**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**


**(Mark
      One)**





x
            Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934
              For
                the quarterly period ended March 31,
                2007




OR




o
            Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934
              For
                the transition period from _______________ to
                _______________.


Commission
      File Number:   0-27653





**PACIFIC
      CMA, INC.**


(Exact
      Name of Registrant as Specified in Its Charter)





Delaware
            84-1475073(State
                or Other Jurisdiction of
            (I.R.S.
                EmployerIncorporation
                or Organization)
            Identification
                No.)





c/o
      Airgate International Corp., 153-04, Rockaway Blvd., Jamaica, New York
      11434


(Address
      of Principal Executive Offices) (Zip Code)





(212)
      247-0049


(Registrant’s
      Telephone Number, Including Area Code)





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.    Yes
x No
o





Indicate
      by check mark whether the Registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      One)


Large
                accelerated filer o
            
            Accelerated
                filer o
            
            Non-accelerated
                filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).   Yes
o No
x





Indicate
      the number of shares outstanding of each of the Registrant’s classes of common
      stock, as of the latest practicable date.


Common
      Stock: Outstanding as of: **** May
      11,
      2007: 28,619,271 shares








**PACIFIC
      CMA, INC.**





**INDEX
      TO FORM 10-Q**




**Page
                No.****PART
                I.**
            **FINANCIAL
                INFORMATION**
            3**Item
                1.**
            **Financial
                Statements**
            3Condensed
                Consolidated Balance Sheets as of March 31, 2007 (Unaudited)
              and
                December 31, 2006 (Audited)
            3Condensed
                Consolidated Statements of Operations for the Three Months
              Ended
                March 31, 2007 and 2006 Restated (Unaudited)
            4Condensed
                Consolidated Statements of Cash Flows for the Three Months
              Ended
                March 31, 2007 and 2006 Restated (Unaudited)
            5Notes
                to Condensed Consolidated Financial Statements (Unaudited)
            6**Item
                2.**
            **Management’s
                Discussion and Analysis of Financial**
              **Condition
                and Results of Operations**
            18**Item
                3.**
            **Quantitative
                and Qualitative Disclosures About Market Risk**
            31**Item
                4.**
            **Controls
                and Procedures**
            32**PART
                II.**
            **OTHER
                INFORMATION**
            34**Item
                1.**
            **Legal
                Proceedings**
            34**Item
                1A.**
            **Risk****Factors**
            34**Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of Proceeds**
            34**Item
                3.**
            **Defaults
                Upon Senior Securities**
            34**Item
                4.**
            **Submission
                of Matters to a Vote of Security Holders**
            34**Item
                5.**
            **Other****Information**
            34**Item
                6.**
            **Exhibits**
            34**SIGNATURES**
            35


2




**PART
      1.**  **FINANCIAL
      INFORMATION**





**Item
                1.**
              **Financial
                  Statements**





**Pacific
      CMA, Inc.**


**Condensed
      Consolidated Balance Sheets**


**March
      31, 2007 and December 31, 2006**




**Assets**


**(Unaudited)**
              **2007**
            
            **2006****Current
                Assets**Cash
                and cash equivalents
            
            $
            1,248,741
            
            $
            2,783,696Restricted
                cash
            
            
            6,245,535
            
            
            5,863,185Accounts
                and notes receivable, net of allowance for doubtful accounts; 2007
                -
                $693,673; 2006 - $680,632
            
            
            17,356,429
            
            
            21,445,304Refundable
                income taxes
            
            
            109,568
            
            
            76,274Other
                receivables
            
            
            453,642
            
            
            1,076,042Deposits
                and prepaid expenses
            
            
            1,973,841
            
            
            1,668,086Total
                current assets
            
            
            27,387,756
            
            
            32,912,587**Property
                and Equipment**,
                net of accumulated depreciation; 2007 - $1,392,454; 2006 -
                $1,193,307
            
            
            1,685,823
            
            
            1,758,832**Other
                Assets**Goodwill
            
            
            4,314,622
            
            
            3,745,832Intangible
                assets, net of accumulated amortization; 2007 - $2,892,334; 2006
                -
                $2,726,137
            
            
            694,390
            
            
            410,431Deferred
                financing costs on convertible and non-convertible notes
            
            
            366,413
            
            
            403,502Investment
                deposit
            
            
            610,000
            
            
            955,656Investment
                in equity method subsidiaries
            
            
            1,152,908
            
            
            1,168,5087,138,333
            
            
            6,683,929Total
                Assets
            
            $
            36,211,912
            
            $
            41,355,348**Liabilities
                and Stockholders’ Equity****Current
                Liabilities**Notes
                payable - bank and non-convertible note
            
            $
            7,328,548
            
            $
            6,714,451Current
                maturities of capital lease obligations
            
            
            69,894
            
            
            64,123Accounts
                payable
            
            
            11,484,210
            
            
            15,076,453Accrued
                expenses
            
            
            1,248,208
            
            
            1,456,000Deferred
                tax liabilities
            
            
            139,463
            
            
            74,583Payable-minority
                shareholder
            
            
            123,893
            
            
            123,893Short-term
                loan payable
            
            
            1,943,095
            
            
            2,242,105Income
                taxes payable
            
            
            10,084
            
            
            10,084Total
                current liabilities
            
            
            22,347,395
            
            
            25,761,692**Capital
                Lease Obligations**
            
            
            103,099
            
            
            80,855**Convertible
                Note**,
                net
            
            
            2,393,739
            
            
            3,512,811Total
                Liabilities
            
            
            24,844,233
            
            
            29,355,358**Series
                A Preferred Stock**,
                net
            
            
            1,850,864
            
            
            1,633,983**Minority
                Interest**
            
            
            189,503
            
            
            175,596**Stockholders’
                Equity**Common
                stock, US$0.001 par value; authorized - 100,000,000 shares
                and
              issued
                - 2007 - 28,619,271 shares and 2006 - 28,597,712 shares
            
            
            4,845,646
            
            
            4,805,193Treasury
                common stock, at cost, 2007 and 2006 - 41,800 shares
            
            
            (32,623
            )
            
            (32,623
            )Warrants
                outstanding
            
            
            1,610,679
            
            
            1,610,679Additional
                paid-in capital
            
            
            6,659,211
            
            
            6,659,211Retained
                earnings
            
            
            (3,819,673
            )
            
            (2,916,121
            )Accumulated
                other comprehensive income
            
            
            64,072
            
            
            64,072Total
                stockholders’ equity
            
            
            9,327,312
            
            
            10,190,411Total
                stockholders’ equity and liabilities
            
            $
            36,211,912
            
            $
            41,355,348




*See
      Notes to Condensed Consolidated Financial Statements*


3




**Pacific
      CMA, Inc.**


**Condensed
      Consolidated Statements of Operations**


**Three
      Months Ended March 31, 2007 and 2006**


**(Unaudited)**




**200****7**
            
            **2006**
              **(Restated)****Freight
                Forwarding Income**
            
            $
            33,175,189
            
            $
            30,429,925**Operating
                Expenses**Cost
                of forwarding
            
            
            (27,449,164
            )
            
            (25,750,270
            )General
                and administrative
            
            
            (5,696,359
            )
            
            (4,562,123
            )Depreciation
                and amortization
            
            
            (371,035
            )
            
            (246,565
            )Stock-based
                compensation cost
            
            
            (34,912
            )
            
            (34,912
            )(33,551,470
            )
            
            (30,593,870
            )**Operating
                Loss**
            
            
            (376,281
            )
            
            (163,945
            )**Other
                Income (Expense)**Interest
                and other income
            
            
            108,371
            
            
            102,750Interest
                expenses
            
            
            (267,149
            )
            
            (186,626
            )Convertible
                and non-convertible note amortization of deferred financing
                costs
            
            
            (37,089
            )
            
            (18,334
            )Amortization
                of convertible and non-convertible note discount
            
            
            (30,866
            )
            
            (10,434
            )Loss
                of equity method subsidiaries
            
            
            (15,600
            )
            
            (10,621
            )(242,333
            )
            
            (123,265
            )**Loss
                Before Income Taxes**
            
            
            (618,614
            )
            
            (287,210
            )**Provision
                (Benefit) for Income Taxes**
            
            
            9,150
            
            
            (206,964
            )**Loss
                Before Minority Interest**
            
            
            (627,764
            )
            
            (80,246
            )**Minority
                Interest**
            
            
            (13,907
            )
            
            (6,403
            )**Net
                Loss**
            
            
            (641,671
            )
            
            (86,649
            )**Accretion
                of Series A Preferred Stock, net to redemption value and
                dividends**
            
            
            (261,881
            )
            
            (691,854
            )**Net
                Loss attributable to common stockholders**
            
            $
            (903,552
            )
            $
            (778,503
            )**Basic
                Loss Per Share attributable to common
                stockholders**
            
            $
            (0.03
            )
            $
            (0.03
            )**Diluted
                Loss Per Share attributable to common
                stockholders**
            
            $
            (0.03
            )
            $
            (0.03
            )**Weighted
                average number of shares outstanding during the year -
                basic**
            
            
            28,599,543
            
            
            26,693,517**Weighted
                average number of shares outstanding during  the year -
                diluted**
            
            
            28,599,543
            
            
            26,693,517




*See
      Notes to Condensed Consolidated Financial Statements*




4




**Pacific
      CMA, Inc.**


**Condensed
      Consolidated Statements of Cash Flows**


**Three
      Months Ended March 31, 2007 and 2006**


**(Unaudited)**




**2007**
            
            **2006
                (Restated)****Operating
                Activities**Net
                loss
            
            $
            (641,671
            )
            $
            (86,649
            )Items
                not requiring (providing) cashAmortization
                of convertible and non-convertible note discount and deferred financing
                costs
            
            
            67,955
            
            
            28,768Depreciation
                and amortization
            
            
            371,035
            
            
            246,565Common
                stock issued for services and employee compensation
            
            
            34,912
            
            
            34,912Deferred
                income taxes
            
            
            (13,897
            )
            
            (279,228
            )Other
            
            
            42,367
            
            
            17,018Changes
                inAccounts
                receivable
            
            
            4,148,621
            
            
            (123,584
            )Accounts
                payable
            
            
            (3,684,722
            )
            
            376,767Accrued
                expenses
            
            
            (215,119
            )
            
            (229,856
            )Income
                taxes refundable/payable
            
            
            (52,949
            )
            
            821,181Other
                assets and liabilities
            
            
            347,365
            
            
            54,052Net
                cash provided by operating activities
            
            
            403,897
            
            
            859,946**Investing
                Activities**Purchase
                of property and equipment
            
            
            (75,257
            )
            
            (176,734
            )Proceeds
                from sale of property and equipment
            
            
            --
            
            
            6Deposit
                refund (paid) for potential equity investment
            
            
            140,000
            
            
            (350,000
            )Acquisition
                of subsidiary
            
            
            (718,939
            )
            
            (597,945
            )Net
                cash used in investing activities
            
            
            (654,196
            )
            
            (1,124,673
            )**Financing
                Activities**Net
                change in restricted cash
            
            
            (382,350
            )
            
            (303,746
            )Net
                change in notes payable - bank
            
            
            614,093
            
            
            156,899Principal
                payments under capital lease obligation
            
            
            (27,991
            )
            
            (15,116
            )Preferred
                stock dividend
            
            
            (39,460
            )
            
            1,600Principal
                payments of other loan
            
            
            (299,010
            )
            
            (92,663
            )Principal
                payments of revolving note
            
            
            (1,149,938
            )
            
            (116,201
            )Repurchase
                of common stock
            
            
            --
            
            
            (7,796
            )Net
                cash used in financing activities
            
            
            (1,284,656
            )
            
            (377,023
            )**Decrease
                in Cash and Cash Equivalents**
            
            
            (1,534,955
            )
            
            (641,750
            )**Cash
                and Cash Equivalents, Beginning of Period**
            
            
            2,783,696
            
            
            2,018,093**Cash
                and Cash Equivalents, End of Period**
            
            $
            1,248,741
            
            $
            1,376,343**Supplemental
                Cash Flow Information**Interest
                paid
            
            $
            267,149
            
            $
            186,626




*See
      Notes to Condensed Consolidated Financial Statements*





5




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




**Note
              1:**
            **Basis
                of Presentation**




The
      accompanying condensed consolidated financial statements of Pacific CMA, Inc.
      (the “Company”) and its subsidiaries (the “Group”) as of March 31, 2007 and for
      the three months ended March 31, 2007 and 2006 have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and with the instructions to Form 10-Q and
      Article 10 of Regulation S-X of the Securities Exchange Act of 1934.
      Accordingly, they do not include all of the information and footnotes required
      by accounting principles generally accepted in the United States of America
      for
      complete financial statements. The accompanying unaudited condensed consolidated
      financial statements reflect all adjustments that are, in the opinion of the
      Company’s management, necessary to fairly present the financial position,
      results of operations and cash flows of the Company. Those adjustments consist
      only of normal recurring adjustments.




