $ | 120 | 2,750,291 | $ | 2,750 | $ | 863,175 | $ | (995,334 | ) | $ | 2,586 | $ | (125,703 | ) | |||||||||||||||||||||
Stock
issued for acquisition
|
- | - | 1,175,000 | 1,175 | 450,000 | 450 | 10,398,825 | - | - | 10,400,450 | ||||||||||||||||||||||||||||||
Recapitalization
for reverse merger
|
- | - | - | - | 1,798,750 | 1,799 | (14,641,049 | ) | - | - | (14,639,250 | ) | ||||||||||||||||||||||||||||
Recapitalization
for reverse merger
|
- | - | 1,175,000 | 1,175 | 2,249,059 | 2,249 | (3,593,021 | ) | 334,302 | - | (3,255,295 | ) | ||||||||||||||||||||||||||||
Foreign
currency translation adjustments
|
- | - | - | - | - | - | - | - | (228,976 | ) | (228,976 | ) | ||||||||||||||||||||||||||||
Net
loss for the year
|
- | - | - | - | - | - | - | 275,630 | - | 275,630 | ||||||||||||||||||||||||||||||
Balance
December 31, 2007
|
1,000,000 | 1,000 | 1,295,000 | 1,295 | 4,999,350 | 4,999 | (2,729,846 | ) | (385,402 | ) | (226,390 | ) | (3,334,344 | ) | ||||||||||||||||||||||||||
Convertible
note payable to related party converted
|
||||||||||||||||||||||||||||||||||||||||
to
capital
|
- | - | - | - | 2,864,606 | 2,865 | 2,518,514 | - | - | 2,521,379 | ||||||||||||||||||||||||||||||
Conversion
of Seiries A Preferred to common stock
|
(1,000,000 | ) | (1,000 | ) | - | 2,500,000 | 2,500 | (1,500 | ) | - | - | - | ||||||||||||||||||||||||||||
Conversion
of Seiries B Preferred to common stock
|
- | - | (845,000 | ) | (845 | ) | 8,450,000 | 8,450 | (7,605 | ) | - | - | - | |||||||||||||||||||||||||||
Accrued
salary for president converted to stock
|
- | - | - | - | 581,247 | 581 | 448,404 | - | - | 448,985 | ||||||||||||||||||||||||||||||
Private
placement
|
- | - | - | - | 15,113,000 | 15,113 | 3,344,075 | - | - | 3,359,188 | ||||||||||||||||||||||||||||||
Foreign
currency translation adjustment
|
- | - | - | - | - | - | - | - | 38,895 | 38,895 | ||||||||||||||||||||||||||||||
Net
loss for the period
|
- | - | - | - | - | - | - | (2,086,618 | ) | - | (2,086,618 | ) | ||||||||||||||||||||||||||||
Balance
December 31, 2008
|
- | $ | - | 450,000 | $ | 450 | 34,508,203 | $ | 34,508 | $ | 3,572,042 | $ | (2,472,020 | ) | $ | (187,495 | ) | $ | 947,485 |
For
the Year Ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
Restated
|
|||||||
Net
(loss) income
|
$ | (2,086,618 | ) | $ | 275,630 | |||
Adjustments
to reconcile net income (loss) to net cash provided by (used in) operating
activities:
|
||||||||
Depreciation
expense
|
35,438 | 18,406 | ||||||
Minority
interest
|
156,489 | 264,820 | ||||||
Allowance
for doubtful accounts
|
(330,439 | ) | 68,149 | |||||
Registration
rights penalty
|
1,597,000 | |||||||
Changes
in assets and liabilities:
|
||||||||
(Increase)
decrease in accounts receivable
|
723,098 | (1,227,947 | ) | |||||
(Increase)
in accounts receivable - related party
|
7,000 | - | ||||||
(Increase)
decrease in other receivables
|
- | 114,158 | ||||||
Decrease
in other assets
|
- | (419 | ) | |||||
Decrease
(increase) in prepaid expenses and other current assets
|
114 | (313,237 | ) | |||||
(Decrease)
increase in accounts payable
|
(1,856,023 | ) | 1,054,327 | |||||
(Decrease)
in other accruals and current liabilities
|
(338,148 | ) | (162,440 | ) | ||||
(Decrease)
increase in taxes payable
|
(1,220 | ) | 27,245 | |||||
Increase
in advances from customers
|
449,848 | 572,877 | ||||||
NET
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
|
(1,643,461 | ) | 691,569 | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital
expenditures
|
(37,246 | ) | (13,504 | ) | ||||
Advances
to related parties
|
(6,998 | ) | (419,940 | ) | ||||
NET
CASH USED IN FINANCING ACTIVITIES
|
(44,244 | ) | (433,444 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from 2008 Unit Offering
|
3,778,250 | - | ||||||
2008
Unit Offering expenses
|
(420,863 | ) | - | |||||
Repayment
of short-term financing
|
(12,633 | ) | - | |||||
Advances
from related parties
|
299,285 | - | ||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
3,644,039 | - | ||||||
EFFECT
