China Logistics Grou (PINK:CHLO)

Item 2.01 Completion of Acquisition or Disposition of Assets.

On December 29, 2014, China Logistics Group, Inc. ( the "Company") discontinued operations in the Tianjin Branch of Shandong Jiajia International Freight & Forwarding Co., Ltd. (“Shandong Jiajia”)(“Tianjin Branch”). Shandong Jiajia and its branches in Shanghai, Qingdao, Tianjin, Xiamen and Lianyungang are companies registed in People's Republic of China and majority owned subsidiaries of the Company.

Tianjin Branch has not been operating profitably in recent years due to the appreciation of Chinese dollar, the slowdown in Chinese economy and the decline in Chinese foreign trade industry. In order to better focus the Company's working capital and efficiency, we have decided to discontinue the operation of Tianjin branch and hold the asset for sale. We expect to recorded a loss of approximately $130,000 related to the disposition of the Tianjin Branch in fiscal 2015.

SHANGHAI, China, March 5, 2014 /PRNewswire/ --

China Logistics Group, Inc. (OTCQB: CHLO), an international freight forwarder and logistics management company, announced today that the company sees opportunity for expansion through potential acquisition or merger in fiscal 2014.

For the past several years the logistics and freight forwarding industry in China has suffered from a sustained weakness in global demand largely due to a prolonged recession in the European Union and a significant slowdown in China's domestic economy. During this time China Logistics Group began several initiatives for growth including diversifying its client base through expansion into new markets and broadening the scope of its services with the addition of limited domestic trucking services.

While China Logistics Group believes its growth initiatives coupled with economic improvements in certain key markets will place the Company on a sustainable growth track, it also sees the potential to further accelerate that growth through strategic acquisition to reach greater economies of scale. As a result management has begun to evaluate several potential acquisition opportunities and is in early stage due diligence with at least one potential acquisition candidate. The Company intends to aggressively pursue these opportunities and is hopeful that at least one strategic acquisition will take place in the current fiscal year.

Danny Chen, Chairman and CEO of China Logistics Group, commented, "We believe the logistics market will gradually recover as the world economy improves making this the perfect time to look for new opportunities to give us an advantage in this competitive market. We believe that the right strategic acquisition or merger will substantially accelerate growth in our business and set the stage for rapid expansion should markets improve substantially in the coming years."

China Logistics Group, Inc. (OTCQB: CHLO), an international freight forwarder and logistics management company, announced today that it expects further expansion in shipping volumes for its South American route out of Shanghai in 2014.

China Logistics began offering freight forwarding services from China to destinations in South America in March of 2012 and further expanded that business in 2013. Trade between China and South America has increased significantly in the past ten years due in large part to strong economic growth in countries like Brazil and Argentina. The Company recently established new agent relationships with two South America based companies, CMA CGM and Evergreen International Corp. The Company estimates freight volume from these two new relationships will be approximately 5,000 TEU (twenty foot equivalent units).

Danny Chen, Chairman and CEO of China Logistics Group, commented, "Trade between China and Latin America has been steadily increasing over the past five years. The top five nations in this trade zone as measured by freight volume were Brazil,Mexico, Chile, Venezuela and Argentina. Management South America represents a perfect business opportunity for the company, and these two new relationships have significant growth potential for the Company in the coming years. We continue to believe the South America route has the potential to become one of the Company's largest revenue-generating shipping routes within the next several years and we intend to work diligently to expand our business in this geographic region."

CHINA LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012

Sales	$	3,192,631		$	6,349,846		$	10,082,430		$	17,917,318
Cost of sales		2,917,863			6,343,360			9,073,975			16,682,335
Gross profit		274,768			6,486			1,008,455			1,234,983

Operating expenses:
Selling, general and administrative		288,291			254,258			907,969			769,870
Gain on disposal of property and equipment		(3,362	)		-			(3,362	)		(1,089	)
Bad debt expense (recovery), net		13,679			(2,877	)		181,030			9,422
Total operating expenses		298,608			251,381			1,085,637			778,203
(Loss) income from operations		(23,840	)		(244,895	)		(77,182	)		456,780