The
      condensed consolidated balance sheet of the Company as of December 31, 2006
      has
      been derived from the audited consolidated balance sheet of the Company as
      of
      that date.




The
      condensed consolidated statements of operations for the three months ended
      March
      31, 2007 and 2006, and cash flows for the three months ended March 31, 2007
      and
      2006 are not necessarily indicative of the results that may be expected for
      the
      entire year. These condensed consolidated financial statements should be read
      in
      conjunction with the consolidated financial statements and the related notes
      thereto for the year ended December 31, 2006 included in the Company’s Form 10-K
      filed on April 2, 2007.




***Principles
      of Consolidation***




The
      condensed consolidated financial statements include the financial statements
      of
      the Company and its subsidiaries. All significant intercompany balances and
      transactions have been eliminated in consolidation.




***Cash
      Equivalents***




The
      Company considers all liquid investments with original maturities of three
      months or less to be cash equivalents. At March 31, 2007, cash equivalents
      consisted primarily of money market accounts with brokers and certificates
      of
      deposit. At March 31, 2007, the Company’s cash accounts in the United States of
      America exceeded federally insured limits by approximately
      $1,026,000.




***Restricted
      Cash***




Restricted
      cash consists of fixed deposits, collateral deposits and certificates of deposit
      held by banks providing collateral for overdraft, trust receipts, letters of
      credit and support bank guarantees provided to certain vendors of the Company.
      At March 31, 2007, the restricted cash held for these facilities amounted to
      $6,245,535. The restricted cash also includes cash held in lockbox accounts
      for
      financing the loan arrangement of the secured convertible and non-convertible
      note with details discussed in Note 7. As of March 31, 2007, the cash held
      in
      the lockbox account amounted to $369,636 under the compensating balance
      arrangement.




6


**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




***Registration
      Rights Agreements***




The
      Company has adopted EITF 05-4, The Effect of Liquidated Damages Clause on a
      Freestanding Financial Instrument Subject to Issue No. 00-19, View C to account
      for its registration rights agreements. The Company has entered into
      registration rights agreements in association with the issuance of preferred
      stock, debt and warrants. View C of EITF 05-4 takes the position that the
      registration rights should be accounted for separately from the financial
      instrument as the payoff of the financial instruments is not dependent on the
      payoff of the registration rights agreement, and according to DIG K-1,
      registration rights agreements and the financial instruments do not meet the
      combining criteria as they relate to different risks. The Financial Accounting
      Standards Board (Board) has postponed further discussion on EITF 05-4. Since
      the
      Board has not reached a consensus, the Company's accounting for the registration
      rights may change when the Board reaches a consensus.




***New
      Accounting Pronouncements***




FASB
      Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an
      interpretation of FASB Statement No. 109,”requires that an enterprise evaluate
      all tax positions recognized in that enterprise’s financial statements for any
      uncertainty that the tax positions will not be sustained under examination.
      The
      evaluation process is twofold. First, an enterprise must determine whether
      it is
      more likely than not that a tax position will be sustained upon examination.
      Secondly, the enterprise must measure the amount of benefit to recognize in
      its
      financial statements for tax positions which meet the more likely than not
      threshold. FASB Interpretation No. 48 became effective for fiscal years
      beginning after December 15, 2006. For the quarter ending March 31, 2007, the
      Company does not believe there is any uncertainty with respect to the tax
      positions reflected in its financial statements which would result in a material
      change in the amount of benefit recognized in the financial statements;
      therefore, no provision has been made for the adoption of FASB Interpretation
      No. 48.




In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities,” which provides companies an option
      to report selected financial assets and liabilities at fair value. SFAS No.
      159
      requires companies to provide information helping financial statement users
      to
      understand the effect of a company’s choice to use fair value on its earnings,
      as well as to display the fair value of the assets and liabilities a company
      has
      chosen to use fair value for on the face of the balance sheet. Additionally,
      SFAS No. 159 establishes presentation and disclosure requirements designed
      to
      simplify comparisons between companies that choose different measurement
      attributes for similar types of assets and liabilities. The statement is
      effective as of the beginning of an entity’s first fiscal year beginning after
      November 15, 2007. The Company has not determined the effect, if any, the
      adoption of this statement will have on its consolidated financial
      statements.




**Note
              2:**
            **Restatement
                of Financial Statements**




We
      have
      restated our consolidated financial statements as of and for the three months
      ended March 31, 2006. The determination of the restatements was made as a result
      of a correction of the Company’s application of SFAS No. 150, Accounting for
      Certain Financial Instruments with Characteristics of both Liabilities and
      Equity (SFAS 150), in accounting for the Company’s Series A Preferred Stock. The
      Company originally accounted for its Series A Convertible Preferred Stock as
      a
      liability; however, since the preferred stock is convertible, the redemption
      feature is conditional and the Series A Preferred Stock should not be accounted
      for under SFAS 150. The Company has reviewed EITF D-98, Classification and
      Measurement of Redeemable Securities, and determined that the Series A Preferred
      Stock should be accounted for as temporary equity. This reclassification also
      resulted in the offering costs related to the Series A Preferred Stock to be
      reclassified from other assets and netted against the balance at which the
      Series A Preferred Stock was recorded. As a result of this reclassification,
      the
      Company also reversed the amortization of the offering costs and recorded these
      charges directly to retained earnings. In addition, the Company has modified
      its
      presentation of earnings (loss) per share attributable to common stockholders
      to
      reflect the impact of the deemed dividend and beneficial conversion feature
      related to the preferred stock. Finally, the Company reversed the tax accounting
      for the beneficial conversion feature and deemed dividend that has been recorded
      to the Series A Preferred Stock.




The
      Company has elected to accrete the discount related to the preferred stock
      over
      the period from the date of issuance through the Series A Preferred Stock’s
      redemption date using the effective interest method. The impact of the
      restatement on the consolidated statements of operations and cash flows is
      shown
      in the accompanying tables.




7


The
      following table presents the effect of the Restatement on the consolidated
      statement of operations




**Three
                  Months Ended March 31, 2006****As
                  Previously Reported**
              
              **Adjustments**
              
              **As
                  Restated****Freight
                  Forwarding Income**
              
              $
              30,429,925
              
              
              
              
              $
              30,429,925**Operating
                  Expenses**Cost
                  of forwarding
              
              
              (25,750,270
              )
              
              
              
              
              (25,750,270
              )General
                  and administrative
              
              
              (4,562,123
              )
              
              
              
              
              (4,562,123
              )Depreciation
                  and amortization
              
              
              (246,565
              )
              
              
              
              
              (246,565
              )Stock-based
                  compensation cost
              
              
              (34,912
              )
              
              
              
              
              (34,912
              )(30,593,870
              )
              
              
              
              
              (30,593,870
              )**Operating
                  Loss**
              
              
              (163,945
              )
              
              
              
              
              (163,945
              )**Other
                  Income (Expense)**Interest
                  and other income
              
              
              102,750
              
              
              
              
              
              102,750Interest
                  expense
              
              
              (186,626
              )
              
              
              
              
              (186,626
              )Preferred
                  stock dividend and amortization of deferred financing
                  costs
              
              
              (165,055
              )
              
              165,055
              
              
              --Amortization
                  of preferred stock discount
              
              
              (99,427
              )
              
              99,427
              
              
              --Preferred
                  stock beneficial conversion
              
              
              (427,372
              )
              
              427,372
              
              
              --Minimum
                  borrowing note and revolving note amortization of deferred financing
                  costs
              
              
              (18,334
              )
              
              
              
              
              (18,334
              )Amortization
                  of minimum borrowing note and revolving note discount
              
              
              (10,434
              )
              
              
              
              
              (10,434
              )Loss
                  of equity method subsidiaries
              
              
              (10,621
              )
              
              
              
              
              (10,621
              )(815,119
              )
              
              
              
              
              (123,265
              )**Loss
                  Before Income Taxes**
              
              
              (979,064
              )
              
              
              
              
              (287,210
              )**Benefit
                  for Income Taxes**
              
              
              (483,705
              )
              
              276,741
              
              
              (206,964
              )**Loss
                  Before Minority Interest**
              
              
              (495,359
              )
              
              
              
              
              (80,246
              )**Minority
                  Interest**
              
              
              (6,403
              )
              
              
              
              
              (6,403
              )**Net
                  Loss**
              
              $
              (501,762
              )
              
              
              
              
              (86,649
              )**Accretion
                  of Series A Preferred Stock, net to redemption
                  value**
              
              
              
              
              
              (691,854
              )
              
              (691,854
              )**Net
                  income attributable to common shareholders**
              
              
              
              
              
              
              
              $
              (778,503
              )**Earnings
                  Per Share attributable to common stockholders****-Basic**
              
              $
              (0.02
              )
              
              
              
              $
              (0.03
              )**-Diluted**
              
              $
              (0.02
              )
              
              
              
              $
              (0.03
              )**Weighted
                  average number of shares outstanding during the
                  period****-
                  Basic**
              
              
              26,693,517
              
              
              
              
              
              26,693,517**-
                  Diluted**
              
              
              26,693,517
              
              
              
              
              
              26,693,517
  8


The
      following table presents the effect of the Restatement on the consolidated
      statement of cash flows:




**Three
                Months Ended March 31, 2006****As
                Previously**
              **Reported**
            
            **Adjustments**
            
            **As
                Restated****Operating
                Activities**Net
                loss
            
            $
            (501,762
            )
            $
            415,113
            
            $
            (86,649
            )Items
                not requiring (providing) cashAmortization
                of preferred stock discount
            
            
            99,427
            
            
            (99,427
            )
            
            --Preferred
                stock dividend and amortization of deferred financing
                costs
            
            
            166,655
            
            
            (165,055
            )
            
            1,600Preferred
                stock beneficial conversion
            
            
            427,372
            
            
            (427,372
            )
            
            --Amortization
                of convertible and non-convertible note
            
            
            28,768
            
            
            
            
            
            28,768discount
                and deferred financial costsDepreciation
                and amortization
            
            
            95,461
            
            
            
            
            
            95,461Amortization
                of intangibles
            
            
            151,104
            
            
            
            
            
