1123493--4/15/2008--China_Logistics_Group

related topics

{operation, international, foreign}

{regulation, change, law}

{financial, litigation, operation}

{stock, price, share}

{control, financial, internal}

{investment, property, distribution}

{interest, director, officer}

{operation, natural, condition}

{stock, price, operating}

{personnel, key, retain}

{product, candidate, development}

Risks Relating to Overall Business Operations WE HAVE RECENTLY EXPANDED OUR BUSINESS THROUGH THE ACQUISITION OF A MAJORITY OWNERSHIP INTEREST IN SHANDONG JIAJIA WHICH IS LOCATED IN THE PRC. OUR MANAGEMENT MAY NOT BE SUCCESSFUL IN TRANSITIONING THE INTERNAL OPERATIONS OF A PRIVATELY HELD CHINESE COMPANY TO A SUBSIDIARY OF A U.S. PUBLICLY HELD COMPANY AND THE CHINESE GOVERNMENT MUST APPROVE THE ACQUISITION. HISTORICALLY OUR WEAK FINANCIAL CONDITION RAISED SUBSTANTIAL DOUBT REGARDING OUR ABILITY TO CONTINUE AS A GOING CONCERN. WE ANTICIPATE THAT WE WILL CONTINUE TO INCUR OPERATING LOSSES FROM OUR MEDIA READY DIVISION AND THERE ARE NO ASSURANCES THAT OUR THE RESULTS FROM SHANDONG JIAJIA WILL OFFSET THESE LOSSES. WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL AND THE LOSS OF THESE KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. SHANDONG JIAJIA IS DEPENDENT ON THIRD PARTIES FOR EQUIPMENT AND SERVICES ESSENTIAL TO OPERATE ITS BUSINESS, AND IT COULD LOSE CUSTOMERS AND REVENUES IF IT FAILS TO SECURE THIS EQUIPMENT AND THESE SERVICES. SHANDONG JIAJIA RELIES ON OVERSEAS CARGO AGENTS TO PROVIDE SERVICES TO IT AND TO ITS CUSTOMERS, AND SHANDONG JIAJIA'S ABILITY TO CONDUCT BUSINESS SUCCESSFULLY MAY BE AFFECTED IF IT IS UNABLE TO MAINTAIN ITS RELATIONSHIPS WITH THESE OVERSEAS CARGO AGENTS. SHANDONG JIAJIA INCURS SIGNIFICANT CREDIT RISKS IN THE OPERATION OF ITS BUSINESS WHICH COULD REDUCE OUR OPERATING PROFITS. RISKS RELATED TO DOING BUSINESS IN CHINA YOU MAY EXPERIENCE 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 RMB MAY HAVE A MATERIAL ADVERSE EFFECT ON YOUR INVESTMENT. A SUBSTANTIAL PORTION OF OUR CONSOLIDATED ASSETS AND OPERATIONS ARE LOCATED IN THE PRC AND ARE SUBJECT TO CHANGES RESULTING FROM THE POLITICAL AND ECONOMIC POLICIES OF THE CHINESE GOVERNMENT. CONTROVERSIES AFFECTING CHINA S TRADE WITH THE UNITED STATES COULD DEPRESS OUR STOCK PRICE. THE CHINESE GOVERNMENT EXERTS SUBSTANTIAL INFLUENCE OVER THE MANNER IN WHICH OUR CHINESE SUBSIDIARIES MUST CONDUCT OUR BUSINESS ACTIVITIES. FUTURE INFLATION IN CHINA MAY INHIBIT ECONOMIC ACTIVITY IN CHINA. ANY RECURRENCE OF SEVERE ACUTE RESPIRATORY SYNDROME, OR SARS, OR ANOTHER WIDESPREAD PUBLIC HEALTH PROBLEM, COULD INTERRUPT OUR OPERATIONS. RESTRICTIONS ON CURRENCY EXCHANGE MAY LIMIT OUR ABILITY TO RECEIVE AND USE OUR REVENUES EFFECTIVELY. CHINESE LAWS AND REGULATIONS GOVERNING SHANDONG JIAJIA'S BUSINESS OPERATIONS ARE SOMETIMES VAGUE AND UNCERTAIN. ANY CHANGES IN SUCH CHINESE LAWS AND REGULATIONS MAY HAVE A MATERIAL AND ADVERSE EFFECT ON OUR BUSINESS. WE MAY BE UNABLE TO ENFORCE OUR RIGHTS DUE TO POLICIES REGARDING THE REGULATION OF FOREIGN INVESTMENTS IN CHINA. RECENT PRC REGULATIONS RELATING TO ACQUISITIONS OF PRC COMPANIES BY FOREIGN ENTITIES MAY CREATE REGULATORY UNCERTAINTIES THAT COULD RESTRICT OR LIMIT OUR ABILITY TO OPERATE, INCLUDING OUR ABILITY TO PAY DIVIDENDS. FAILURE TO COMPLY WITH THE UNITED STATES FOREIGN CORRUPT PRACTICES ACT COULD SUBJECT US TO PENALTIES AND OTHER ADVERSE CONSEQUENCES. WE MAY HAVE DIFFICULTY ESTABLISHING ADEQUATE MANAGEMENT, LEGAL AND FINANCIAL CONTROLS IN THE PRC. RISKS RELATED TO HOLDING OUR SECURITIES OUR CORPORATE ACTIONS ARE SUBSTANTIALLY CONTROLLED BY OUR MANAGEMENT. THE EXERCISE OF OUTSTANDING WARRANTS AND THE POSSIBLE CONVERSION OF OUR SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK WILL BE DILUTIVE TO OUR EXISTING SHAREHOLDERS. WE HAVE NOT VOLUNTARILY IMPLEMENTED VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, SHAREHOLDERS MAY HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS, CONFLICTS OF INTEREST AND SIMILAR MATTERS. WE MAY BE EXPOSED TO POTENTIAL RISKS RELATING TO OUR INTERNAL CONTROLS OVER FINANCIAL REPORTING AND OUR ABILITY TO HAVE THOSE CONTROLS ATTESTED TO BY OUR INDEPENDENT AUDITORS. BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE OTC BULLETIN BOARD, OUR STOCK IS CONSIDERED A PENNY STOCK WHICH CAN ADVERSELY AFFECT ITS LIQUIDITY.

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1123493--4/15/2008--China_Logistics_Group_Inc