Other income (expense):
Interest income		5,382			3,447			10,503			3,632
Interest expense		(83,392	)		-			(281,074	)		-
Foreign currency transaction loss		(4,206	)		-			(38,662	)		-
Loss from change in fair value of derivative liabilities		(31,802	)		-			(60,642	)		-
Other (expense) income		(1,075	)		36,312			500			33,424
Total other (expense) income, net		(115,093	)		39,759			(369,375	)		37,056
(Loss) income before income taxes		(138,933	)		(205,136	)		(446,557	)		493,836
Benefit from (provision for) income taxes		-			161			-			(3,303	)
Net (loss) income		(138,933	)		(204,975	)		(446,557	)		490,533
Less: net (loss) income attributable to the non-controlling interest		(3,501	)		(94,685	)		(4,966	)		261,242
Net (loss) income attributable to China Logistics Group, Inc. shareholders	$	(135,432	)	$	(110,290	)	$	(441,591	)	$	229,291

Comprehensive income (loss):
Net (loss) income	$	(138,933	)	$	(204,975	)	$	(446,557	)	$	490,533
Foreign currency translation adjustments		2,481			(67,092	)		11,161			(28,263	)
Comprehensive (loss) income		(136,452	)		(272,067	)		(435,396	)		462,270
Less: comprehensive (loss) income attributable to the non-controlling interest		(2,285	)		(127,560	)		503			247,393
Comprehensive (loss) income attributable to China Logistic Group, Inc. shareholders	$	(134,167	)	$	(144,507	)	$	(435,899	)	$	214,877

Net (loss) income per common share:
Basic	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	0.01
Diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	0.00

Weighted average number of shares outstanding:
Basic		101,658,431			41,508,203			73,479,756			41,508,203
Diluted		101,658,431			41,508,203			73,479,756			46,008,203

Item 4.01

Changes in Registrant’s Certifying Accountant

On November 12, 2013, China Logistics Group, Inc. (the “Company" informed its independent registered public accounting firm RBSM LLP that Company would like to terminate the client-auditor relationship, effective immediately and the Company engaged HHC, CPA Corporation (“HHC" as the Company's independent registered public accounting firm. RBSM LLP had served as the Company’s independent registered public accounting firm since February 8, 2013 and reported on the Company’s consolidated financial statements for the year ended December 31, 2012. The dismissal of RBSM LLP and engagement of HHC was approved by the Board of Directors of the Company on November 12, 2013.

The report of RBSM LLP dated May 10, 2013 on our consolidated balance sheet as of December 31, 2012 and the related consolidated statements of operations and comprehensive income, change in shareholders equity and cash flows for the year ended December 31, 2012 did not contained an adverse opinion or a disclaimer of opinion, nor was such report qualified or modified as to uncertainty, audit scope, or accounting principles, except that the report of RBSM LLP on the Company’s financial statements for fiscal year 2012 contained an explanatory paragraph, which noted that there was substantial doubt about the Company’s ability to continue as a going concern. During our most recent fiscal year and the subsequent interim period preceding our decision to dismiss RBSM LLP we had no disagreements with the firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope of procedure which disagreement if not resolved to the satisfaction of RBSM LLP would have caused it to make reference to the subject matter of the disagreement in connection with its report.

During the fiscal year ended December 31, 2012, and during the subsequent interim period through November 12, 2013 , there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.

During our most recent fiscal year and the subsequent interim period prior to retaining HHC (1) neither we nor anyone on our behalf consulted HHC regarding (a) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements or (b) any matter that was the subject of a disagreement or a reportable event as set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K, and (2) HHC did not provide us with a written report or oral advice that they concluded was an important factor considered by us in reaching a decision as to accounting, auditing or financial reporting issue.

We provided RBSM LLP with a copy of this Current Report on Form 8-K prior to its filing with the Securities and Exchange Commission, and requested that the firm furnish us with a letter addressed to the Securities and Exchange Commission stating whether they agree with the statements made in this Current Report on Form 8-K, and if not, stating the aspects with which they do not agree. A copy of the letter provided by RBSM LLP is filed as Exhibit 16.1 to this Current Report on Form 8-K.

Item 4.02

Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Audit Report.

On May 7, 2013, the Board of Directors of China Logistics Group, Inc. determined that certain of the company’s historical consolidated financial statements could no longer be relied upon as a result of errors in these financial statements, including:

•

the consolidated unaudited financial statements for the first three quarters of the years ended December 31, 2012, 2011 and 2010, and

•

the consolidated audited financial statements for the years ended December 31, 2011, 2010 and 2009.

For 2011, we have determined that we incorrectly understated accounts receivable, net, advances to suppliers and accounts payable and accrued expenses and overstated the beginning accumulated deficit. For 2010, we have determined that we incorrectly overstated accounts receivable, net, accounts payable and accrued expenses and the beginning accumulated deficit. For 2009, we have determined that we incorrectly overstated accounts payable and accrued expenses. Our business and operations are in the People’s Republic of China (“PRC”). These restatements were caused by errors that occurred in the consolidation process and related to adjustments made to convert financial statements prepared in accordance with PRC generally accepted accounting principles to generally accepted accounting principles in the United Statements (“U.S. GAAP”).