            151,104Gain
                on sale of property and equipment
            
            
            (6
            )
            
            
            
            
            (6
            )Minority
                interest in income of subsidiaries
            
            
            6,403
            
            
            
            
            
            6,403Common
                stock issued for services and employee compensation
            
            
            34,912
            
            
            
            
            
            34,912Undistributed
                earnings of affiliates
            
            
            10,621
            
            
            
            
            
            10,621Deferred
                income taxes
            
            
            (555,969
            )
            
            276,741
            
            
            (279,228
            )Changes
                inAccounts
                receivable
            
            
            (123,584
            )
            
            
            
            
            (123,584
            )Accounts
                payable
            
            
            376,767
            
            
            
            
            
            376,767Accrued
                expenses
            
            
            (229,856
            )
            
            
            
            
            (229,856
            )Income
                taxes refundable/payable
            
            
            54,052
            
            
            
            
            
            54,052Other
                assets and liabilities
            
            
            821,181
            
            
            
            
            
            821,181Net
                cash provided by (used in) operating activities
            
            
            861,546
            
            
            
            
            
            861,546**Investing
                Activities**Purchase
                of property and equipment
            
            
            (176,734
            )
            
            
            
            
            (176,734
            )Proceeds
                from sale of property and equipment
            
            
            6
            
            
            
            
            
            6Deposit
                refund from potential equity investment
            
            
            (350,000
            )
            
            
            
            
            (350,000
            )Acquisition
                of subsidiary
            
            
            (597,945
            )
            
            
            
            
            (597,945
            )Net
                cash used in investing activities
            
            
            (1,124,673
            )
            
            
            
            
            (1,124,673
            )**Financing
                Activities**Net
                change in restricted cash
            
            
            (303,746
            )
            
            
            
            
            (303,746
            )Net
                change in notes payable - bank
            
            
            156,899
            
            
            
            
            
            156,899Principal
                payments under capital lease obligation
            
            
            (15,116
            )
            
            
            
            
            (15,116
            )Principal
                payments in other loan
            
            
            (92,663
            )
            
            
            
            
            (92,663
            )Principal
                payment of revolving note
            
            
            (116,201
            )
            
            
            
            
            (116,201
            )Repurchase
                of common stock
            
            
            (7,796
            )
            
            
            
            
            (7,796
            )Net
                cash provided by financing activities
            
            
            (378,623
            )
            
            
            
            
            (378,623
            )**Decrease
                in Cash and Cash Equivalents**
            
            
            (641,750
            )
            
            
            
            
            (641,750
            )**Foreign
                Currency Exchange Difference**
            
            
            --
            
            
            
            
            
            --**Cash
                and Cash Equivalents, Beginning of Period**
            
            
            2,018,093
            
            
            
            
            
            2,018,093**Cash
                and Cash Equivalents, End of Period**
            
            $
            1,376,343
            
            
            
            
            $
            1,376,343




9




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




**Note
              3:**
            **Investment
                Deposit**




At
      March
      31, 2006, the Company entered into a Stock Purchase Agreement with HTL Logistics
      Limited, a Cayman Island corporation (“HTL”), pursuant to which the Company had
      agreed to acquire seventy percent (70%) of the outstanding shares of capital
      stock of HTL. The Company deposited $750,000 with HTL to be applied to the
      purchase price at the closing of the transaction. On November 8, 2006, both
      parties decided to cancel this transaction and HTL agreed to refund the deposit.
      As of March 31, 2007, $140,000 has been refunded.




**Note
              4:**
            **Earnings
                Per Share**




The
      following is a reconciliation of the numerator and denominator of basic and
      diluted earnings per share:




**(Unaudited)**
              **Three
                Months Ended March 31****2007**
            
            **2006
                (Restated)****Loss**
            
            **Weighted
                Average Shares**
            
            **Per-Share
                Amount**
            
            **Loss**
            
            **Weighted
                Average Shares**
            
            **Per-Share
                Amount****Net
                loss attributable to common stockholders**
            
            $
            (903,552
            )
            
            
            
            
            
            
            $
            (778,503
            )**Basic
                EPS**Loss
                attributable to common stockholders
            
            
            (903,552
            )
            
            28,599,543
            
            $
            (0.03
            )
            
            (778,503
            )
            
            26,693,517
            
            $
            (0.03
            )Stock
                options and warrants
            
            
            
            
            
            --
            
            
            
            
            
            
            
            
            --**Diluted
                EPS**Loss
                attributable to common stockholders
            
            $
            (903,552
            )
            
            28,599,543
            
            $
            (0.03
            )
            $
            (778,503
            )
            
            26,693,517
            
            $
            (0.03
            )




Common
      stock equivalents related to warrants, convertible preferred stock and
      convertible note of $4,735,788, $3,409,091 and $4,499,459, respectively, are
      not
      included in the calculation of dilutive earnings per share for the three months
      ended March 31, 2007 because they have an anti-dilutive effect.




Common
      stock equivalents related to warrants, convertible preferred stock and
      convertible note of $4,385,788, $4,375,000 and $4,499,459, respectively, are
      not
      included in the calculation of dilutive earnings per share for the three months
      ended March 31, 2006 because they have an anti-dilutive effect.




10




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




**Note
              5:**
            **Common
                Stock and Preferred Stock**




As
      of
      March 31, 2007, the Company’s authorized capital stock was comprised of
      100,000,000 shares of common stock, $0.001 par value and 10,000,000 shares
      of
      preferred stock, $0.001 par value. As of March 31, 2007 and December 31, 2006,
      28,619,271 and 28,597,712 shares of common stock, respectively; and 3,000 shares
      of preferred stock are outstanding.




The
      outstanding Series A Preferred Stock is redeemable in 2008. The redeemable
      amounts and unamortized discounts are as follows:




**March
                31,**
              **2007**
            
            **December
                31, 2006**Redeemable
                amount
            
            $
            3,000,000
            
            $
            3,000,000Unamortized
                discount
            
            
            (1,149,136
            )
            
            (1,366,017
            )Carrying
                value
            
            $
            1,850,864
            
            $
            1,633,983




Accretion
      of the additional beneficial conversion feature for Series A Preferred Stock
      was
      $145,406 and $427,372 during the three months ended March 31, 2007 and 2006,
      respectively.





Future
      amortization of the deferred financing costs, preferred stock discount and
      beneficial conversion feature is as follows:




April
                1, 2007 to December 31, 2007
            
            $
            751,4582008
            
            
            397,678




In
      connection with the issuance of the Series A Preferred Stock, the Company
      incurred $958,951 of financing costs. These costs have been recorded as a
      discount of the preferred stock and are accreted over the term of the preferred
      stock. For the three months ended March 31, 2007 and 2006, the Company
      recognized $36,119 and $101,555 respectively related to the accretion of the
      Series A Preferred Stock deferred financial cost.




11




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




***2000*** **Stock Plan**




The
      Company has a 2000 Stock Plan (“Plan”) to issue stock options and grants
      pursuant to various agreements with employees, service providers, business
      associates and others that will have an important business relationship with
      the
      Company or its affiliates. The maximum number of shares of the Company’s common
      stock available for issuance under the Plan is 2,200,000 shares. As of March
      31,
      2007, the maximum number of shares available for future grants under the Plan
      was 1,060,135 shares. The options and stock grants vest over an 18-month
      period.




***Treasury
      Stock***




Based
      on
      a resolution of the Board of Directors in October 2005, the Company authorized
      the repurchase of shares of its outstanding Common Stock, in an aggregate amount
      not to exceed $500,000. As of March 31, 2007, 41,800 shares of common stock
      at
      an aggregate cost of $32,623 have been repurchased and reflected at cost as
      a
      reduction from stockholders’ equity.




**Note
              6:**
            **Notes
                Payable - Bank and Non-Convertible
                Notes**




Short-term
      borrowings and weighted average interest rates at March 31, 2007 and December
      31, 2006, were:




**March
                31, 2007**
            
            **December
                31, 2006****Weighted
                Average Interest**
              **Rate**
            
            **Amount**
            
            **Weighted
                Average Interest**
              **Rate**
            
            **Amount**Notes
                payable - bank and non-convertible note
            
            
            6.58
            %
            $
            7,328,548
            
            
            7.56
            %
            $
            6,714,451







The
      Company has certain banking facilities to finance its working capital. The
      facilities available totaled approximately $9,925,450 before outstanding
      borrowings at March 31, 2007. The facilities accrue interest at rates varying
      with the prime rate in Hong Kong, Hong Kong Interbank Offered Rate (HIBOR),
      or
      the cost of funds rate. As of March 31, 2007, these rates ranged between 4.16%
      and 8.75%. The facilities require annual renewals and are collateralized by
      personal guarantees of two directors and restricted cash of approximately
      $5,839,206. As of March 31, 2007 and December 31, 2006, amounts outstanding
      against these facilities were $7,328,548 and $6,714,451, respectively. The
      facilities have no expiration date for which they are subjected to banks’ review
      and negotiation about the amounts and terms annually.




12




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




**Note
              7:**
            **Convertible
                and Non-Convertible Notes**




Effective
      August 4, 2005, the Company completed a financing transaction with Laurus Master
      Fund, Ltd. ("Laurus"), by and among the Company, certain of the Company's United
      States subsidiaries (the "Subsidiaries"), and Laurus (the "Financing") that
      was
      later restructured. The financing consisted of (i) a Secured Convertible Minimum
      Borrowing Note (the "Minimum Borrowing Note") in the principal amount of $4
      million, which was convertible into shares of the Company's common stock, par
      value $0.001 per share (the "Common Stock"), and (ii) a Secured Revolving Note
      (the "Revolving Note”). The notes were in the aggregate principal amount of $7.5
      million. Effective May 2, 2006, the Company completed the restructuring of
      its
      outstanding $7.5 million credit facility (the “Laurus Credit Facility”) with
      Laurus. The conversion feature of the Laurus Credit Facility has been limited
      to
      the conversion of the secured convertible note (the “Convertible Note”) in the
      maximum principal amount of $4 million, which is convertible into shares of
      the
      Common Stock at fixed conversion rate of $0.88 per share with respect to the
      first $3,750,000 and $1.05 per share with respect to the remaining $250,000.
      There were no borrowings on the revolving loan at March 31, 2007. Total
      available borrowings were $4.6 million at March 31, 2007.




The
      Notes
      were due on July 29, 2008. The interest rate on the Notes is equal to the
      greater of (i) six percent (6%), and (ii) the prime rate plus one percent (1)%.
      The interest rate may be adjusted downward depending on (i) whether the Company
      has registered the shares of Common Stock underlying the Minimum Borrowing
      Note,
      and the Warrant, and (ii) the price of the Common Stock.




During
      2005, the Company also issued to Laurus a warrant (the “Warrant”) to purchase,
      at any time prior to July 29, 2012, up to 1,500,000 shares of Common Stock
      at a
      purchase price of $1.00 per share, subject to adjustments. The fair value of
      the
      warrant was calculated to be $531,011 using the Black-Scholes model. The
      following assumptions were used to calculate the value of the warrant: dividend
      yield of 0%, risk free interest rate 4.13%, expected life of 7 years, and
      volatility of 45.64%.




In
      connection with the restructuring during 2006, the Company issued an additional
      warrant to Laurus providing Laurus the right to purchase up to an additional
      350,000 shares of Common Stock at an exercise price of $0.88 per share. The
      fair
      value of the warrant was calculated to be $59,276 using the Black-Scholes model.
      The Company discounted the carrying value of the notes by the fair value of
      the
      warrants. The discount is being amortized over the term of the notes as
      additional interest expense. The following assumptions were used to calculate
      the value of the warrant: dividend yield of 0%, risk free interest rate of
      4.88%, expected life of 6.24 years, and volatility of 29.32%.