OF EXCHANGE RATE ON CASH
|
78,423 | 40,572 | ||||||
NET
INCREASE IN CASH
|
2,034,757 | 298,697 | ||||||
CASH -
beginning of year
|
1,121,605 | 822,908 | ||||||
CASH
- end of year
|
$ | 3,156,362 | $ | 1,121,605 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid during the period for foreign taxes
|
$ | 34,524 | $ | 31,361 | ||||
Convertible
note payable converted to common stock -related party
|
$ | 2,521,379 | $ | - | ||||
Accrued
compensation converted to common stock - related party
|
$ | 448,985 | $ | - |
•
|
the
prior receipt of all regulatory approvals and licenses from the necessary
governmental agencies in China related to this acquisition,
and
|
|
•
|
the
receipt of two years of audited financial statements of Shandong Jiajia
together with the interim period for the nine months ended
September 30, 2007.
|
•
|
effective
consolidation of resources among relatively independent
affiliates;
|
|
•
|
maintaining
the balance between the collection of accounts receivable and the
extension of longer credit terms offered to our current and prospective
clients in an effort to boost sales; and
|
|
•
|
our
ability to effectively handle the increases in costs due to soaring fuel
prices and the weak U.S. dollar.
|
•
|
the
recognition of an agreement to issue 450,00 shares of Series B preferred
stock with a fair value of $3,780,000;
|
|
•
|
the
recognition of the Company’s acquisition of a 51% interest in Shandong
Jiajia as a capital transaction implemented through reverse acquisition
accounting;
|
|
•
|
the
correction of the accounting treatment accorded a convertible note payable
to a related party and principal stockholder, Mr. David Aubel;
and,
|
|
•
|
the
restatement of historical balance sheets and related disclosures to give
retroactive effect to a 1 for 40 reverse stock split completed on March
11, 2008;
|
•
|
the
recognition of an accrual of certain professional fees, totaling $141,800
in expense, which were erroneously omitted.
|
|
•
|
the
adjustment to the fair value of assets and liabilities of the accounting
acquiree (formerly MediaReady, Inc.) recognized in connection with the
acquisition of a 51% interest in Shandong Jiajia International Freight
Forwarding Co., Ltd. accounted for as a capital transaction implemented
through a reverse acquisition;
|
Adjustment
|
||||||||||||
As
Filed
|
To
Restate
|
Restated
|
||||||||||
Other
Accruals and Current Liabilites
|
$
|
343,301
|
$
|
141,800
|
$
|
485,101
|
||||||
Accumulated
Deficit
|
$
|
(313,084
|
)
|
$
|
(141,800
|
)
|
$
|
(454,884
|
)
|
|||
Minority
Interest component (49%)
|
69,482
|
69,482
|
||||||||||
$
|
(313,084
|
)
|
$
|
(72,318
|
)
|
$
|
(385,402
|
)
|
As
Filed
|
Adjustment
to Restate
|
Restated
|
||||||||||
General
and administrative expenses
|
$ | 498,831 | $ | 141,800 | $ | 640,631 | ||||||
Net
Income (Loss)
|
347,948 | (141,800 | ) | 206,148 | ||||||||
Minority
Interest component (49%)
|
69,482 | ) | 69,482 | |||||||||
Earnings
(Loss) Per Share:
|
347,948 | (72,318 | ) | 275,630 | ||||||||
Basic
|
$ | 0.10 | $ | (0.02 | ) | $ | 0.08 | |||||
Diluted
|
$ | 0.04 | $ | (0.04 | ) | $ | 0.08 |
|
•
|
In
connection with the recording of our acquisition of a 51% interest in
Shandong Jiajia on December 31, 2007, the Company failed to adequately
recognize all adjustments necessary to properly reflect the fair value of
the accounting acquiree (then named MediaReady, Inc.) as of the effective
date of the transactions as provided under the provisions of Statement of
Financial Accounting Standards No. 141, Business
Combinations. As a result of this re-evaluation, several
assets and liabilities were adjusted to fair value as of the transaction
date. These corrections resulted in the restatement to our
balance sheet as of December 31, 2007. While the revaluation
did not affect our statements of operations or earnings per share as of
December 31, 2007. These fair value adjustments did not affect
our consolidated statements of operations or earnings (loss) per share for
the periods presented.