For example, in 2011, in the consolidation process, a U.S. GAAP adjustment was made for approximately $405,000 to write-off accounts receivable that was previously written in a prior year. Accordingly, at December 31, 2011, accounts receivable balances were understated and bad debt expense was overstated. In our 2011 restatement, we expect to revise this adjustment to reflect the proper accounts receivable balance which caused a decrease in bad debt expense and an increase in accounts receivable by approximately $405,000. Additionally, in 2011, in the consolidation process, a U.S. GAAP adjustment amounting to approximately $290,000 was improperly recorded which caused allowance for doubtful accounts on accounts receivable to be understated as well as bad debt expense. In our 2011 restatement, we expect to revise this adjustment to reflect the proper accounts receivable bad debt expense allowance which will cause an increase in bad debt expense and an increase in allowance for doubtful accounts by approximately $290,000.

In 2009, in the consolidation process, a U.S. GAAP adjustment was recorded for approximately $215,000 to accrue professional fees which were already reflected in the accounting records. Accordingly, accrued expenses and professional fees were overstated. Additionally, due to an incorrect U.S. GAAP adjustment, cost of sales and accounts payable balance previously accrued in 2008 amounting to approximately $304,000 were not properly reversed in 2009. Accordingly, at December 31, 2009 accounts payable and cost of sales were overstated. In our 2009 restatement, we expect to revise these U.S. GAAP adjustments to reflect the proper amounts to costs of sales, professional fees and accounts payable and accrued expense balances which will cause a decrease in cost of sales of $304,000, a decrease in professional fees of $215,000 and a decrease in accounts payable and accrued expenses of approximately $519,000.

CHINA LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS


	For the Years Ended Decemnber 31,
	2012			2011
				(As Restated)
Sales	$	23,133,394		$	24,869,518

Cost of sales		21,914,116			24,431,175

Gross profit		1,219,278			438,343

Operating expenses:
Selling, general and administrative		1,131,035			1,174,438
Bad debt - related party		318,487			-
Bad debt expense		580,500			318,195

Total operating expenses		2,030,022			1,492,633

Loss from operations		(810,744	)		(1,054,290	)

Other income (expenses):
Other income (expense)		(30,467	)		(104,467	)
Interest income (expense)		4,551			(562	)

Total other expenses		(25,916	)		(105,029	)

Loss before income taxes		(836,660	)		(1,159,319	)

Provision for income taxes		-			17,670

Net loss		(836,660	)		(1,176,989	)

Less: net loss attributable to the non-controlling interest		(352,560	)		(501,953	)

Net loss attributable to China Logistics Group, Inc.	$	(484,100	)	$	(675,036	)

Comprehensive loss:
Net loss	$	(836,660	)	$	(1,176,989	)
Foreign currency translation adjustments		47,350			(14,490	)
Comprehensive loss		(789,310	)		(1,191,479	)
Less: net loss attributable to the noncontrolling interest		(352,560	)		(501,953	)
Comprehensive loss attributable to China Logistics Group, Inc.	$	(436,750	)	$	(689,526	)

Net loss per common share:
Basic	$	(0.01	)	$	(0.02	)
Diluted	$	(0.01	)	$	(0.02	)

Weighted average number of common shares outstanding:
Basic		41,508,203			41,508,203
Diluted		41,508,203			41,508,203

See notes to consolidated financial statements.

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CHINA LOGISTICS GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended March 31,
	2012			2011
Sales	$	5,367,060		$	4,609,433
Cost of sales		4,561,091			4,190,551
Gross profit		805,969			418,882

Operating expenses:
Selling, general and administrative		241,746			294,137
Gain on disposal of property and equipment		(1,089)			-
Depreciation and amortization		1,612			8,586
Bad debt expense		-			51,135
Total operating expenses		242,269			353,858
Income from operations		563,700			65,024

Other income (expenses):
Other expense		(1,698	)		(8,346	)
Interest income (expense)		1,198			(1,796	)
Total other expenses		(500	)		(10,142	)
Income before income taxes		563,200			54,882
Foreign taxes		3,935			1,548
Net Income		559,265			53,334
Less: Net income attributable to the noncontrolling interest		280,508			88,661
Net income (loss) attributable to China Logistics Group, Inc.	$	278,757		$	(35,327	)

Comprehensive Income:
Net income		559,265			53,334
Foreign currency translation adjustment		59,387			12,390
Comprehensive income	$	618,652		$	65,724

