UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


(MARK ONE)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 For the quarterly period ended June 30, 2004

                                       OR

[ ]  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 Small Business Issuer as Specified in Its Charter)

                 Delaware                                       84-1435073
     (State or Other Jurisdiction of                        (I.R.S. Employer
     Incorporation or Organization)                         Identification No.)

        1350 Avenue of the Americas, Suite 3100, New York, New York 10019
                    (Address of Principal Executive Offices)

                                 (212) 247-0049
                (Issuer's Telephone Number, Including Area Code)

Check  whether  the Issuer:  (1) has filed all  reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 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
    ---      ---


The number of shares  outstanding of the  Registrant's  Common Stock, as of June
30, 2004, was 25,830,590 shares.

   Transitional Small Business Disclosure Format (Check One): Yes [ ] No [ X ]

<PAGE>




                                PACIFIC CMA, INC.

                              INDEX TO FORM 10-QSB


PART I.     FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

      Consolidated Balance Sheets as of June 30, 2004 (Unaudited)
        and December 31, 2003 (Audited)

      Consolidated Unaudited Statements of Operations for the Six Months
        and Three Months Ended June 30, 2004 and 2003

      Consolidated Unaudited Statements of Cash Flows for the Six Months
        Ended June 30, 2004 and 2003

      Notes to Consolidated Unaudited Financial Statements

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

ITEM 3.     CONTROLS AND PROCEDURES


PART II.    OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

ITEM 2.     CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASERS OF
            EQUITY SECURITIES

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ITEM 5.     OTHER INFORMATION

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K


SIGNATURES

                                       2
<PAGE>

                                     PART I
                             FINANCIAL INFORMATION


Item 1. Financial Statements



                                                  PACIFIC CMA, INC.
                                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                         JUNE 30, 2004 AND DECEMBER 31, 2003
<TABLE>
<CAPTION>


ASSETS

<S>                                                                                <C>                 <C>
                                                                                     2004                2003
                                                                            ----------------------------------------
                                                                                  (UNAUDITED)

    CURRENT ASSETS
        Cash and cash equivalents                                             $      1,592,601   $        912,240
        Restricted cash                                                              5,730,573          5,786,064
        Accounts receivable, net of allowance for doubtful accounts of
          $157,562 and $156,617, respectively                                        8,906,120          7,360,859
        Refundable income taxes                                                        404,837            147,092
        Other receivables                                                            2,338,281          1,413,401
        Deposits, prepayments and other assets                                         805,186            742,081
                                                                               ---------------    ---------------
               Total current assets                                                 19,777,598         16,361,737
                                                                               ---------------    ---------------

    PROPERTY AND EQUIPMENT, net of accumulated depreciation of $792,792
       and $641,838                                                                    455,456            241,186
                                                                               ---------------    ---------------

    OTHER ASSETS
        Goodwill                                                                     2,740,508          2,683,768
        Intangible assets, net of accumulated amortization of
          $1,240,223 and $953,333                                                    1,646,485          1,906,667
        Investment deposits                                                          1,076,154            900,900
        Equity investment in affiliate                                                 190,660                 --
        Other                                                                          832,443            293,022
                                                                               ---------------    ---------------
                                                                                     6,486,250          5,784,357
                                                                               ---------------    ---------------

                                                                              $     26,719,304   $     22,387,280
                                                                               ===============    ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES
        Notes payable - bank                                                  $      4,976,968   $      6,008,594
        Current maturities of long-term debt                                            61,713             26,851
        Accounts payable                                                             7,718,134          7,319,281
        Accrued expenses and other                                                     504,309            618,852
        Short-term loans payable                                                       187,747            537,510
                                                                               ---------------    ---------------
               Total current liabilities                                            13,448,871         14,511,088
                                                                               ---------------    ---------------

    LONG-TERM DEBT                                                                      81,698             21,592
                                                                               ---------------    ---------------

    SERIES A PREFERRED STOCK (net of discount $1,100,931)                            3,899,069                 --
                                                                               ---------------    ---------------