|
Adjustment
|
||||||||||||
As
Filed
|
To
Restate
|
Restated
|
||||||||||
Accounts
receivable – related party (a)
|
$
|
160,350
|
$
|
(153,350
|
)
|
$
|
7,000
|
|||||
Deferred
expenses
|
5,450
|
(5,450
|
)
|
-
|
||||||||
Prepaid
expenses and other current assets
|
338,895
|
(10,830
|
)
|
328,065
|
||||||||
Property
and equipment, net
|
46,622
|
(4,286
|
)
|
42,336
|
||||||||
Deposits
|
12,000
|
(12,000
|
)
|
-
|
||||||||
$
|
563,317
|
$
|
(185,916
|
)
|
$
|
377,401
|
||||||
Accounts
payable – trade (b)
|
$
|
4,444,825
|
$
|
(835,940
|
)
|
$
|
3,608,885
|
|||||
Other
accruals and current liabilities (c)
|
343,301
|
141,800
|
485,101
|
|||||||||
Minority
Interest (d)
|
670,510
|
(69,482
|
)
|
601,028
|
||||||||
Additional
paid-in capital
|
(3,379,049
|
)
|
649,203
|
(2,729,846
|
)
|
|||||||
Accumulated
deficit
|
(313,084
|
)
|
(72,318
|
)
|
(385,402
|
)
|
||||||
$
|
1,766,503
|
$
|
(186,737
|
)
|
$
|
1,579,766
|
(a)
|
Reflects
fair value adjustment to accounts receivable balance due from a single
customer subsequently deemed uncollectible.
|
(b)
|
Reflects
fair value adjustment including $764,220 due to a single vendor, formally
forgiven in April 2008, and previously reported as a gain in the second
quarter 2008.
|
(c)
|
Reflects
recording of accrued professional fees at December 31, 2007 by Shandong
Jiajia as discussed above.
|
(d)
|
Reflects
the effect on minority interest of $141,800 in professional fees
recognized by Shandong Jiajia.
|
|
•
|
When
merchandise departs the shipper’s location when the trade pricing terms
are CIF (cost, insurance and freight),
|
|
•
|
When
merchandise departs the shipper’s location when the trade pricing terms
are CFR (cost and freight cost), or
|
|
•
|
When
the merchandise arrives at the destination port if the trade pricing terms
are FOB (free on board)
destination.