Earnings (loss) per common share:
Basic	$	0.01		$	0.00
Diluted	$	0.01		$	0.00

Weighted average number of shares outstanding:
Basic		41,508,203			41,508,203
Diluted		46,008,203			46,008,203




	For the Three Months Ended September 30						For the Nine Months Ended September 30
	2011			2010			2011			2010


Sales	$	6,944,879		$	6,931,542		$	17,618,543		$	18,144,298
Cost of sales		6,662,172			6,621,608			16,571,363			17,390,586
Gross profit		282,707			309,934			1,047,180			753,712

Operating expenses:
Selling, general and administrative		206,992			293,155			734,693			1,168,114
Depreciation and amortization		2,727			3,489			14,634			8,635
Bad debt expense		63,985			(350	)		63,985			(350	)
Total operating expenses		273,704			296,294			813,312			1,176,399
Income (loss) from operations		9,003			13,640			233,868			(422,687	)

Other income (expenses):
Other income (expense)		(59,304	)		64,260			(74,300	)		(3,892	)
Extinguishment of registration rights liability		(5,859	)		1,597,000			(5,859	)		1,597,000
Change in fair value of derivative liability					-			-			(447,059	)
Interest income (expense)		(3,616	)		(2,674	)		(5,169	)		(5,956	)
Total other income (expenses)		(68,779	)		1,658,586			(85,328	)		1,140,093
Income (loss) before income taxes		(59,776	)		1,672,226			148,540			717,406
Foreign taxes		8,218			10,538			13,836			21,346
Net Income (loss)		(67,994	)		1,661,688			134,704			696,060
Less: Net income (loss) attributable to the noncontrolling interest		(28,252	)		(29,527	)		96,659			(44,740	)
Net income (loss) attributable to China Logistics Group, Inc.		(39,742	)		1,632,161			38,045			651,320

Other comprehensive income (loss):
Foreign currency translation adjustments		45,624			24,320			49,116			33,310
Comprehensive income	$	5,882		$	1,656,481		$	87,162		$	684,630

Earnings (loss) per common share:
Basic	$	(0.00	)	$	0.04		$	0.00		$	0.02
Diluted	$	(0.00	)	$	0.04		$	0.00		$	0.02

Weighted average number of shares outstanding:
Basic		41,508,203			39,508,203			41,508,203			37,629,082
Diluted		46,008,203			39,508,203			46,008,203			37,629,082

Commenting on China Logistics Group's financial performance, Wei Chen, CEO and Chairman, stated, "Our performance over the course the first nine months of 2011 reflect our ability to successfully navigate through a very challenging environment in the shipping industry in China. The current cargo overcapacity has resulted in a declining price environment which has now pressured margins. Through our aggressive marketing we have increased volumes to largely offset price declines and have worked hard to maintain and improve our operational profitably in 2011. We have also strengthened our balance sheet both in cash and working capital to position our company for future growth. As we move through the remainder of 2011 and into 2012 we will continue to control costs while aggressively working to expand our customer base for both domestic and international logistics management services to fuel our future growth."

Net revenue for the full year of 2010 was $23.4 million, an increase of 17.8% compared to the 19.8 million recorded in the full year of 2009. The increase in revenue is largely attributable to a rebound in shipping activities across all of China's major ports, particularly outbound shipping to North America, aided by a gradual improvement in the global economy.
For the full year of 2010 we recorded a loss of ($166,000) inclusive of non-cash income of $1.6 million related to the extinguishment of a registration rights liability and a non-cash loss of ($447,000) related to the change in fair market value of a derivative liability. This compares to net income of $1.7 million recorded for the full year of 2009 inclusive of non-cash income of $3.3 million related to the change in fair market value of that same derivative liability.
Basic and diluted EPS of ($0.00) for the full year of 2010 as compared to basic EPS of $0.07 and diluted EPS of $0.06 for the full year of 2009.
At December 31, 2010 we had cash of $1.3 million compared to $1.7 million at December 31, 2009. Total Assets at December 31, 2010 improved to $6.5 million from $6.4 million at December 31, 2009 while total liabilities decreased to $5.3 million at December 31, 2010 from $8.7 million at December 31, 2009.

