SOURCE: China Logistics Group, Inc.

November 17, 2010 11:56 ET

China Logistics Group Reports Financial Results for the Third Quarter of 2010

SHANGHAI, CHINA--(Marketwire - November 17, 2010) - China Logistics Group, Inc. (OTCBB: CHLO), an international freight forwarder and logistics management company, announced today its financial results for the third quarter of 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

Net revenues for the third quarter of 2010 were $6.9 million, an increase of 19.7% compared to the $5.8 million recorded in the third quarter of 2009. Revenues for the nine months ended September 30, 2010 reached $18.1 million, up 33.4% from the $13.6 million recorded in the comparable period in 2009. The increase in revenue is largely attributable to a rebound in shipping activities aided by the Chinese Government's economic stimulus measures undertaken in 2009 coupled with a gradual improvement in the global economy. In the third quarter of 2010 our gross margins improved to 4.5%, a significant sequential improvement from gross margins of 0.6% in the second quarter of 2010. Gross margins were, however, still lower than the 8.9% gross margins achieved in the third quarter of 2009. The decrease in gross margins when compared to 2009 reflects an improvement in the extremely competitive environment that has been pervasive in the logistics market throughout 2010. Operating expenses for the third quarter of 2010 and the first nine months ended September 30, 2010 were $296,000 and $1.2 million respectively, as compared to operating expenses $268,000 and $794,000 recorded in the same periods of 2009. The increase in operating expenses is primarily due to higher professional fees, consulting services and stock based incentive compensation expenses to certain officers and directors of our company.

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. For the first nine months of 2010, we recorded net income of $0.7 million inclusive of a loss of $0.4 million due to the change in fair value of a derivative liability, compared to net income of $3.4 million in 2009 inclusive of a gain of $3.4 million in the first nine months of 2009 for the change in fair value of that same liability. This resulted in basic and diluted EPS of $0.04 in the third quarter of 2010 as compared to basic and diluted EPS of $0.00 in the third quarter of 2009. We recorded basic and diluted EPS for the nine months ended September 30, 2010 of $0.02 as compared to basic EPS of $0.10 and diluted EPS of $0.08 for the same period in 2009.

At September 30, 2010 we had cash of $1.2 million compared to $1.7 million at December 31, 2009. Total Assets at September 30, 2010 improved to $8.2 million from $6.4 million at December 31, 2009 while total liabilities decreased to $6.4 million at September 30, 2010 from $8.7 million at December 31, 2009.

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."

About China Logistics Group, Inc.

China Logistics Group, Inc. is a U.S. company doing business in China through its 51% ownership in its subsidiary Shandong Jiajia International Freight & Forwarding Co., Ltd. (Shandong Jiajia). Established in 1999; Shandong Jiajia is an international freight forwarder and logistics manager located in China. Shandong Jiajia acts as an agent for international freight and shipping companies. It sells cargo space and arranges land, maritime, and air international transportation for clients seeking primarily to export goods from China.

Since its formation in 1999, Shandong Jiajia has offered its clients a comprehensive service package which includes receipt of goods, warehousing, transporting shipments, consolidation of freight, customs declaration, inspection declaration, multimodal transport, and combined large-scale logistics.

The Company has established relationships with both domestic and international transportation service providers. Shandong Jiajia has been an agent of world known shipping companies including NYK (Nippon Yusen Kaisha), P&O (Nedlloyd), and RCL (Regional Container Lines). Shandong JiaJia has branch offices in major seaport cities in China including Shanghai, Qingdao, Xiamen, and Lianyungang.

                        CONSOLIDATED BALANCE SHEETS

                                               September 30,  December 31,
                                                    2010          2009
                                                ------------  ------------
Cash                                            $  1,171,947  $  1,720,838
Accounts receivable, net                           4,407,647     2,923,990
Other receivables and current assets               1,123,373     1,100,662
Advances to vendors and other prepaid expenses     1,080,402       146,062
Due from related parties                             438,756       447,032
                                                ------------  ------------
Total Current Assets                               8,222,125     6,338,584

PROPERTY AND EQUIPMENT, net                           25,458        39,748
                                                ------------  ------------

Total Assets                                    $  8,247,583  $  6,378,332
                                                ============  ============

Accounts payable - trade                           3,485,804     2,733,820
Accrued registration agreement penalty                     -     1,597,000
Other accruals and current liabilities             1,279,757       535,576
Advances from customers                            1,166,729       475,358
Due to related parties                               447,579       814,226
Foreign tax payable                                   22,963        18,784
                                                ------------  ------------
Total Current Liabilities                          6,402,832     6,174,764
                                                ------------  ------------

DERIVATIVE LIABILITY                                       -     2,535,505

                                                ------------  ------------
Total Liabilities                                  6,402,832     8,710,269
                                                ------------  ------------

China Logistics Group, Inc. shareholders'
 equity (deficit):
Preferred stock - $0.001 par value, 10,000,000
 shares authorized;
Series B convertible preferred stock - 450,000
 shares issued and outstanding                           450           450
Common stock, $.001 par value, 500,000,000
 shares authorized; 39,508,203 and 34,508,203
 shares issued and outstanding                        39,508        34,508
Additional paid-in capital                        20,498,980    17,057,203
Accumulated deficit                              (18,950,608)  (19,541,703)
Accumulated other comprehensive income (loss)         85,245      (178,505)
                                                ------------  ------------
Total China Logistics Group, Inc. shareholders'
 equity (deficit)                                  1,673,575    (2,628,047)
Noncontrolling interest                              171,176       296,110
                                                ------------  ------------
Total equity                                       1,844,751    (2,331,937)
                                                ------------  ------------