    STOCKHOLDERS' EQUITY
        Common stock                                                                 6,421,592          6,195,492
        Additional paid-in capital                                                   3,096,924          1,786,718
        Retained earnings                                                            2,369,963          2,433,420
        Accumulated other comprehensive income                                         (10,141)            11,440
        Unearned compensation cost                                                  (2,588,672)        (2,572,470)
                                                                               ---------------    ---------------
               Total stockholders' equity                                            9,289,666          7,854,600
                                                                               ---------------    ---------------

                                                                              $     26,719,304   $     22,387,280
                                                                               ===============    ===============
</TABLE>


 See Notes to Condensed Consolidated Financial Statements                      2


<PAGE>
<TABLE>
<CAPTION>

                                                  PACIFIC CMA, INC.
                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                      (UNAUDITED)                           (UNAUDITED)
                                                    SIX   MONTHS                           ENDED   THREE
                                                    MONTHS ENDED
                                                        JUNE 30                               JUNE 30
<S>                                             <C>                <C>                <C>               <C>
                                                2004               2003               2004              2003
                                         ----------------------------------------------------------------------------

    FREIGHT FORWARDING INCOME              $    38,018,000    $    30,988,201    $    21,563,487   $    16,961,821
                                            --------------     --------------     --------------    --------------

    OPERATING EXPENSES
        Cost of forwarding                     (31,715,123)       (26,003,696)       (17,923,509)      (14,309,698)
        General and administrative              (5,597,834)        (4,554,794)        (3,012,790)       (2,266,451)
        Stock-based compensation cost             (286,396)           (35,313)          (119,973)          (17,656)
        Depreciation and amortization             (370,401)          (386,736)          (190,792)         (193,635)
                                            --------------     --------------     --------------    --------------
                                               (37,969,754)       (30,980,539)       (21,247,064)      (16,787,440)
                                            --------------     --------------     --------------    --------------

    OPERATING INCOME (LOSS)                         48,246              7,662            316,423           174,381
                                            --------------     --------------     --------------    --------------

    OTHER INCOME (EXPENSE)
        Interest and other income                  149,602             86,143             53,953            38,643
        Interest expense                          (162,661)           (82,961)           (72,940)          (39,235)
        Preferred stock dividend and
          amortization of issuance cost           (211,867)                --           (211,867)               --
        Amortization of preferred
          stock discount                           (62,979)                --            (62,979)               --
                                            --------------     --------------     --------------    --------------
                                                  (287,905)             3,182           (293,833)             (592)
                                            --------------     --------------     --------------    --------------

    EQUITY IN LOSS OF AFFILIATE                    (19,340)                --            (19,340)               --
                                            --------------     --------------     --------------    --------------

    INCOME (LOSS) BEFORE INCOME TAXES             (258,999)            10,844              3,250           173,789

    PROVISION (BENEFIT) FOR INCOME
       TAXES                                      (195,541)           (84,976)           (56,589)          (30,004)
                                            --------------     --------------     --------------    --------------

    NET INCOME (LOSS)                      $       (63,458)   $        95,820    $        59,839   $       203,793
                                            ==============     ==============     ==============    ==============

    BASIC EARNINGS PER SHARE               $       (0.002)    $         0.004    $         0.002   $         0.009
                                            =============      ==============     ==============    ==============

    DILUTED EARNINGS PER SHARE             $       (0.002)    $         0.004    $         0.002   $         0.009
                                            =============      ==============     ==============    ==============


See Notes to Condensed Consolidated Financial Statements                                                         3
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                  PACIFIC CMA, INC.
                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                       SIX MONTHS ENDED JUNE 30, 2004 AND 2003

<S>                                                                                 <C>                 <C>
                                                                                (UNAUDITED)        (UNAUDITED)
                                                                                   2004                2003
                                                                            ----------------------------------------

    OPERATING ACTIVITIES
        Net income (loss)                                                     $       (63,458)   $        95,820
        Items not requiring (providing) cash
           Depreciation and amortization                                              370,401            386,736
           (Gain) loss on sale of property and equipment                               (6,701)            11,021
           Stock based compensation cost                                              286,396             35,313
           Amortization of preferred stock discount                                    62,979                 --
           Provision for doubtful accounts                                             33,779                 --
           Share of loss from equity investee                                          19,340                 --
           Other                                                                      146,296                 --
        Changes in
           Accounts receivable                                                     (1,536,346)           503,045
           Deposits, prepayments and other                                         (1,603,835)        (1,161,666)
           Accounts payable                                                           350,042            (88,203)
           Accrued expenses                                                          (107,898)          (255,984)
           Deferred income taxes on acquisition of subsidiary                          (7,195)                --
           Income taxes refundable/payable                                           (257,745)           (18,066)
                                                                               --------------     --------------
               Net cash used in operating activities                               (2,313,945)          (491,984)
                                                                               --------------     --------------