The
      Company had the option of prepaying the outstanding principal amount in whole
      or
      in part by paying an amount equal to 120% of the principal amount, plus (i)
      $200,000 if redeemed prior to the date twelve (12) months from a closing of
      the
      transaction, (ii) $150,000 if redeemed between the period twelve (12) months
      following and twenty-four (24) months following August 4, 2005, and (iii)
      $100,000, if redeemed between the period twenty-four (24) months following
      August 4, 2005 and prior to the Maturity Date, by giving at least seven (7)
      days
      prior written notice of redemption to Laurus.




13


**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




As
      of
      March 31, 2007 and December 31, 2006, the outstanding balance of the Convertible
      Note, net of discount, is $2,393,739 and $3,512,811, respectively, and the
      unamortized discount is $456,323 and $487,189, respectively.




Effective
      April 6, 2007, the Company completed a financing transaction with Wells Fargo
      Bank, National Associates (“Wells Fargo”) pursuant to the terms of a Credit and
      Security Agreement (the "C&S Agreement"), by and between the Company,
      certain of the Company’s United States subsidiaries (the “Subsidiaries”), and
      Wells Fargo (the “Well Fargo Financing”). Pursuant to the C&S Agreement, the
      Company issued to Wells Fargo a revolving note in the principal amount of $10
      million (the “Note”).




On
      that
      date, the Company received initial funding under the Wells Fargo Financing
      of
      approximately $2,947,000, excluding fees and costs in the amount of $50,000
      payable to Wells Fargo, in connection with the Wells Fargo Financing. This
      initial funding was used to pay all of the Company’s payment obligations under
      its financing arrangements with Laurus.




The
      interest rate on the Note is Wells Fargo’s prime rate, plus 0.75%.




The
      Note
      is secured by a first priority lien on the assets of the Company and its
      subsidiaries, and is payable on demand.




**Note
              8:**
            **Income
                taxes**




During
      the year ended December 31, 2006 the Company recorded a full valuation allowance
      of its deferred tax assets related to its United States operations. No income
      tax benefit has been recorded in the statement of operations related to the
      operations in the United States for the three months ended March 31, 2007 as
      these operations incurred a net loss for the first quarter and the Company
      has
      continued to provide for a full valuation allowance for its United States
      operations.




**Note
              9:**
            **Related
                Party Transactions**




As
      of
      March 31, 2007 and December 31, 2006, the Company had a payable to a minority
      shareholder of a subsidiary of $123,893. The payable accrues interest at 3%
      per
      annum, is unsecured and has no fixed payment terms.




14


**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




**Note
              10:**
            **Segment
                of the Business**




***Business
      Segments***




The
      Company operates mainly in two business segments. Those segments are air
      forwarding and sea forwarding services. The accounting policies adopted by
      the
      Company for segment reporting are described in the summary of significant
      accounting policies in the Company’s Form 10-K filed for the year ended December
      31, 2006.




The
      following table summarized the Company’s operations as of and for the three
      months ended March 31, 2007 and 2006 analyzed into air and sea forwarding
      services:




**Air
                Forwarding**
            
            **Sea
                Forwarding**
            
            **Total****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)****2007**
            
            **2006
                (Restated)**
            
            **2007**
            
            **2006
                (Restated)**
            
            **2007**
            
            **2006
                (Restated)**Revenues
            
            $
            17,525,438
            
            $
            19,950,405
            
            $
            15,649,751
            
            $
            10,479,520
            
            $
            33,175,189
            
            $
            30,429,925Cost
                of forwarding
            
            
            (13,721,671
            )
            
            (16,622,054
            )
            
            (13,727,493
            )
            
            (9,128,216
            )
            
            (27,449,164
            )
            
            (25,750,270
            )Depreciation
                and amortization
            
            
            (189,571
            )
            
            (152,050
            )
            
            (181,464
            )
            
            (94,515
            )
            
            (371,035
            )
            
            (246,565
            )Interest
                income
            
            
            35,518
            
            
            34,833
            
            
            4
            
            
            2
            
            
            35,522
            
            
            34,835Interest
                expense
            
            
            (88,476
            )
            
            (62,337
            )
            
            (1,325
            )
            
            (473
            )
            
            (89,801
            )
            
            (62,810
            )Other
                segment expenses attributable to segment
            
            
            (1,596,980
            )
            
            (1,232,970
            )
            
            (1,276,467
            )
            
            (592,422
            )
            
            (2,873,447
            )
            
            (1,825,392
            )Segment
                income
            
            $
            1,964,258
            
            $
            1,915,827
            
            $
            463,006
            
            $
            663,896
            
            
            2,427,264
            
            
            2,579,723Net
                other unallocated expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (3,055,028
            )
            
            (2,659,969
            )Minority
                interest
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (13,907
            )
            
            (6,403
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            (641,671
            )
            $
            (86,649
            )Goodwill
            
            $
            3,261,749
            
            $
            2,862,979
            
            $
            1,052,873
            
            $
            892,414
            
            $
            4,314,622
            
            $
            3,755,393Intangible
                assets
            
            
            532,116
            
            
            685,861
            
            
            162,274
            
            
            195,896
            
            
            694,390
            
            
            881,757Other
                assets
            
            
            18,292,071
            
            
            23,188,452
            
            
            12,910,829
            
            
            8,777,032
            
            
            31,202,900
            
            
            31,965,484Total
                assets
            
            $
            22,085,936
            
            $
            26,737,292
            
            $
            14,125,976
            
            $
            9,865,342
            
            $
            36,211,912
            
            $
            36,602,634




15




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




***Geographical
      Segments***




The
      table
      below summarized the Company’s revenues during the three months ended March 31,
      2007 and 2006 analyzed into geographical locations:




**(Unaudited)**
              **Three
                Months Ended March 31****2007**
            
            **2006**Revenues*
                IATA Area 1
            
            $
            6,332,956
            
            $
            3,446,612*
                IATA Area 2
            
            
            7,690,121
            
            
            5,813,493*
                IATA Area 3
            
            
            19,152,112
            
            
            21,169,820Total
            
            $
            33,175,189
            
            $
            30,429,925




The
      table
      below summarized the Company’s assets as of March 31, 2007 and 2006 analyzed
      into geographical locations:




**(Unaudited)**
            
            **(Unaudited)****As
                of March 31, 2007**
            
            **As
                of March 31, 2006****Trade
                Receivables**
            
            **Other
                Assets (Including Goodwill)**
            
            **Total**
              **Assets**
            
            **Trade
                Receivables**
            
            **Other
                Assets (Including Goodwill)**
            
            **Total**
              **Assets**Assets*IATA
                Area 1
            
            $
            6,286,272
            
            $
            4,084,211
            
            $
            10,370,483
            
            $
            7,317,070
            
            $
            13,105,448
            
            $
            20,422,518*IATA
                Area 2
            
            
            4,289,314
            
            
            8,856
            
            
            4,298,170
            
            
            4,002,414
            
            
            --
            
            
            4,002,414*IATA
                Area 3
            
            
            6,780,843
            
            
            14,762,416
            
            
            21,543,259
            
            
            6,190,461
            
            
            5,987,241
            
            
            12,177,702Total
            
            $
            17,356,429
            
            $
            18,855,483
            
            $
            36,211.912
            
            $
            17,509,945
            
            $
            19,092,689
            
            $
            36,602,634




*
            IATA
                Area 1 comprises all of the North and South American Continent and
                adjacent islands, Greenland, Bermuda, West Indies and the islands
                of the
                Caribbean Sea, the Hawaiian Islands (including Midway and
                Palamyra).




*
            IATA
                Area 2 comprises all of Europe (including the European part of the
                Russian
                Federation) and the adjacent islands, Iceland, the Azores, all of
                Africa
                and the adjacent islands, Ascension Island, that part of Asia lying
                west
                of and including Iran.




*
            IATA
                Area 3 comprises all of Asia and the adjacent islands, except that
                portion
                included in IATA Area 2, all of the East Indies, Australia, New Zealand
                and the adjacent islands, the islands of the Pacific Ocean, except
                those
                included in IATA Area 1.




16




**Pacific
      CMA, Inc.**


**Notes
      to Condensed Consolidated Financial Statements**


**March
      31, 2007 and 2006**


**(Unaudited)**




**Note
              11:**
            **Investment
                in Equity Method
                Subsidiaries**




Investment
      in equity method subsidiaries relates to ownership of Shanghai Air Cargo Ground
      Handling Services Ltd. (“Shanghai Air Cargo”), Vantage Point Services Limited
      (“Vantage Point”), Careship International Transportation Ltd. (“Careship
      International”) and Careship Aviation Limited (“Careship Aviation”) for 35%,
      40%, 46.92% and 20%, respectively. Shanghai Air Cargo began operations in April
      2004 and the interest in Vantage Point, Careship International and Careship
      Aviation was acquired by the Company in October 2004, January 2005 and July
      2006, respectively. Financial results of operations of the affiliates during
      the
      three months ended March 31, 2007 are summarized below:




**(Unaudited)**
                **Three
                  months ended**
                **March
                  31, 2007****Shanghai
                  Air Cargo**
              
              **Vantage
                  Point**
              
              **Careship
                  International**
              
              **Careship
                  Aviation**Net
                  Sales
              
              $
              -
              
              $
              50,048
              
              $
              64,093
              
              $
              -Cost
                  of Sales
              
              
              -
              
              
              53,702
              
              
              28,364
              
              
              -Gross
                  Profit
              
              
              -
              
              
              (3,654
              )
              
              35,730
              
              
              -Net
                  Income (Loss)
              
              
              -
              
              
              (20,634
              )
              
              (28,022
              )
              
              (12,434
              )Equity
                  in Income (Loss) of Affiliates
              
              
              -
              
              
              -
              
              
              (13,148
              )
              
              (2,487
              )


The
      Company invested $846,847 in its 46.92% interest in Careship International
      which
      amount was $792,453 in excess of the underlying equity in net assets of the
      investee in January 2005. This excess was allocated to an intangible asset
      of
      $555,278 and the balance of $237,175 to goodwill. The intangible asset related
      to an exclusive right to conduct business which was granted to Careship
      International by the government of the Peoples Republic of China for a term
      of
      ten years. The intangible is being amortized over the term of the exclusive
      right. The amortization expense is reflected in the loss of equity method
      subsidiaries and amounted to $13,046 for the quarter ended March 31,
      2007.




Shanghai
      Air Cargo Ground Handling Services Ltd ceased its business in the first quarter
      of 2007. Shanghai Air Cargo is under the progress of dissolving.




**Note
              12:**
            **Business
                Acquisitions**




On
      January 2, 2007, the Company completed the acquisition 100% of the equity of
      Parco Shipping Co., Ltd. (“Parco”) for $1,031,620. Parco is a non-asset based
      logistics services company based in Hong Kong, which handles both air and ocean
      shipments between Hong Kong and mainland China. Goodwill and intangible assets
      of $568,790 and $450,156, respectively, were recognized in this
      transaction.




The
      above
      transaction was recorded using the purchase method of accounting. The results
      of
      operations are included in the consolidated financial statement since the date
      of acquisition. Assets and liabilities were recorded based on fair values.
      The
      purchase price in excess of net identified tangible and intangible assets
      acquired is accounted in accordance to FASB Statement No. 141. The acquisition
      of Parco is immaterial to the Company as its total assets value is less than
      1%
      of the Company’s total assets value at the date of acquisition.