|
Year
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Numerator:
|
Restated
|
|||||||
Net
income (loss) applicable to common stockholders (A)
|
$
|
(2,086,618
|
)
|
$
|
275,630
|
|||
Denominator:
|
||||||||
Denominator
for basic earnings per share
|
||||||||
Weighted
average shares outstanding (B)
|
26,823,216
|
3,442,152
|
||||||
Denominator
for diluted earnings per share
|
||||||||
Treasury
Stock method
|
||||||||
Options
|
-
|
5,127
|
||||||
Series
A and B Convertible Preferred Stock
|
-
|
42,329
|
||||||
Adjusted
weighted average shares outstanding (C)
|
26,823,216
|
3,489,608
|
||||||
Basic
and Diluted (Loss) Earnings Per Common Share:
|
||||||||
Earnings
per share- basic (A)/(B)
|
$
|
(0.08
|
)
|
$
|
0.08
|
|||
Earnings
per share- diluted (A)/(C)
|
$
|
(0.08
|
)
|
$
|
0.08
|
Year
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
Options
|
2,000,000
|
-
|
||||||
Warrants
|
117,500
|
117,500
|
||||||
Class
A and B Warrants
|
31,558,500
|
-
|
||||||
Series
B Convertible Preferred Stock
|
4,500,000
|
-
|
||||||
38,176,000
|
117,500
|
2008
|
2007
|
|||||||
Restated
|
||||||||
Trade
receivables
|
$
|
3,203,448
|
$
|
3,926,546
|
||||
Less:
allowance for doubtful accounts
|
(464,275
|
)
|
(794,715
|
)
|
||||
$
|
2,739,173
|
$
|
3,131,831
|
•
|
For
the first and second quarters of 2005 at $0.01 per
share;
|
|
•
|
For
the third quarter 2005 at 20% of the closing price on the date of
conversion; and
|
|
•
|
For
the fourth quarter 2005 and beyond at 40% of the closing price on the date
of conversion
|
Funds
|
Intrinsic
|
|||||||
Year
|
Advanced
|
Value
|
||||||
2005
|
$
|
160,000
|
$
|
240,000
|
||||
2006
|
1,730,168
|
2,595,251
|
||||||
2007
|
874,164
|
1,311,246
|
||||||
2008
|
148,200
|
222,300
|
||||||
$
|
2,912,532
|
$
|
4,368,797
|
Year
|
Number
of Shares Converted
|
Amount
of Note Reduction
|
Intrinsic
Value
|
|||||||||
2005
|
802,500
|
$
|
698,000
|
$
|
14,829,000
|
|||||||
2006
|
592,500
|
1,445,000
|
2,319,000
|
|||||||||
2007
|
1,795,000
|
1,751,720
|
2,821,280
|
|||||||||
2008
|
2,864,606
|
2,521,380
|
(659,432
|
)
|
||||||||
Total
|
6,054,606
|
$
|
6,416,100
|
$
|
20,628,712
|
Useful
Lives
|
2008
|
2007
|
|||||||
Restated
|
|||||||||
Computer
equipment
|
4
years
|
$
|
37,246
|
$
|
228,707
|
||||
Software
|
3
years
|
-
|
361,861
|
||||||
Furniture
and equipment
|
4-5
years
|
89,745
|
112,297
|
||||||
Total:
|
126,991
|
702,865
|
|||||||
Less:
accumulated depreciation
|
(82,847)
|
(660,529)
|
|||||||
$
|
44,144
|
$
|
42,336
|
•
|
effected
a one for 40 reverse stock split of its issued and outstanding common
stock,
|
|
•
|
increased
the number of authorized preferred stock shares from 5,000,000 to
10,000,000 shares, and
|
|
•
|
increased
the number of common stock shares from 200,000,000 shares to 500,000,000
shares.
|
•
|
issue
additional shares to the purchasers to take into account the amount paid
by the purchaser as of the closing date for the shares included in the
units so that the per share price paid by the purchaser equals the lower
price in the subsequent issuance,
|
|
•
|
reduce
the warrant exercise price of any unexercised warrants then held by the
purchaser to such lower price, and
|
|
•
|
if
necessary, issue additional shares to purchaser to take into account the
amount paid, whether in cash or by cashless exercise, by the purchaser if
the purchaser has exercised any warrants so that the per share exercise
price and to the exercise price for the exercised warrants equals the
lower price of the subsequent
issuance.
|
•
|
strategic
license agreements or similar partnering arrangements provided that the
issuances are not for the purpose of raising capital and there are no
registration rights granted,
|
|
•
|
strategic
mergers, acquisitions or consolidation or purchase of substantially all of
the securities or assets of a corporation or other entity provided that we
do not grant the holders of such securities registration rights,
and
|
|
•
|
the
issuance of common stock or options pursuant to stock option plans and
employee purchase plans at exercise prices equal to or higher than the
closing price of our common stock on the issue/grant date or as a result
of the exercise of warrants issued either in the 2008 Unit Offering or
which were outstanding prior to the 2008 Unit
Offering.