    INVESTING ACTIVITIES
        Loans receivable                                                                1,300            238,290
        Purchase of property and equipment                                           (186,737)           (32,194)
        Acquisition of subsidiary                                                      (7,300)                --
        Equity investment in Shanghai Air Cargo                                      (246,493)                --
        Investment deposit                                                           (175,254)                --
        Proceeds from sale of subsidiary                                                   --            132,692
        Proceeds from sale of property and equipment                                   10,962             10,898
                                                                               --------------     --------------
               Net cash provided by (used in) investing activities                   (603,522)           349,686
                                                                               --------------     --------------

    FINANCING ACTIVITIES
        Net change in restricted cash                                                  55,490           (376,209)
        Net change in notes payable - bank                                         (1,031,626)         1,368,054
        Installments paid on acquisition of subsidiary                                     --           (600,000)
        Principal payments under capital lease obligation                             (20,657)           (31,213)
        Payment of short-term debt                                                   (372,558)           (55,851)
        Proceeds from short-term debt                                                      --             64,102
        Stock issuance costs                                                           (3,000)                --
        Proceeds from issuance of Series A Preferred Stock                          5,000,000                 --
        Advances to a director, net                                                    (6,643)           (13,799)
                                                                               --------------     --------------
               Net cash provided by financing activities                            3,621,006            355,084
                                                                               --------------     --------------

    INCREASE IN CASH AND CASH EQUIVALENTS                                             703,539            212,786

    FOREIGN CURRENCY EXCHANGE DIFFERENCE                                              (23,178)                --

    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    912,240            441,657
                                                                               --------------     --------------

    CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $     1,592,601    $       654,443
                                                                               ==============     ==============


See Notes to Condensed Consolidated Financial Statements                                                        4
</TABLE>

<PAGE>


                                PACIFIC CMA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003


NOTE 1:  BASIS OF PRESENTATION

     The accompanying  unaudited condensed  consolidated financial statements of
     Pacific CMA, Inc. (the "Company") and its subsidiaries  (the "Group") as of
     June 30, 2004 and for the six and three months ended June 30, 2004 and 2003
     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-QSB 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,
     2003 has been derived from the audited  consolidated  balance  sheet of the
     Company as of that date.

     The condensed  consolidated  statements  of  operations  for the six months
     ended June 30, 2004 and 2003,  and cash flows for the six months ended June
     30, 2004 and 2003 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,
     2003 included in the Company's Form 10-KSB filed on March 30, 2004.


  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.


                                                                               5


<PAGE>



                                PACIFIC CMA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003


NOTE 2:  EARNINGS PER SHARE

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


<TABLE>
<CAPTION>

                                                                    (UNAUDITED)
                                                             SIX  MONTHS   ENDED
                                                             JUNE 30
                                                  2004                                      2003
                                                              PER-SHARE                                PER-SHARE
                                    LOSS          SHARES        AMOUNT      INCOME        SHARES         AMOUNT
--------------------------------------------------------------------------------------------------------------------

<S>                               <C>                          <C>         <C>                         <C>
      NET INCOME (LOSS)           $  (63,458)            --    $     --    $    95,820            --   $      --

      BASIC EPS
        Income (loss) available
          to common stockholders     (63,458)    25,753,887       (0.002)       95,820    22,422,812        0.004
                                                                ========                                =========
        Stock options and
          warrants                                       --                                  173,428
                                                -----------                              -----------

      DILUTED EPS
        Income (loss) available
          to common
          stockholders and
          assumed conversions     $  (63,458)    25,753,887    $  (0.002)  $    95,820    22,596,240   $    0.004
                                   =========    ===========     ========    ==========   ===========    =========



     Common stock equivalents related to stock options, warrants and convertible
     preferred stock of 200,000, 2,885,788 and 3,472,222,  respectively, are not
     included in the  calculation  of dilutive  earnings per share  because they
     have an anti-dilutive effect.