17




**Item
              2.**
            **Management’s
                Discussion and Analysis of Financial Condition and****Results
                of Operations**





Special
      Note of Caution Regarding Forward-Looking Statements





Certain
      statements in this report, including statements in the following discussion,
      which are not statements of historical fact, are what are known as
      "forward-looking statements," which are basically statements about the future.
      For that reason, these statements involve risk and uncertainty since no one
      can
      accurately predict the future. Words such as "plans," "intends," "hopes,"
      "seeks," "anticipates," "expects," and the like, often identify such
      forward-looking statements, but are not the only indication that a statement
      is
      a forward-looking statement. Such forward-looking statements include statements
      concerning our plans and objectives with respect to the present and future
      operations of the Company, and statements, which express or imply that such
      present and future operations will, or may, produce revenues, income or profits.
      Numerous factors and future events could cause the Company to change such plans
      and objectives, or fail to successfully implement such plans or achieve such
      objectives, or cause such present and future operations to fail to produce
      revenues, income or profits. Therefore, the reader is advised that the following
      discussion should be considered in light of the discussion of risks and other
      factors contained in this report on Form 10-Q and in the Company's other filings
      with the SEC including, but not limited to, its Annual Report on Form 10-K.
      No
      statements contained in the following discussion should be construed as a
      guarantee or assurance of future performance or future results.





These
      forward-looking statements are based largely on our current expectations,
      assumptions, plans, estimates, judgments and projections about our business
      and
      our industry, and they involve inherent risks and uncertainties. Although we
      believe that these forward-looking statements are based upon reasonable
      estimates, judgments and assumptions, we can give no assurance that our
      expectations will in fact occur or that our estimates, judgments or assumptions
      will be correct, and we caution that actual results may differ materially and
      adversely from those in the forward-looking statements. Forward-looking
      statements involve known and unknown risks, uncertainties, contingencies and
      other factors that could cause our or our industry's actual results, level
      of
      activity, performance or achievement to differ materially from those discussed
      in or implied by any forward-looking statements made by or on behalf of us
      and
      could cause our financial condition, results of operations or cash flows to
      be
      materially adversely affected. Accordingly, investors and all others are
      cautioned not to place undue reliance on such forward-looking
      statements.





Potential
      risks, uncertainties, and other factors which could cause the Company's
      financial performance or results of operations to differ materially from current
      expectations or such forward-looking statements include, but are not limited
      to:





·
            International
                economic and political risks, over which we have little or no
                control;


·
            Challenges
                posed by competing in a changing international
                environment;


·
            Political
                uncertainty in Hong Kong and China making it difficult to develop
                any long
                range planning;


·
            Relations
                between the United States and China become
                unstable;


·
            The
                Chinese government could change its policies toward private enterprises
                or
                expropriate private enterprises;


·
            The
                lack of adequate remedies and impartiality under China's legal system
                may
                adversely impact our ability to do business and enforce our agreements
                with third parties;




18




·
            Fluctuations
                in exchange rates;


·
            Our
                dependence on third parties for equipment and
                services;


·
            Competition
                from our own cargo agents;


·
            Having
                seasonal business that causes fluctuations in our results of operations
                and financial condition;


·
            A
                lack of ongoing contractual relationships with our
                customers;


·
            Our
                inventory of shipping space is subject to the significant risk that
                we may
                not be able to "fill" the space while having contracted for that
                space,
                and


·
            Our
                insurance may not be sufficient to cover losses or damages to the
                freight
                we ship or for consequential damages for a shipment of hazardous
                materials.





Many
      of
      these factors are beyond our control, and you should read carefully the factors
      described in "Risk Factors" in our filings (including our Forms 10-K and
      registration statements) with the Securities and Exchange Commission (the “SEC”)
      for a description of some, but not all, risks, uncertainties and contingencies.
      These forward-looking statements speak only as of the date of this document.
      We
      do not undertake any obligation to update or revise any of these forward-looking
      statements to reflect events or circumstances occurring after the date of this
      document or to reflect the occurrence of unanticipated events. Any
      forward-looking statements are not guarantees of future
      performance.







CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES





Management's
      discussion and analysis of financial condition and results of operations are
      based upon our consolidated financial statements. These statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America. These principles require management to make certain
      estimates, judgments and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. On an on-going basis, we evaluate our estimates, based on
      historical experience, and various other assumptions that are believed to be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying values of assets and liabilities that are
      not readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





The
      following critical accounting policies rely upon assumptions, judgments and
      estimates and were used in the preparation of our consolidated financial
      statements:





**RECOGNITION
      OF COST OF FORWARDING**





The
      billing of cost of forwarding is usually delayed. As a result, we must estimate
      the cost of purchased transportation and services, and accrue an amount on
      a
      load-by-load basis in a manner that is consistent with revenue recognition.
      Such
      estimate is based on past trends, and on the judgment of management.
      Historically, upon completion of the payment cycle (receipt and payment of
      transportation bills), the actual aggregate transportation costs are not
      materially different than the accrual. However, in any case in which the actual
      cost varies significantly from the accrual, a revision to the accrual would
      be
      required.




19




**ACCOUNTING
      FOR INCOME TAXES**





In
      preparing our consolidated financial statements, we are required to estimate
      our
      income taxes in each of the jurisdictions where we operate. This process
      involves estimating actual current tax exposure, together with assessing
      temporary differences resulting from differing treatment of items for tax and
      accounting purposes. These differences result in deferred tax assets and
      liabilities, which are included in our condensed consolidated balance sheet.
      We
      are required to assess the likelihood that our deferred tax assets will be
      recovered from future taxable income, and to the extent that we believe that
      recovery is not likely, we must establish a valuation allowance. To the extent
      we establish a valuation allowance, we must include an expense within the tax
      provision of the consolidated statement of income in each period in which the
      allowance is increased.





Significant
      judgment is required in determining the provision for income taxes, deferred
      tax
      assets and liabilities, and any valuation allowance, against our deferred tax
      assets. In the event that actual results differ from these estimates or the
      estimates are adjusted in future periods, then we may need to establish an
      additional valuation allowance, which could materially impact our financial
      position and results of operations.





If
      the
      realization of the deferred tax assets in the future is considered more likely
      than not, an adjustment to the deferred tax assets would increase net income
      in
      the period such determination is made. The establishment of the valuation
      allowance for the full amount for our US deferred tax assets aggregating
      $2,137,000 during the fourth quarter of 2006 does not impair our ability to
      use
      the deferred tax assets upon achieving profitability. Our federal and state
      net
      operating loss carry-forwards do not expire for the next 13 to 20
      years.





**VALUING
      LONG-LIVED ASSETS, INTANGIBLES AND GOODWILL**





We
      assess
      the impairment of identifiable long-lived assets purchased, intangible assets
      and goodwill whenever events or changes in circumstances indicate that the
      carrying amount may be impaired. Factors that we consider when evaluating for
      possible impairment include the following:





**·**
            Significant
                under-performance relative to expected historical or projected future
                operating results;**·**
            Significant
                changes in the manner of our use of the acquired assets or the strategy
                for our overall business; and**·**
            Significant
                negative economic trends.





When
      determining whether the carrying value of long-lived assets and goodwill is
      impaired based upon the existence of one or more of the above factors, we
      determine the existence of impairment by comparison of the carrying amount
      of
      the asset to expected future cash flows to be generated by the asset. If such
      assets are considered impaired, the impairment is measured as the amount by
      which the carrying value of the assets exceeds their fair values. As of March
      31, 2007, goodwill totaled approximately $4.3 million, other intangible assets
      amounted to approximately $694,000 and our long-lived assets, consisting
      primarily of net property, plant and equipment, totaled approximately $1.7
      million.




20




**ACCOUNTS
      AND NOTES RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS**





Accounts
      receivable are stated at the amount billed to customers. The Company provides
      an
      allowance for doubtful accounts, which is based upon a review of outstanding
      receivables, historical collection information and existing economic conditions.
      The allowance is provided for accounts with a significant pattern of
      uncollectibility based on historical experience and management’s evaluation of
      accounts receivable. Accounts receivable are ordinarily due 30 days after the
      issuance of the invoice. The Company does not accrue interest on past due
      receivables.





**OVERVIEW**





The
      Company does not carry on any business activities by itself. Instead, through
      its subsidiaries and associated companies, it provides supply chain management
      solutions, contract logistics services and international freight forwarding
      services. The Company’s current business was formed from a base of two freight
      forwarders, AGI Logistics (HK) Ltd. (“AGI”) and Airgate International Corp.
      (“Airgate”) which were acquired in 2000 and 2002, respectively and the business
      is managed from our principal support group offices in New York and Hong
      Kong.





The
      Company's wholly owned subsidiary AGI, operates an integrated logistics and
      freight forwarding business which is based in Hong Kong. The principal services
      are provided by AGI and its own subsidiaries (wholly owned and majority owned)
      and its associated (those companies that it holds a minority equity position)
      companies. At March 31, 2007, AGI wholly-owned subsidiaries included Careship
      International Transportation Limited (formerly known as Shenzhen Careship
      International Transportation Ltd.) ("HK Careship"), Pacific CMA Limited
      (formerly known as AGI China Limited), WCL Global Logistics Limited (“WCL”) and
      Parco Shipping Co. Ltd. (“Parco”) which were acquired by AGI in 2000, 2002, 2006
      and 2007, respectively. The majority owned subsidiaries included AIO Global
      Logistics Limited (62%) and SDA Forwarding Co. Limited (51%). AGI also has
      investments in equity method subsidiaries: Shanghai Air Cargo Ground Handling
      Services Ltd (“Shanghai Air Cargo”), Vantage Point Services Limited (“Vantage
      Point”), Careship International Transportation Ltd. (“Careship International”)
      and Careship Aviation Limited (“Careship Aviation”) of 35%, 40%, 46.92% and 20%
      of their total equity, respectively.





The
      business of AGI was first established in August 1998 and now consists of its
      own
      operations, as well as those of its subsidiaries and associated
      companies.





Airgate,
      a privately held New York based freight forwarder that was established in 1995,
      was acquired on April 30, 2002. Airgate is a non-asset based logistics services
      company which primarily handles the air and ocean import shipments from the
      Far
      East and Southwest Asia to the U.S.


Paradigm,
      a privately held Miami based freight forwarder was acquired on April 30, 2004.
      Paradigm is a non-asset based logistics services company which primarily handles
      the air and ocean import shipments from Asia to the U.S. After the acquisition,
      a branch office in Los Angeles was opened in 2005




**OVERALL
      RESULTS**





Freight
      forwarders are compensated on a transactional basis for the movement of goods
      and provision of related services to their customers. Therefore, our revenue
      is
      derived from our freight forwarding services based upon the rates that we charge
      our customers for the movement of their freight from origin to destination.
      The
      carrier's contract is with us, not with our customers. We are responsible for
      the payment of the carrier's charges and we are legally responsible for the
      shipment of the goods. We are responsible for any claims for damage to the
      goods
      while in transit. In most cases, we receive reimbursement from the carriers
      for
      any claims. Since many shippers do not carry insurance sufficient to cover
      all
      losses, we also carry insurance to cover any unreimbursed claims for goods
      lost
      or destroyed in the event of a total loss. Gross revenue represents the total
      dollar value of services we sell to our customers. Our costs of transportation,
      products and handling include the direct cost of transportation, including
      tracking, rail, ocean, air and other costs. We commit to pay for space with
      shippers prior to receiving committed orders from our customers. We act
      principally as a service provider to add value and expertise in the procurement
      and execution of these services for our customers. Therefore, our gross profits
      (gross revenues less the direct costs of transportation, products, and handling)
      are indicative of our ability to source, add value and resell services and
      products that are provided by third parties.