GeoTeam Note:

Adjusted 2010 vs. 2009 EPS for

Full year: $(0.01) vs. $(0.02)
Fourth Quarter: $(0.03) vs. $(0.02)

Commenting on China Logistics Group's financial performance, Wei Chen, its CEO and Chairman, stated, "We are pleased with our performance in 2010 where we transitioned out of a very difficult period for our industry. As we continue to grow our sales in an improving market we intend to work aggressively to add additional relationships with new cargo carriers and build our growing customer base. Additionally, we will seek to improve our performance by focusing our efforts on higher margin product shipments while controlling our internal costs. We enter 2011 with a rebounding world economy and improved balance sheet that is poised to accelerate our growth. We look forward to delivering a much improved performance in 2011 and continue to build on our sales momentum this year."

While there can be no assurances given the continued economic uncertainties, we believe that our cash on hand and other components of our working capital will be sufficient to fund our operations and satisfy our obligations for the next twelve months.

On December 8, 2010, the Honorable Alan S. Gold, U.S. District Judge the U.S. District Court for the Southern District of Florida (Case No. 08-61517-CIV-GOLD/MCALILEY) entered an order which, among other things, affirmed and adopted the Magistrate Judge’s September 10, 2010 report and recommendation denying the Securities and Exchange Commission’s (the “SEC”) motion seeking disgorgement of $931,000 from China Logistics Group, Inc. The Judge’s order also denied the SEC’s motion for disgorgement from the Company. The SEC’s motion for disgorgement was filed in connection its September 24, 2008 complaint against Mr. V. Jeffrey Harrell, our former CEO and principal and financial accounting officer, Mr. David Aubel, previously our largest shareholder and formerly a consultant to us, and the Company based upon the alleged improper conduct of Messrs. Harrell and Aubel that occurred at various times between in or about April 2003 and September 2006 as previously disclosed in Item 1 – Legal Proceedings in our Form 10-Q filed with the SEC on November 15, 2010..

Financial Highlights - 3rd quarter 2010

Revenue increases to $6.9 million, up 19.7% from $5.8 Million in the 3rd quarter of 2009 - 3rd quarter 2010 revenue increases 19.7% sequentially from the 2nd quarter of 2010 Revenues for the nine months ended September 30, 2010 reached $18.1 million, up 33.4% from $13.6 million recorded in the same period in 2009.

Net income for the third quarter of 2010 was $1.7 million inclusive of $1.6 million in other income related to the reversal of a liability related the registration payment penalty incurred in connection with the financing we completed in 2008. This compared to $0.3 million for the same period in 2009.

Non-GAAP EPS was negligable.

Commenting on China Logistics Group's financial performance, Wei Chen, its CEO and Chairman, stated, "We are pleased with our performance in the third quarter. We will continue to actively seek cooperative relationships with new cargo carriers and to further expand our customer base while controlling costs in order to increase sales and margins in a very competitive environment. We are confident that the business environment will continue to improve and that our efforts will lead to better overall performance in the coming quarters."

On a non-GAAP basis, net income for the first quarter of 2010 was $207,000 as compared to a non-GAAP loss of ($409,000) in the first quarter of 2009. This resulted in non-GAAP basic EPS of $0.01 as compared to non-GAAP basic EPS of ($0.01) in the first quarter of 2009 after deducting all non-cash items including $232,000 related to the increase in the fair market value of outstanding warrants treated as derivative liabilities. On a GAAP basis the Company recorded a net loss of ($28,000) as compared to net income of $3.0 million in the first quarter of 2009 (inclusive of a gain of $3.4 million from the reduction in fair market value of the same warrants). This resulted in GAAP basic EPS of $0.00 as compared to basic GAAP EPS of $0.09 in the first quarter of 2009.

Commenting on China Logistics Group financial performance, Wei Chen, its CEO and Chairman, stated, "We are pleased with our performance in the first quarter. We increased sales over 69% from the same period in 2009 and were operationally profitable for the first quarter of 2010. Our efforts to cut costs reduced operating expenses as a percentage of revenue and our business climate has significantly improved creating positive momentum for our business as we move into the remainder of 2010. We believe our business will continue to improve as the demand for logistic services in and out of China continues to grow and we intend to work diligently on behalf of our company and its shareholders."

On August 27, 2009 China Logistics Group, Inc. filed a Current Report on Form 8-K disclosing that its Board of Directors had determined that its financial statements for the year ended December 31, 2008 and the three months ended March 31, 2009 could no longer be relied upon as a result of errors in the financial statements.

By letter dated September 1, 2009 the staff of the Securities and Exchange Commission requested that we amend that report to provide a brief description of the facts underlying the conclusion to the extent known at the time of the filing of the 8-K. This Current Report on Form 8-K/A is being filed in response to the staff's comments. The disclosure which appeared in Item 8.01 of the Current Report on Form 8-K filed on August 27, 2009 is unchanged in this amendment.

China Logistics Grou (PINK:CHLO)

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