Total Liabilities and Equity                    $  8,247,583  $  6,378,332
                                                ============  ============


                    For the Three Months Ended  For the Nine Months Ended
                          September 30,               September 30,
                    --------------------------  --------------------------
                        2010          2009          2010          2009
                    ------------  ------------  ------------  ------------ 
                                   (Restated)                  (Restated)

Sales               $  6,931,542  $  5,791,128  $ 18,144,298  $ 13,597,689
Cost of sales          6,621,608     5,274,887    17,390,586    12,857,603
                    ------------  ------------  ------------  ------------
  Gross profit           309,934       516,241       753,712       740,086
                    ------------  ------------  ------------  ------------
Operating expenses:
  Selling, general
   and administrative    293,155       264,236     1,168,114       782,524
  Depreciation and
   amortization            3,489         3,121         8,635        10,206
  Bad debt (recovery)
   expense                  (350)          447          (350)        1,691
                    ------------  ------------  ------------  ------------
        expenses         296,294       267,804     1,176,399       794,421
                    ------------  ------------  ------------  ------------
Income (loss) from
 operations               13,640       248,437      (422,687)      (54,335)
                    ------------  ------------  ------------  ------------

Other income
  Realized exchange
   gain (loss)                 -          (492)            -        35,465
     of registration
     liability         1,597,000             -     1,597,000             -
  Other income
   (expense)              64,260             -        (3,892)            -
    Gain (loss) on
     change in fair
     value of
     liability                 -        13,887      (447,059)    3,397,587
  Interest expense        (2,674)       (1,375)       (5,956)         (562)
                    ------------  ------------  ------------  ------------
       Total other
        income         1,658,586        12,020     1,140,093     3,432,490
                    ------------  ------------  ------------  ------------

Income before income
 taxes                 1,672,226       260,457       717,406     3,378,155
  Foreign taxes           10,538         6,698        21,346        14,838
                    ------------  ------------  ------------  ------------
Net Income             1,661,688       253,759       696,060     3,363,317
                    ------------  ------------  ------------  ------------
    Less: net income
     to the
     interest            (29,527)     (150,179)      (44,740)      (78,270)
                    ------------  ------------  ------------  ------------
Net income
 attributable to
 China Logistics
 Group, Inc.        $  1,632,161  $    103,580  $    651,320  $  3,285,047

Other comprehensive
  Foreign currency
   adjustments            24,320         3,294        33,310         7,092
                    ------------  ------------  ------------  ------------
 income             $  1,656,481  $    106,874  $    684,630  $  3,292,139
                    ============  ============  ============  ============

Earnings per common
     Basic          $       0.04  $       0.00  $       0.02  $       0.10
                    ============  ============  ============  ============
     Diluted        $       0.04  $       0.00  $       0.02  $       0.08
                    ============  ============  ============  ============

Weighted average
 number of shares
   Basic              39,508,203    34,508,203    37,629,082    34,508,203
                    ============  ============  ============  ============
   Diluted            39,508,203    39,008,203    37,629,082    39,008,203
                    ============  ============  ============  ============

Safe Harbor Statement

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, China Armco Metals, Inc., is hereby providing cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements (as defined in such act). Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, indicated through the use of words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "estimated," "intends," "plans," "believes" and "projects") may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. These statements include, but are not limited to, our guidance and expectations regarding revenues, net income and earnings. In addition, any such statements are qualified in their entirety by reference to, and are accompanied by, the following key factors that have a direct bearing on our results of operations:

--  our ability to continue as a going concern;
--  risks from Securities and Exchange Commission litigation;
--  the loss of the services of any of our executive officers or the loss
    of services of any of our key persons responsible for the management,
    sales, marketing and operations efforts of our subsidiaries;
--  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;
--  our dependence upon advisory services provided by a U.S. company due to
    our management's location in the PRC;
--  Our reliance on overseas cargo agents to provide services to us and to
    our customers;
--  Significant credit risks in the operation of our business;
--  Difficulties in effecting service of legal process, enforcing foreign
    judgments or bringing original actions in China based on United States
    or other foreign laws;
--  Fluctuation in the value of the renminbi (rmb);
--  Substantially all of our assets and all of our operations are located
    in the PRC and are subject to changes resulting from the political and
    economic policies of the Chinese government;
--  The Chinese government exerts substantial influence over the manner in
    which we must conduct our business activities;
--  A slowdown in the Chinese economy or an increase in its inflation rate; 
--  Any recurrence of severe acute respiratory syndrome, or SARS, or
    another widespread public health problem;
--  Restrictions on currency exchange;
--  Chinese laws and regulations governing our business operations are
    sometimes vague and uncertain and the effects of any changes in such
    laws and regulations;
--  Our ability to enforce our rights due to policies regarding the
    regulation of foreign investments in the PRC;
--  The dilutive effects of an exercise of our outstanding warrants and the
    possible conversion of our Series B Convertible Preferred stock;
--  Our lack of various corporate governance measures, in the absence of
    which, shareholders may have more limited protections against
    interested director transactions, conflicts of interest and similar
--  The impact of "penny stock" status and lack of liquidity of our stock
    which currently trades and is quoted on the OTC bulletin board; and
--  The impact of the cashless exercise provisions of our outstanding

We caution that the factors described herein could cause actual results to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. This press release is qualified in its entirety by the cautionary statements and risk factor disclosure contained in our Securities and Exchange Commission filings, including our Annual Report on Form 10-K for the year ended December 31, 2009.

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