                                                                    (UNAUDITED)
                                                            THREE  MONTHS  ENDED
                                                            JUNE 30
                                                  2004                                      2003
                                                              PER-SHARE                                PER-SHARE
                                   INCOME         SHARES        AMOUNT      INCOME        SHARES         AMOUNT
--------------------------------------------------------------------------------------------------------------------

      NET INCOME                  $  50,839              --    $     --    $   203,794            --   $      --

      BASIC EPS
        Income available to
          common stockholders        50,839      25,825,590        0.002       203,794    22,423,350        0.009
                                                                ========                                =========
        Stock options and
          warrants                                  224,106                                  173,428
                                                -----------                              -----------

      DILUTED EPS
        Income available to
          common stockholders
          and assumed
          conversions             $  50,839      26,049,696    $   0.002   $   203,794    22,596,778   $    0.009
                                   ========     ===========     ========    ==========   ===========    =========


     Common  stock  equivalents  related to warrants and  convertible  preferred
     stock of 2,685,788  and  3,472,222,  respectively,  are not included in the
     calculation   of  dilutive   earnings  per  share   because  they  have  an
     anti-dilutive effect.


</TABLE>
                                                                               6
<PAGE>



                                PACIFIC CMA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003


NOTE 3:  COMMON STOCK AND PREFERRED STOCK

     As of June 30, 2004, the Company's  authorized  capital stock  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 the same date, the Company's
     issued and  outstanding  capital stock  comprised of  25,830,590  shares of
     common stock and 5,000 shares of preferred stock.


  PREFERRED STOCK

     On  April  14,  2004,  the  Company  sold  to two  institutional  investors
     $3,000,000  stated  amount  of its  Series A  Preferred  Stock  and  issued
     warrants to purchase  937,500 shares of common stock, at per share exercise
     prices of $1.76 for  468,750  shares and $2.00 for  468,750  shares.  These
     warrants expire seven years from date of issuance.

     On May 6, 2004, the Company sold to an institutional investor $2,000,000 of
     its Series A Preferred  Stock and issued warrants to purchase an additional
     625,000  shares of common stock at per share  exercise  prices of $1.76 for
     312,500 shares and $2.00 for 312,500  shares.  These warrants  expire seven
     years from issuance.

     The Series A  Preferred  Stock has a stated  value of $1,000 per share,  is
     convertible  into shares of Common Stock at a conversion price of $1.44 per
     share and pays an annual  dividend  equal to six (6%) percent of the stated
     value of the Series A Preferred Stock  outstanding,  which at the option of
     the Company, subject to certain conditions, may be paid in shares of Common
     Stock.  The Series A Preferred  Stock is mandatorily  redeemable four years
     from issuance.

     As the Series A Preferred Stock is mandatorily redeemable,  it was recorded
     in  accordance  with  Statement  150,   Accounting  for  Certain  Financial
     Instruments  With  Characteristics  of Both  Liabilities  and  Equity.  The
     relative  fair  value of the Series A  Preferred  Stock was  recorded  as a
     long-term  liability  and the  dividends  paid and accrued are  included in
     interest  expense.  Additionally,  the Series A Preferred  Stock was issued
     with a beneficial  conversion  feature.  In accordance  with EITF 98-5, the
     intrinsic  value  of the  beneficial  conversion  option  of  $166,667  was
     recorded as additional  finance charges under the caption  "Preferred Stock
     dividend and  amortization  of issuance  cost" and  credited to  additional
     paid-in capital for the quarter and six-month  period ending June 30, 2004.
     Lastly,  in accordance with Opinion 14, Accounting for Convertible Debt and
     Debt Issued With Stock Purchase Warrants,  the Series A Preferred Stock and
     detachable  stock warrants were recorded at their relative fair values with
     the value of the warrants recorded as additional paid-in capital.  The fair
     value of the warrants was  determined  based on the  Black-Scholes  method.
     Effectively,  the Series A  Preferred  Stock was  recorded at a discount of
     $1,163,910.  This discount is amortized ratably over the term of the Series
     A Preferred  Stock.  For the quarter  ending and the six months ending June
     30, 2004, the Company recognized $62,979 related to the amortization of the
     Series A Preferred Stock discount.