|
•
|
until
the earlier of the registration statement having been effective for 240
days or the date on which all the shares of common stock sold in the
offering, including the shares underlying the warrants, have been sold we
will not file any additional registration statements, other than a Form
S-8, and
|
|
•
|
until
the earlier of two years from the closing date or the date on which all
shares of common stock sold in the offering, including the shares
underlying the warrants, have been sold or transferred we agreed we would
not:
|
|
•
|
amend
our articles of incorporation or bylaws so as to adversely affect the
rights of the investors,
|
|
•
|
repurchase
or otherwise acquire any of our securities or make any dividends or
distributions of our securities, or
|
|
•
|
prepay
any financing related or other outstanding debt
obligations.
|
Shares
|
||||
Settlement
of obligation to former President and CEO
|
581,247
|
|||
Settlement
(conversion) of note payable to principal shareholder
|
2,864,606
|
|||
Conversion
1,000,000 shares of Series A Convertible Preferred Stock
|
2,500,000
|
|||
Conversion
of 845,000 shares of Series B Convertible Preferred Stock
|
8,450,000
|
|||
2008
Unit offering
|
15,113,000
|
|||
29,508,853
|
•
|
in
connection with the acquisition of the 51% interest in Shandong Jiajia
effective December 31, 2007:
|
||
•
|
issued
250,000 share of common stock to Capital One Resources Co., Ltd. in
connection with consulting services rendered in the Shandong Jiajia
transaction. The shares had a fair value at issuance of
$380,000,
|
||
•
|
issued
1,000,000 of Series A preferred stock to finance, in part, the acquisition
of a 51% interest in a company incorporated in the People Republic of
China, Shandong Jiajia, at a fair value of $2.10 per preferred share, for
a total of $2,100,000,
|
||
•
|
issued
120,000 shares of Series B preferred stock as partial compensation in
connection with the acquisition of a 51% interest in Shandong Jiajia
valued at $8.00 per preferred share, for a total of $960,000,
|
||
•
|
issued
an additional 725,000 shares of Series B preferred stock to third parties
for services rendered in connection with the Shandong Jiajia transaction
at a fair value of $8.40 per share, for a total of
$6,090,000,
|
||
•
|
granted
stock options to purchase 2,000,000 shares of common stock to finance, in
part, the purchase of a 51% interest in a company incorporated in the
Peoples Republic of China, Shandong Jiajia, at a fair value of
$480,000,
|
||
•
|
issued
62,500 shares of common stock to China Direct Investments, Inc. under a
management consulting agreement. The shares had a fair value of
$168,000 at issuance,
|
||
•
|
issued
2,500 shares of common stock to an employee for services rendered at $2.60
per share, for a total of $6,500,
|
||
•
|
issued
16,250 shares of common stock to third parties for services rendered with
a fair value of $58,950,
|
||
•
|
cancelled
12,500 shares held in treasury at $15.00 per share, for a total of
$187,500,
|
||
•
|
a
related party, Mr. David Aubel, converted $1,751,720 in convertible notes
payable into 1,795,000 shares of common stock at prices ranging $0.28 to
$2.00 per share,
|
||
•
|
the
Company president, Mr. V Jeffrey Harrell, converted $193,500 in accrued
compensation into 135,000 shares of common stock at $1.44 per
share,
|
||
•
|
the
Company was released from an obligation to issue 18,000 shares of common
stock to an employee under an employment agreement. Accordingly, during
the year ended December 31, 2007 the Company reversed the amounts
expensed for the fair market value of the stock during the years ended
December 31, 2006, 2005 and 2004, respectively, for a total of
$221,100,
|
Risk-free
rate
|
2.5%
|
Expected
Volatility
|
175%
|
Life
|
3
years
|
Dividend
yield
|
0%
|
Shares
Underlying options
|
Weighted
Average Exercise Price
|
Weighted
Average Contractual Term (years)
|
Aggregate
Intrinsic Value
|
|||||||||||||
Outstanding
at December 31, 2007
|
2,000,000
|
$
|
0.30
|
2.0
|
$
|
-
|
||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Outstanding
at December 31, 2008
|
2,000,000
|
$
|
0.30
|
2.0
|
$
|
-
|
December
31, 2008
|
December
31, 2007
|
||||||||
Restated
|
|||||||||
Risk-free
rate
|
3.0 | % | 4.45 | % | |||||
Volatility
|
100 | % | 96 | % | |||||
Expected
Dividend Yield
|
0 | % | 0 | % |
Shares
Underlying
Warrants
|
Weighted Average
Exercise Price
|
|||||||
Outstanding
at December 31, 2007 (1)
|
117,500
|
$
|
9.69
|
|||||
Granted (2)
|
31,558,500
|
0.42
|
||||||
Exercised
|
—
|
—
|
||||||
Outstanding
at December 31, 2008
|
31,676,000
|
$
|
0.46
|
2008
|
2007
|
|||||||
Restated
|
||||||||
Due
to Xiangfen Chen
|
$
|
123,458
|
$
|
229,252
|
||||
Due
to Bin Liu
|
62,652
|
-
|
||||||
Due
to Tianjin Sincere Logistics Co., Ltd.