21




The
      majority of our transactions are denominated in Hong Kong dollars or United
      States dollars. The risk due to exchange rate fluctuation is negligible so
      long
      as the Hong Kong dollar remains "pegged" to the United States dollar. Sales
      are
      made on credit, generally thirty days, or on a cash basis. We have a credit
      control policy, that our employees have been instructed to follow by checking
      or
      obtaining the credit reference of new customers, the credit records of our
      customers are reviewed by senior staff and a chief executive officer of the
      Company’s respective subsidiaries **** must
      give his/her prior approval for orders in excess of a pre-determined amount.
      We,
      on the other hand, receive credit on a short-term basis, generally thirty days,
      from airlines and shipping lines. In the United States, we generally have to
      pay
      vendors immediately.





In
      addition, the Company completed the acquisition of Parco Shipping Co., Ltd.
      (“Parco”) for $1,031,620 on January 2, 2007. Parco is a non-asset based
      logistics services company based in Hong Kong, which handles both air and ocean
      shipments between Hong Kong and mainland China. Goodwill and intangible assets
      of $568,790 and $450,156, respectively, were recognized in this
      transaction.





**THREE
      MONTHS ENDED MARCH 31, 2007 COMPARED WITH THREE MONTHS ENDED MARCH 31,
      2006**





Total
      revenue for the three months ended March 31, 2007 increased approximately 9%
      compared with the three months ended March 31, 2006, from $30,429,925 in 2006
      to
      $33,175,189 in 2007. The increase in revenue was primarily the result of the
      organic growth of AGI, HK Careship, Paradigm and Airgate, in addition to the
      inclusion of the results of Parco that we acquired in January 2007.





Revenue
      derived from the operations of AGI and its subsidiaries (“AGI Group”) increased
      approximately 15% during the three months ended March 31, 2007 as compared
      with
      the same period of 2006. The significant organic growth of AGI Group was the
      result of the following factors:





·
            An
                increase in the routed freight traffic from the existing agency
                partners;·
            Improvements
                in the agency network which enabled the Company to secure new freight
                business; and·
            The
                inclusion of the revenue of Parco $463,693 after its acquisition
                on
                January 2, 2007.





The
      revenue of Airgate represented approximately 50% of our total revenue for the
      three months ended March 31, 2007. Airgate focuses its operations on the import
      of goods from the Far East and deconsolidation of cargo. Revenue derived from
      the operations of Airgate increased approximately 1% for the three months ended
      March 31, 2007 when compared with the same period of 2006. The increase is
      the
      result of the efforts of Airgate's staff to add additional customers during
      the
      three months ended March 31, 2007.




22




Total
      revenue derived from Paradigm and AGI Singapore amounted to approximately $4.36
      million, which represents approximately 13% of total revenue of the
      Group.





When
      compared with the three months ended March 31, 2006, the cost of freight
      forwarding for the same period of 2007 increased approximately 6.6%, from
      $25,750,270 in 2006 to $27,449,164 in 2007. The increase in costs was primarily
      the result of the organic growth of the Company and the acquisition of Parco
      in
      January 2007 and the inclusion of its results thereafter.





Gross
      profit margin for the three months ended March 31 increased from approximately
      15.38% in 2006 to approximately 17.26% for the same period in 2007 while the
      gross profit (revenue minus cost of forwarding) for the three months ended
      March
      31 increased 22.36%, from $4,679,655 in 2006, to $5,726,025 in 2007. The
      increase in gross profit margin is the result of increase in freight revenue
      and
      good control of cost.





Net
      loss
      attributable to common stockholders for the three months ended March 31
      increased approximately 16%, from $778,503, which is after restatement, in
      2006,
      to $903,552 in 2007. The increase in net loss was mainly due to the significant
      increase in general and administrative costs, interest expenses, and
      depreciation and amortization expenses. Details of expense fluctuations will
      be
      discussed in the sections "Operating expenses" and "Non-operating expenses"
      respectively.





**BUSINESS
      SEGMENT OPERATING RESULTS**





The
      results of operations for each segment are as follows:





**AIR
      FREIGHT OPERATIONS:** Revenue
      from airfreight operations decreased approximately 12%, from $19,950,405 for
      the
      three months ended March 31, 2006 to $17,525,438 for the same period of 2007.
      Airfreight revenue for international operations (that includes AGI Group and
      AGI
      Singapore) was $10,418,916, while airfreight revenue for domestic operations
      (that includes Airgate and Paradigm) was $9,205,677, and offsetting
      inter-company transactions totaled $2,099,155. The volume of airfreight
      decreased for the three months ended March 31, 2007, when compared with the
      same
      period of 2006. The decrease was primarily due to large volume shipments in
      the
      first quarter of 2006.





Costs
      for
      the airfreight forwarding operations decreased approximately 17%, from
      $16,622,054 for the three months ended March 31, 2006 to $13,721,671 for the
      same period of 2007. Airfreight cost attributable to foreign operations was
      $8,650,607, while airfreight cost attributable to domestic operations was
      $7,190,925, and offsetting inter-company costs were $2,119,861. The airfreight
      cost decrease during the three months ended March 31, 2007 was due to economies
      of scale and more efficient use of cargo mix. Gross profit margin increased
      from
      approximately 16.7% for the three months ended March 31, 2006 to approximately
      21.7 % for the same period of 2007. As a result of decreased costs, overall
      gross profits increased approximately 14.3% to $3,803,767





Total
      segment overhead attributable to the airfreight operation increased by
      approximately 30%, from $1,412,524 for the three months ended March 31, 2006
      to
      $1,839,509 for the same period of 2007, as a result of increases in salaries
      and
      sales commissions. Details regarding the increase in overhead expenses are
      discussed below in "Operating Expenses".




23




Overall,
      net segment income for the airfreight operation increased by approximately
      3%
      from $1,915,827 for the three months ended March 31, 2006 to $1,964,258 for
      the
      same period of 2007. The increase in net segment income was mainly the result
      of
      lower segment cost.





**SEA
      FREIGHT OPERATION:** Revenue
      from sea freight operations increased approximately 49%, from $10,479,520 for
      the three months ended March 31, 2006 to $15,649,751 for the same period of
      2007. Sea freight revenue for international operations was $5,331,793, while
      sea
      freight revenue for domestic operations was $10,526,192, and offsetting
      inter-company transactions were $208,234. The increase in revenue was due to
      the
      contribution from the new branch offices of HK Careship in China, and the
      increase in quantity of freight consolidation by Airgate Chicago, new customers
      in European countries and our agents in India, Japan and Turkey introduced
      more
      customers into our network, which led to greater revenue from the Shanghai
      market in 2007.





Costs
      for
      the sea freight forwarding operation increased approximately 50%, from
      $9,128,216 for the three months ended March 31, 2006 to $13,727,493 for the
      same
      period of 2007. Sea freight costs attributable to foreign operations were
      $4,402,565, while costs attributable to domestic operations were $9,512,457,
      and
      inter-company costs were $187,529. However, the gross profit margin decreased
      slightly from approximately 12.89% for the three months ended March 31, 2006
      to
      approximately 12.28% for the same period of 2007. As a result of increased
      revenues, overall gross profits increased approximately 42%, to
      $1,922,258.





Total
      segment overhead attributable to the sea freight operation increased
      approximately 112%, from $687,408 for the three months ended March 31, 2006
      to
      $1,459,252 for the same period of 2007. Overall net income for the sea freight
      operation decreased approximately 30%, from $663,896 for the three months ended
      March 31, 2006 to $463,006 for the same period of 2007. The decrease in net
      segment income was mainly the result of the greater resources being allocated
      to
      seafreight operations in 2007. Details regarding the increase in overhead
      expenses are discussed below in “Operating Expenses”.





**OPERATING
      EXPENSES**





**GENERAL
      AND ADMINISTRATIVE EXPENSES**





General
      and administrative expenses increased approximately 25%, from $4,562,123 for
      the
      three months ended March 31, 2006 to $5,696,359 for the same period of 2007.
      There was a significant incremental increase in expenses for the following
      items
      for the three months ended March 31, 2007: sales commissions, depreciation
      and
      amortization, entertainment, rent and rates, as well as salaries and allowance.
      As the Company has been continuously growing and in order to cope with the
      growth in 2007, our staff planning needs called for the hiring of additional
      staff throughout our offices during 2006 and 2007.





Sales
      commission: Sales commission increased approximately 65% from $585,795 for
      the
      three months ended March 31, 2006 to $966,341 for the same period of 2007;
      the
      increase is a result of the increase in freight forwarding income during the
      three months ended March 31, 2007.





Overseas
      traveling: Expenses related to overseas traveling increased approximately 19%,
      from $122,568 for the three months ended March 31, 2006 to $145,911 for the
      same
      period of 2007. The increase in travel expense was due to expenses attributable
      to an increased number of trips to Mainland China, Japan, South East Asia and
      European countries to promote our freight business.




24




Rent
      and
      Rates: Rent and rates increased approximately 94%, from $222,966 for the three
      months ended March 31, 2006 to $431,908 for the same period of 2007. The
      increase was due to the new leases for the expansion of the office spaces in
      our
      HK and Los Angeles offices during 2006 in order to cope with the growth of
      these
      subsidiaries.





Salaries
      and allowance: Salaries and allowance increased approximately 9% from $2,105,329
      for the three months ended March 31, 2006 to $2,302,244 for the same period
      of
      2007. This increase was the result of the addition of approximately 39 staff
      persons during 2006 and first quarter 2007 in order to keep pace with our
      growth.




**STOCK-BASED
      COMPENSATION COST**





Stock-based
      compensation cost remains the same $34,912 for the three months ended March
      31,
      2006 and the same period of 2007.




**DEPRECIATION
      AND AMORTIZATION**





Depreciation
      and amortization increased approximately 50% from $246,565 for the three months
      ended March 31, 2006 to $371,035 for the same period of 2007. The increase
      was
      mainly attributable to purchases of additional fixture and furniture and office
      equipment for the new offices in Los Angeles and Hong Kong during 2006 and
      2007.





Amortization
      arises from intangible customer relationship assets recorded in conjunction
      with
      the acquisitions of Airgate on April 30, 2002, Paradigm on April 30, 2004,
      WCL
      on July 1, 2005 and May 1, 2006, and Parco on January 2, 2007. These intangible
      assets are amortized on a straight-line basis over a period of five to eight
      years. During the three months ended March 31, 2007 and 2006, the amortization
      expense attributable to these assets was $166,197 and $151,104, respectively,
      an
      increase of $15,093.




**NON
      OPERATING INCOME AND EXPENSES**





**INTEREST
      AND OTHER INCOME**





Interest
      and other income increased from $102,750 for the three months ended March 31,
      2006 to $108,371 for the same period of 2007. This increase is mainly due to
      the
      $14,672 management fee received by AGI Singapore during the first quarter of
      2007.





**INTEREST
      EXPENSE**





Interest
      expense increased from $186,626 for the three months ended March 31, 2006 to
      $267,149 for the same period of 2007. The increase in interest expense is
      primarily due to the increase in amortization of deferred financial cost and
      note discounts on the Convertible Note and Non-Convertible Note borrowed, and
      the increase in notes payable from banking facilities.