                                                                               7

<PAGE>


                                PACIFIC CMA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003



    OTHER STOCK GRANTS

     In March 2004,  the Company  entered  into a service  agreement  with a key
     employee.  Under the terms of the  agreement,  the  Company  granted to the
     employee 100,000 shares.  The shares were registered with the SEC by filing
     Form S-8 on March 29, 2004. The agreement requires the employee to continue
     to provide  services to the Company from  January 1, 2004 through  December
     31,  2008.  Compensation  cost is  measured  at the grant date based on the
     estimated fair value of the restricted  shares.  The  compensation  cost is
     recognized  as  expense  over  the  service   period   required  under  the
     agreements.  The unearned portion of the  compensation  cost is recorded in
     equity as  unearned  compensation  cost.  The  Company is holding the stock
     certificates pending the completion of the service period.

     Also in March 2004,  the Company  issued 50,000 shares of common stock to a
     business  advisor.  In May 2004,  the  Company  issued  5,000  shares to an
     employee. The Company recorded an expense of $64,100 which is the estimated
     fair value of the stock on the grant date.



NOTE 4:  PLEDGE OF ASSETS

        As of June 30, 2004, the Group had pledged the following assets:

          a.   Restricted cash deposits of $5,730,573.

          b.   Shares in Airgate acquired in 2002  (representing 81% controlling
               interest) to the sellers in respect of the consideration  payable
               to them for the acquisition of Airgate.



NOTE 5:  NOTES PAYABLE - BANK

     The Company has a $2,500,000  line of credit that  accrues  interest at the
     bank's  prime  rate plus  0.75%  (5.00% at June 30,  2004) and  matures  in
     September 2004. The line is collateralized  by a $1,500,000  certificate of
     deposit  held by the Bank,  substantially  all the assets of Airgate  and a
     personal  guarantee  of a director  of the  Company.  This  certificate  of
     deposit is recorded as restricted  cash. The note requires the Company meet
     certain debt to equity ratios and other financial covenants. As of June 30,
     2004, the Company is not in compliance with certain of these covenants.  As
     of June 30, 2004 and  December  31,  2003,  there was  $2,500,000  borrowed
     against this facility.

     The Company has certain  other  banking  facilities  to finance its working
     capital. The facilities  available totaled  approximately  $7,000,000.  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 June  30,  2004,  these  rates  ranged  between  1.01% -  7.00%.  The
     facilities  require  annual  renewals  and are  collateralized  by personal
     guarantees  by  two  directors  and   restricted   cash  of   approximately
     $4,000,000.  As of June 30, 2004 and December 31, 2003, amounts outstanding
     against these facilities were $2,476,968 and $3,508,594, respectively.

                                                                               8

<PAGE>



                                PACIFIC CMA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003


NOTE 6:  RELATED PARTY TRANSACTIONS

        The Company had the following balances with related parties:

                                         JUNE 30,         DECEMBER 31,
                                           2004               2003
                                       ---------------------------------

           Payable to Alfred Lam, CEO $        13,849    $        20,493
                                       ==============     ==============


     There were no material related party transactions for the six month periods
     ended June 30, 2004 and 2003.



NOTE 7:  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-KSB filed for the
     year ended December 31, 2003.

     The following table summarized the Company's  operations for the six months
     ended June 30, 2004 and 2003 analyzed into air and sea forwarding services:
<TABLE>
<CAPTION>

                                        AIR FORWARDING               SEA FORWARDING                  TOTAL
<S>                                   <C>           <C>            <C>           <C>           <C>           <C>
                                      2004          2003           2004          2003          2004          2003
                                 --------------------------------------------------------------------------------------


           Revenue                 $24,570,705   $20,033,792    $13,447,295   $10,954,409   $38,018,000   $30,988,201
           Cost of forwarding       (20,016,847)  (16,614,202)   (11,698,276)  (9,389,494)   (31,715,123)  (26,003,696)
           Depreciation and
              amortization            (245,433)     (239,210)       (87,348)      (83,371)     (332,781)     (322,581)
           Interest expense            (67,641)      (45,622)       (13,372)       (2,264)      (81,013)      (47,886)
           Other segment
              expenses
              attributable to
              segment               (1,431,618)   (1,279,817)      (748,039)     (632,442)   (2,179,657)   (1,912,259)
                                    ----------    ----------     ----------    ----------    ----------    ----------