|
183,448
|
-
|
||||||
Other
|
9,139
|
|||||||
$
|
378,697
|
$
|
229,252
|
Location
|
Approximate
Square Feet
|
Annual
Rent
|
Additional
Charges
|
Expiration
of Lease
|
||||||
Shanghai
Branch (1)
|
7,008 |
$43,700
(RMB
300,000)
|
$20,440
(RMB
140,622)
|
May
31, 2009
|
||||||
Xiamen
Branch, Xiamen City, Fujian Province (2)
|
1,026 |
$1,459
(RMB
10,800)
|
0 |
December
31, 2009
|
||||||
Tianjin
Branch, Tianjin City (3)
|
3,014 |
$21,962
(RMB
150,000)
|
0 |
May
31, 2013
|
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
US
Operations
|
$
|
(2,249,
494
|
)
|
$
|
-
|
|||
Chinese
Operations
|
588,965
|
597,655
|
||||||
$
|
(1,660,529
|
)
|
$
|
597,655
|
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Resated
|
||||||||
US
Operations
|
$
|
-
|
$
|
-
|
||||
Chinese
Operations
|
269,600
|
57,205
|
||||||
$
|
269,600
|
$
|
57,205
|
Year
Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
Income
tax provision (benefit) at Federal statutory rate
|
$
|
(581,000
|
)
|
$
|
209.000
|
|||
State
income taxes, net of Federal Benefit
|
(76,000
|
)
|
27,000
|
|||||
Permanent
differences
|
632,000
|
-
|
||||||
Temporary
differences
|
123,000
|
-
|
||||||
U.S.
tax rate in excess of foreign tax rate
|
(86,000
|
) |
(39,000
|
)
|
||||
Increase in valuation allowance | 258,000 | - | ||||||
Abatement
of foreign income taxes
|
-
|
(140,000
|
)
|
|||||
Tax
provision (benefit)
|
$
|
270,000
|
$
|
57,000
|
December
31,
|
||||||||
2008
|
2007
|
|||||||
Restated
|
||||||||
Federal
net operating loss carryforward
|
$
|
3,928,000
|
$
|
3,700,000
|
||||
State
net operating loss carryforward
|
633,000
|
600,000
|
||||||
Provisions
|
-
|
-
|
||||||
Timing
differences
|
639,000
|
167,000
|
||||||
5,200,000
|
4,467,000
|
|||||||
Valuation
allowance
|
(5,200,000
|
)
|
(4,467,000
|
)
|
||||
Tax
provision (benefit)
|
$
|
-
|
$
|
-
|
Year
ending December 31, 2008
|
|
$
|
25,492
|
Sales
|
Assets
|
|||||||
United
States
|
$
|
—
|
$
|
201,605
|
||||
Peoples Republic
of China
|
35,561,833
|
6,584,459
|
||||||
$
|
35,561,833
|
$
|
6,786,064
|
China
Logistics Group, Inc.
|
|
Date:
May 18, 2009
|
By:
/s/ Wei Chen
|
Wei
Chen, Chairman, Chief Executive Officer and President (Principal Executive
Officer)
|
Signature
|
Title
|
Date
|
/s/ Wei Chen
|
Chairman
of the Board, Chief Executive Officer and President (Principal Executive
Officer)
|
May
18, 2009
|
Wei Chen | ||
/s/ Wei Chen
|
Chief
Financial Officer (Principal Financial and Accounting
Officer)
|
May
18, 2009
|
Wei Chen | ||
/s/ Hui Liu
|
Director
|
May
18, 2009
|
Hui Liu |