25




**CONVERTIBLE
      NOTE AND NON-CONVERTIBLE NOTE AMORTIZATION OF DEFERRED FINANCING
      COST**





The
      deferred financing costs related to Convertible Note and Non-Convertible Note
      is
      amortized over their term to maturity, which is three years. A total of $37,089
      and $18,334 was expensed for the three months ended March 31, 2007 and 2006,
      respectively. The increase in expense was the result of the effective interest
      rate method being used to calculate the expenses. The expense becomes larger
      when amortized deferred financial cost and loan balance becomes
      larger.





**AMORTIZATION
      OF CONVERTIBLE NOTE AND NON-CONVERTIBLE NOTE DISCOUNT**





This
      discount is amortized ratably over the term of the Convertible Note and
      Non-Convertible Note, which is three years. A total of $30,866 and $10,434
      of
      the discount was amortized into expense for the three months ended March 31,
      2007 and 2006, respectively. The increase in expense was the result of the
      effective interest rate method being used to calculate the expenses. The expense
      getting larger when amortized deferred financial cost and loan balance getter
      larger.





**ACCRETION
      OF SERIES A PREFERRED STOCK, NET TO REDEMPTION VALUE AND
      DIVIDENDS**





Accretion
      of Series A Preferred Stock and Dividends was $261,881 and $691,854 for the
      three months ended March 31, 2007 and 2006, respectively. The decrease is
      primarily related to the conversion of 600 shares of preferred stock into common
      stock during first quarter 2006, and the deferred costs related to those shares
      were expensed immediately after redemptions.




**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      provided approximately $403,897 and $859,946 of cash from operating activities
      for the three months ended March 31, 2007 and 2006, respectively. This decrease
      in cash from operations was mainly attributable to larger net loss in 2007
      and
      less amounts used in accounts payable and accrued expenses in 2006.





Net
      cash
      used in investing activities was $654,196 and $1,124,673 for the three months
      ended March 31, 2007 and 2006, respectively. During the three months ended
      March
      31, 2007, we used $75,257 to purchase equipment to improve our office facilities
      and used $718,939 for acquisition of Parco. We received $140,000 for the deposit
      refund from a potential equity investment.





Net
      cash
      used in financing activities was $1,284,656 and $377,023 for the three months
      ended March 31, 2007 and 2006, respectively. During the three months ended
      March
      31, 2007, we made principal payments under capital lease obligations and
      repayment of profit tax loan and short-term loan of $27,991 and $299,010,
      respectively. With our lockbox arrangement with Laurus and the banking
      facilitates with other banks our restricted cash decreased $382,350. Moreover,
      $1,149,938 was used to repay the revolving note from Laurus, and $39,460 to
      paid
      dividend on preferred stock. Net proceeds from note payable in bank were
      $614,093.





Working
      capital was $5,040,361 (inclusive of restricted cash of approximately $6.2
      million) and $7,150,895 (inclusive of restricted cash of approximately $5.9
      million) as of March 31, 2007 and 2006 respectively. We believe that we will
      be
      able to rely on cash flow from operations for short-term liquidity, and also
      believe that we have adequate liquidity to satisfy our material commitments
      for
      the twelve months following March 31, 2007. We also believe that we can obtain
      additional liquidity through further negotiation of short-term loans from banks
      to satisfy our short-term funding needs, if any.




26




We
      intend
      to continue our expansion plans through a mixture of organic growth and
      acquisitions. Future acquisitions will focus on companies that serve as freight
      forwarders in key markets or offer services (such as customs brokerage) that
      complement our existing services. We intend to achieve organic growth through
      the establishment of new branch offices in Latin America, joint ventures in
      the
      PRC and through a major marketing campaign through the Indian subcontinent,
      including India, Sri Lanka and Bangladesh. In order to achieve this goal, we
      will be required to raise a certain amount of capital. To a certain extent,
      these activities will have a significant impact on both liquidity and capital
      resources.




**CONTRACTUAL
      OBLIGATIONS AND COMMERCIAL COMMITMENT**





We
      have
      entered into various contractual obligations, which may be summarized as
      follows:




Payments
                Due by PeriodContractual
                Obligations
            
            Total
            
            Less
                than 1 year
            
            1-3
                years
            
            4-5
                years$
            
            $
            
            $
            
            $Capital
                Lease Obligations
            
            
            172,993
            
            
            69,894
            
            
            103,099
            
            
            --Operating
                Leases
            
            
            3,561,194
            
            
            1,604,465
            
            
            1,913,619
            
            
            43,110Cargo
                Space Commitments
            
            
            1,862,150
            
            
            1,862,150
            
            
            --
            
            
            --Series
                A Preferred Stock and Cumulative Dividends
            
            
            3,245,500
            
            
            182,500
            
            
            3,063,000
            
            
            --




We
      have
      capital lease obligations of $172,993 as of March 31, 2007, of which $69,894
      is
      repayable within one year, and $103,099 is repayable after one year.





We
      also
      entered into various lease commitments for office premises and warehouses in
      the
      United States, Hong Kong, Singapore and China. The total outstanding lease
      commitments under non-cancelable operating leases are $3,561,194 as of March
      31,
      2007. As of March 31, 2007, the current portion of these commitments of
      $1,604,465 is payable within one year.





We
      have
      entered into written agreements with various sea and airfreight carriers
      committing to take up a guaranteed minimum amount of cargo space each year.
      As
      of March 31, 2007, the amount outstanding for such commitments to be entered
      in
      2007 was approximately $1.86 million.




27




As
      of
      March 31, 2007, our commercial commitments may be summarized as
      follows:




Total
                  Amounts
              
              Amount
                  of Commitment
                Less
                  than
              
              Expiration
                  Per PeriodOther
                  Commercial Commitments
              
              Committed
              
              1
                  year
              
              1-3
                  years$
              
              $
              
              $Overdraft
              
              
              3,705,804
              
              
              3,705,804
              
              
              --Invoice
                  Trust Receipt
              
              
              3,622,744
              
              
              3,622,744
              
              
              --Guarantees
                  by bank
              
              
              568,123
              
              
              568,123
              
              
              --Minimum
                  Borrowing Notes, net of discounts of $336,330
              
              
              2,393,739
              
              
              --
              
              
              2,393,739Payable
                  - minority shareholders
              
              
              123,893
              
              
              123,893
              
              
              --




As
      of
      March 31, 2007, to finance our working capital, our available banking facilities
      were approximately $9,925,000 obtained from creditworthy commercial banks in
      Hong Kong. As of that date, the total amount of bank credit facilities utilized
      was $7,328,548. This was made up of (i) $3,705,804 of overdrafts; (ii)
      $3,622,744 of invoice trust receipts. Moreover, we had a borrowing facility
      with
      Laurus, subject to certain requirements. The total available amount of the
      credit facility was $7.5 million. As of March 31, 2007, the total amount
      outstanding for the credit facility, net of discount is $2,393,739.





While
      the
      banks are not obligated to advance any further funds to us, we believe that
      absent any significant downtrend in business, these sources of credit will
      continue to be available to us.





Effective
      April 6, 2007, the Company completed a financing transaction with Wells Fargo
      Bank, National Associates (“Wells Fargo”) pursuant to the terms of a Credit and
      Security Agreement (the "C&S Agreement"), by and between the Company,
      certain of the Company’s United States subsidiaries (the “Subsidiaries”), and
      Wells Fargo (the “Well Fargo Financing”). Pursuant to the C&S Agreement, the
      Company issued to Wells Fargo a revolving note in the principal amount of $10
      million (the “Note”).





On
      that
      date, the Company received initial funding under the Wells Fargo Financing
      of
      approximately $2,947,000, excluding fees and costs in the amount of $50,000
      payable to Wells Fargo, in connection with the Wells Fargo Financing. This
      initial funding was used to pay all of the Company’s payment obligations under
      its financing arrangements with Laurus.





The
      interest rate on the Note is Wells Fargo’s prime rate, plus 0.75%.




28




**OUTLOOK**





We
      believe the following factors may have a positive impact on our future results
      of operation and our financial conditions:





**CHINA'S
      INCREASED EXPORTS**





According
      to the report on China’s 2006 Economic, Social Development Plan issued by
      official Chinese News Agency Xinhua, China’s economic growth was fast but
      steady. China’s GDP for the year 2006 reached 20.94 trillion yuan, up 10.7
      percent from the year before. Economic development became more stable, and
      the
      development of service industries related to business and production such as
      logistics, banking, insurance and information services was
      accelerated.





The
      report states that vigorous efforts were made to change the pattern of growth
      of
      China’s foreign trade. The country’s export and import volume reached US$1.76
      trillion in 2006, up 23.8 percent from the year before. Because the current
      international environment should remain favorable overall, and domestic
      enterprises and their products are becoming more competitive, growth in exports
      should remain strong. There should be a reasonable increase in the scale of
      imports as a result of the end of the transition period for China’s WTO entry
      coupled with policies to encourage imports and the service trade, which should
      hold down the excessive rate of increase in the trade surplus to a certain
      extent.





The
      report also estimates that government revenue for the year 2007 will total
      4.4065 trillion yuan, with GDP increasing by about 8%. GDP growth has hovered
      around 10% or slightly higher in recent years.





As
      a
      result, the rising trading power of China has been especially important for
      transportation companies. With extensive operational centers based in Hong
      Kong
      and South China, management believes the Company is well positioned to take
      advantage of this rapid growth in trade.





**CLOSER
      ECONOMIC PARTNERSHIP**





We
      have
      updated our research on the effects of CPEA since it became operational, and
      certain of the following information was extracted from the Trade and Industry
      Department, The Government of HKSAR Press Release “The CEPA benefits Hong Kong
      economy” on January 5, 2006.





The
      Closer Economic Partnership Arrangement ("CEPA") that was signed on June 29,
      2003, originally focused on stimulating and enhancing Hong Kong's economic
      recovery. After that, Six Annexes to CEPA Main Text, Supplement to CEPA (CEPA
      II) and Supplement II to CEPA (CEPA III) were subsequently signed on September
      23, 2003, October 27, 2004 and October 18, 2005, respectively. In theory, CEPA
      significantly lowers the barriers for Hong Kong enterprises to tap the Mainland
      China market. Now in its third year of operation, CEPA fostered closer economic
      co-operation between the Mainland and Hong Kong and contributed to the long-term
      economic development in both places.




29




Under
      the
      CEPA, Hong Kong companies are permitted to set up wholly owned enterprises
      in
      Mainland China to provide logistics services and related consultancy services
      for ordinary road freight, and to engage in the management and operation of
      logistics services through electronic means. It permits freight forwarding
      agents to operate in Mainland China on a wholly owned basis a full two years
      ahead of China's WTO entrance timetable, and will permit such agents to enjoy
      national treatment in respect of the minimum registered capital
      requirement.





CEPA
      III,
      signed in October 2005, just came into effect on January 1, 2006, provides
      tariff-free access for all products of Hong Kong origin (except prohibited
      articles) imported into the Mainland upon applications by local manufacturers
      and upon CEPA rules of origin being met and agreed upon. On trade in services,
      taking the three phases of CEPA together, the Mainland has agreed to provide
      preferential treatment to Hong Kong service suppliers in 27 service areas.
      Twenty three liberalization measures spread across 10 service areas, including
      distribution and transport, became effective on January 1, 2006 under CEPA
      III.


In
      reviewing its operations in the past two years, CEPA has been implemented
      smoothly since its inception. More than 10,000 applications for Certificate
      of
      Origin under CEPA (CO(CEPA)), with a total export value exceeding HK$3.5 billion
      (around US$449 million) have been issued. The products concerned range from
      textiles and clothing and foods to pharmaceutical, plastics and plastics
      products. The amount of CO(CEPA) issued and the value of CEPA exports in 2005
      both recorded more than a 100% increase compared with 2004 after a wide range
      of
      products including food and beverages were granted zero-tariff preference under
      CEPA II.