           Segment income          $ 2,809,166   $ 1,854,941    $   900,260   $   846,838     3,709,426     2,701,779
                                    ==========    ==========     ==========    ==========


           Net other
              unallocated
              expenses                                                                       (3,772,884)   (2,605,959)
                                                                                             ----------    ----------


           Net income (loss)                                                                $   (62,458)  $    95,820
                                                                                             ==========    ==========


           Goodwill                $ 2,069,566   $ 2,012,826    $   670,942   $   670,942   $ 2,740,508   $ 2,683,768
           Intangible assets         1,237,704     1,644,500        408,781       548,167     1,646,485     2,192,667
           Other assets             16,891,780     8,633,750      5,440,531     3,514,656    22,332,311    12,148,406
                                    ----------    ----------     ----------    ----------    ----------    ----------


                  Total assets     $20,199,050   $12,291,076    $ 6,520,254   $ 4,733,765   $26,719,304   $17,024,841
                                    ==========    ==========     ==========    ==========    ==========    ==========

</TABLE>
                                                                               9
<PAGE>


<TABLE>
<CAPTION>

                                                  PACIFIC CMA, INC.
                                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                                JUNE 30, 2004 AND 2003


        The following  table  summarized the Company's  operations for the three
        months ended June 30, 2004 and 2003 analyzed into air and sea forwarding
        services:

                                        AIR FORWARDING               SEA FORWARDING                  TOTAL
<S>                                   <C>           <C>            <C>           <C>           <C>           <C>
                                      2004          2003           2004          2003          2004          2003
                                 --------------------------------------------------------------------------------------


           Revenue               $  14,007,874 $  10,979,119  $   7,555,613   $ 5,982,702 $  21,563,487   $ 16,961,821
           Cost of forwarding      (11,368,629)   (9,090,408)    (6,554,880)   (5,219,290)  (17,923,509)   (14,309,698)
           Depreciation and
              amortization            (124,094)     (119,799)       (44,069)      (35,951)     (168,163)      (155,750)
           Interest expense            (30,102)      (19,016)        (6,610)       (1,300)      (36,712)       (20,316)
           Other segment
              expenses
              attributable to
              segment                 (740,541)     (676,902)      (391,094)     (351,066)   (1,131,635)    (1,027,968)
                                   -----------   -----------    -----------    ----------   -----------    -----------
           Segment income

                                 $   1,744,508 $   1,072,994  $     558,960   $   375,095     2,303,468      1,448,089
                                   ===========   ===========    ===========    ==========


           Net other
              unallocated
              expenses                                                                       (2,243,629)    (1,244,296)
                                                                                            -----------    -----------


           Net income                                                                     $      59,839   $    203,793
                                                                                            ===========    ===========


           Goodwill              $   2,069,566 $   2,012,826  $     670,942   $   670,942 $   2,740,508   $  2,683,768
           Intangible assets         1,237,704     1,644,500        408,781       548,167     1,646,485      2,192,667
           Other assets             16,891,780     8,633,750      5,440,531     3,514,656    22,332,311     12,148,406
                                   -----------   -----------    -----------    ----------   -----------    -----------


                  Total assets   $  20,199,050 $  12,291,076  $   6,520,254   $ 4,733,765 $  26,719,304   $ 17,024,841
                                   ===========   ===========    ===========    ==========   ===========    ===========



    GEOGRAPHICAL SEGMENTS

        The  table  below   summarized  the  Group's   turnover   analyzed  into
geographical locations:

                                                      SIX MONTHS ENDED                    THREE MONTHS ENDED
                                                          JUNE 30                               JUNE 30
                                                  2004               2003               2004              2003
                                           ----------------------------------------------------------------------------

           Turnover
               * IATA Area 1                 $     4,894,202    $     4,093,811    $     3,138,043   $     2,261,872
               * IATA Area 2                       9,259,620          5,012,616          5,321,800         3,966,939
               * IATA Area 3                      23,864,178         21,881,774         13,103,644        10,733,010
                                              --------------     --------------     --------------    --------------

                  Total                      $    38,018,000    $    30,988,201    $    21,563,487   $    16,961,821
                                              ==============     ==============     ==============    ==============