Through
      our Hong Kong-based AGI Logistics (HK) Ltd and Careship International
      Transportation Limited, we believe we can enjoy "first mover" advantage; that
      is, we believe that our Hong Kong-based subsidiaries can benefit from CEPA
      because we have experience in doing business in, and we believe that we are
      knowledgeable in the PRC regulations and business practices. We believe that
      our
      existing offices in Hong Kong and Mainland China can also respond quicker than
      other U.S. freight forwarders to ongoing developments in China.





**OUTSOURCING
      OF NON-CORE ACTIVITIES**





Companies
      are increasingly outsourcing freight forwarding, warehousing and other supply
      chain activities so that they may focus on their respective core competencies.
      Companies are increasingly turning to freight forwarders, and logistics and
      supply chain management providers, to manage their purchase orders and assure
      timely delivery of products at a lower cost and at greater efficiency than
      if
      the function was undertaken directly.





**GLOBALIZATION
      OF TRADE**





As
      barriers to international trade are gradually reduced, international trade
      will
      similarly increase. In addition, companies are increasingly sourcing for
      supplies and raw materials from the most competitive suppliers throughout the
      world. This form of sourcing would generally also lead to increased volumes
      of
      trade.





**INCREASED
      NEED FOR TIME-DEFINITE DELIVERY**





The
      demand for just-in-time and other time definite delivery has increased as a
      result of the globalization of manufacturing, greater implementation of
      demand-driven supply chains, the shortening of product cycles and the increasing
      value of individual shipments.




30




Companies
      are decreasing the number of freight forwarders and supply chain management
      providers with which they interact so that they work with providers who are
      more
      familiar with their requirements, processes and procedures, and who can function
      as long-term partners. As such, freight forwarders that are globally integrated
      and are able to provide a full complement of services, including pick-up and
      delivery, shipment via air, sea and land, warehousing and distribution and
      customs brokerage, are well positioned to gain from this shift.





The
      following is a list of significant new developments occurring during the year
      ended December 31, 2006 and quarter ended March 31, 2007:





·
            Our
                operation team for the European Market has strengthened by hiring
                new
                personnel in Hong Kong;





·
            On
                February 28, 2006, the Company acquired the remaining 49% of the
                outstanding stock of WCL Global Logistics Ltd. (“WCL”) for $597,945. WCL
                is a non-asset based logistics services company based in Hong Kong.
                It
                also has a branch office in Guangzhou, PRC, which handles both air
                and
                ocean shipments all over the world. Goodwill and intangible assets
                of
                $514,586 and $50,646 respectively, were recognized in this
                transaction;





·
            On
                July 1, 2006, the Company acquired an additional 11% of the outstanding
                stock of AIO Global Logistics Limited (“AIO”) for $11,315, increasing our
                ownership percentage of AIO from 51% to 62%. AIO is a non-asset based
                logistics services company based in Hong Kong. Goodwill of $6,735
                was
                recognized in this transaction;





·
            On
                July 1, 2006, the Company acquired 51% of the stock of SDA Forwarding
                Co.
                Limited (“SDA”) for $15,300. SDA is a non-asset based logistics services
                company based in Hong Kong. SDA was acquired to strengthen our sales
                and
                customer base in South East Asia;





·
            On
                July 1, 2006, the Company invested $20,000 for 20% of the outstanding
                stock of Careship Aviation Limited (“Careship Aviation”). Careship
                Aviation is a joint venture project among independent third parties
                to
                provide non-asset based logistics services in Shanghai PRC and Hong
                Kong.
                It was acquired to strengthen our sales and services to our customer
                base
                in Hong Kong and to strengthen our sales and customer base in Shanghai.
                Careship Aviation did not engage in any business activity during
                2006.





·
            On
                January 2, 2007, the Company completed the acquisition of Parco Shipping
                Co., Ltd. (“Parco”) for $1,031,620. Parco is a non-asset based logistics
                services company based in Hong Kong, which handles both air and ocean
                shipments between Hong Kong and mainland China. Goodwill and intangible
                assets of $568,790 and $450,156, respectively, were recognized in
                this
                transaction.




**Item
                3.**
              **Quantitative
                  and Qualitative Disclosure About Market
                  Risk**





The
      Company is exposed to market risk in the ordinary course of its business. These
      risks are primarily related to foreign exchange risk and changes in short-term
      interest rates. The potential impact of the Company's exposure to these risks
      is
      presented below:




31




FOREIGN
      EXCHANGE RISK





The
      Company conducts business in many different countries and currencies. The
      Company's business often results in revenue billings issued in a country and
      currency, which differs from that where the expenses related to the service
      are
      incurred. This brings a market risk to the Company's earnings. Foreign exchange
      rate sensitivity analysis can be quantified by estimating the impact on the
      Company’s earnings as a result of hypothetical change in the value of the U.S.
      Dollar, the Company's functional currency, relative to the other currencies
      in
      which the Company transacts business. As one of our major subsidiaries uses
      the
      Hong Kong Dollar (“HKD”), which has been linked to the U.S. Dollar at a rate of
      HKD 7.80 to USD 1.00, as its functional currency, there has been no material
      change in the Company's foreign exchange risk exposure. However, if the HKD
      was
      unlinked to the US Dollar, an average 10% weakening of the U.S. Dollar,
      throughout the period


ended
      March 31, 2007, would have had the effect of raising operating income
      approximately $272,000. An average 10% strengthening of the U.S. Dollar, for
      the
      same period would have had the effect of reducing operating income by
      approximately $222,000. The Company currently does not utilize any the
      derivative financial instruments or hedging transactions to manage foreign
      currency risk.





INTEREST
      RATE RISK





The
      Company does not currently utilize derivative financial instruments to hedge
      against changes in interest rates. At March 31, 2007, the Company had cash
      and
      cash equivalents and restricted cash of $7.5 million and short-term borrowings
      of $7.3 million, all subject to variable short-term interest rates. A
      hypothetical change in the interest rate of 10% would have an insignificant
      impact on the Company's earnings. In management’s view, there has been no
      material change in Company's market risk exposure between March 31, 2006 and
      March 31, 2007.




**Item
                4.**
              **Controls
                  and Procedures**





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, conducted an evaluation of the effectiveness of our
      disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
      of the Exchange Act), as of the end of the period covered by this quarterly
      report.





Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      does not expect that our disclosure controls and procedures will prevent all
      errors and all fraud. A control system no matter how well designed and operated,
      can provide only reasonable, not absolute, assurance that the control system’s
      objectives will be met. Further, the design of a control system must reflect
      the
      fact that there are resource constraints, and the benefits of controls must
      be
      considered relative to their costs. Because of the inherent limitations in
      all
      control systems, no evaluation of controls can provide absolute assurance that
      all control issues, errors, and instances of fraud, if any, have been or will
      be
      detected. The inherent limitations include, among other things, the realities
      that judgments in decision-making can be faulty, and that breakdowns can occur
      because of simple error or mistake. Controls and procedures also can be
      circumvented by the individual acts of some persons, by collusion of two or
      more
      people, or by management or employee override of the controls and procedures.
      The design of any system of controls and procedures is based in part upon
      certain assumptions about the likelihood of future events, and there can be
      no
      assurance that any design will succeed in achieving its stated goals under
      all
      potential future conditions. Over time, controls and procedures may become
      inadequate because of changes in conditions or deterioration in the degree
      of
      compliance with policies or procedures. Because of the inherent limitations
      in a
      cost-effective control system, misstatements due to error or fraud may occur
      and
      not be detected. If and when management learns that any control or procedure
      is
      not being properly implemented, (a) it immediately reviews our controls and
      procedures to determine whether they are appropriate to accomplish the control
      objective and, if necessary, modifies and improves our controls and procedures
      to assure compliance with our control objectives, (b) it takes immediate action
      to cause our controls and procedures to be strictly adhered to, (c) it
      immediately informs all relevant managers of the requirement to adhere to such
      controls, as well as all relevant personnel throughout our organization, and
      (d)
      it implements in our training program specific emphasis on such controls and
      procedures to assure compliance with such controls and procedures. The
      development, modification, improvement, implementation and evaluation of our
      systems of controls and procedures is a continuous project that requires changes
      and modifications to them to remedy deficiencies, to improve training, and
      to
      improve implementation in order to assure the achievement of our overall control
      objectives.




32




Virchow,
      Krause and Company, LLP (“VK”), our independent auditors, advised our management
      and Audit Committee that during the course of the 2006 audit, material
      weaknesses in internal control were noted relating to an insufficient review
      of
      our allowance for doubtful accounts.





Based
      on
      discussions with our auditors, we recognize a need to enhance procedures. In
      2006, we provided an additional reserve on our accounts receivable and corrected
      the material weaknesses by enhancing review procedures in the first quarter
      of
      2007.





Consequently,
      taking into account the issues and corrective measures described above, based
      upon the evaluation of our disclosure controls and procedures, our Chief
      Executive Officer and Chief Financial Officer have concluded that, subject
      to
      the limitations noted above, our disclosure controls and procedures as of March
      31, 2007 were effective to ensure that material information relating to us
      and
      our consolidated subsidiaries is made known to them by others within those
      entities to allow timely decisions regarding required disclosures.





Except
      for the corrective measures referred to above, there have been no other changes
      in our internal controls, or in other factors that could significantly effect
      internal controls. Subsequent to the date the Chief Executive Officer and the
      Chief Financial Officer completed their evaluation.





33




**PART
      II**





**OTHER
      INFORMATION**





**Item
              1.**
            **Legal
                Proceedings**





Reference
      is made to our Annual Report on Form 10-K for our fiscal year ended December
      31,
      2006 (the “Annual Report”), Part I, Item 3: “Legal Proceedings.”





**Item
      1A.**  **Risk
      Factors -** Reference
      is made to the Annual Report, Part I, Item 1.A “Risk Factors”, but we note that
      the hearing date referenced in the Risk Factor “Threatened AMEX Delisting:
      Defaults on Indebtedness” has been postponed until June 13, 2006.





**Item
              2.**
            **Unregistered
                Sales of Equity Securities and Use of
                Proceeds**




None





**Item 
              3.**
            **Defaults
                Upon Senior Securities**





None ****




**Item
              4.**
            **Submission
                of Matters to a Vote of Security Holders**





No
      matters were submitted to a vote of the Company’s stockholders during the last
      quarter of its fiscal year ended December 31, 2006.





**Item
              5.**
            **Other
                Information**





None




**Item
              6.**
            **Exhibits**





(a)
            *Exhibits
                (filed herewith)*




31.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 (Rule
                13a-14(a)).





31.2
            Certification
                of the Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 (Rule
                13a-14(a)).





32.1
            Certification
                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                (Rule
                13a-14(b)).




32.2
            Certification
                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
                as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                (Rule
                13a-14(b)).





34





**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned, thereunto
      duly authorized.




**PACIFIC
                  CMA, INC.**Date:
                  May 14, 2007
              By:
              /s/
                Alfred
                LamName:
              Alfred
                  LamTitle:
              Chairman
                  of the Board of Directors(Principal
                  Executive Officer)Date:
                  May 14, 2007
              By:
              /s/
                Anita
                ChanName:
              Anita
                  ChanTitle:
              Chief
                  Financial Officer(Principal
                  Financial and Accounting
                  Officer)




35