</TABLE>
                                                                              10

<PAGE>
<TABLE>
<CAPTION>



                                                  PACIFIC CMA, INC.
                                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                                JUNE 30, 2004 AND 2003


                                               (UNAUDITED)   (UNAUDITED)  AS  OF
                                           JUNE 30, 2004 AS OF JUNE 30, 2003
                                              OTHER ASSETS                               OTHER ASSETS
                                   TRADE       (INCLUDING       TOTAL         TRADE       (INCLUDING      TOTAL
                                RECEIVABLES     GOODWILL)       ASSETS     RECEIVABLES    GOODWILL)       ASSETS
                               --------------------------------------------------------------------------------------


<S>                     <C>      <C>           <C>            <C>           <C>           <C>           <C>

         Assets
             *IATA Area 1        $ 5,759,541   $  9,785,128   $ 15,544,669  $4,353,298    $6,177,614    $10,530,912
             *IATA Area 2            551,047             --        551,047     145,631            --        145,631
             *IATA Area 3          2,595,532      8,028,056     10,623,588   1,462,167     4,886,131      6,348,298
                                  ----------    -----------    -----------   ---------     ---------     ----------

                  Total          $ 8,906,120   $ 17,813,184   $ 26,719,304  $5,961,096    $11,063,745   $17,024,841
                                  ==========    ===========    ===========   =========     ==========    ==========


        *  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 (Islamic Rep. 6f).

        *  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.

</TABLE>


NOTE 8:  CONCENTRATIONS

        The Company had sales to two major customers  (deferred as customers who
        represent  10% or more of total  sales).  Sales to these  customers as a
        percent of total sales are as follows:
<TABLE>
<CAPTION>

                                           SIX MONTHS ENDED           THREE MONTHS ENDED
                                               JUNE 30                      JUNE 30
                      MAJOR CUSTOMER      2004          2003          2004          2003
-----------------------------------------------------------------------------------------------

<S>                                           <C>           <C>           <C>           <C>
           A                                  13%           12%           13%           12%
           B                                   7            13             7            13


</TABLE>


                                                                              11

<PAGE>

                                PACIFIC CMA, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2004 AND 2003


NOTE 9:  INVESTMENT IN AFFILIATE

     The  investment  in  affiliate  relates to a 35%  ownership of Shanghai Air
     Cargo Ground Handling Services, Ltd. The affiliate is a joint venture which
     began  operations  in April 2004.  Financial  results of  operations of the
     affiliate from inception to June 30, 2004 are summarized below:

                                          (UNAUDITED)      (UNAUDITED)
                                          SIX MONTHS       THREE MONTHS
                                             ENDED            ENDED
                                           JUNE 30,          JUNE 30,
                                             2004              2004
                                       ------------------------------------

           Net Sales                     $     220,121    $      220,121
                                          ============     =============

           Gross Profit                  $      70,471    $       70,471
                                          ============     =============

           Net Loss                      $     (55,257)   $      (55,257)
                                          ============     =============




                                                                              12


<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN 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",  "will",
"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 Pacific CMA, Inc. (herein the "Company," "Registrant," "us," "we,"
"our" and  similar  terms)  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  Registrant 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.

     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;
-        Political  uncertainty  in Hong Kong and China  making it  difficult to
         develop any long range planning;
-        Relations between the United States and China remaining stable;
-        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;
-        Fluctuations in exchange rates;

                                                                              13
<PAGE>

-        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;
-        Taking on significant  credit risks in the operation of our business as
         East Coast  U.S.  freight  forwarders  expect us to offer  thirty  days
         credit from the time of cargo delivery;
-        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 the  Registrant's  filings
(including its Forms 10-KSB and registration statements) with the Securities and
Exchange Commission 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  Pacific  CMA  Inc.'s  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.
                                                                              14
<PAGE>


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 consolidated balance sheet. We must then
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 statement
of operations 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.  Based on our current
financial  projections,  we  currently  believe that we will realize 100% of our
deferred tax assets.

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:

         1.       significant  under-performance relative to expected historical
                  or projected future operating results;

         2.       Significant  changes in the manner of our use of the  acquired
                  assets  or the  strategy  for  our  overall  business;  and

         3.       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 June
30, 2004, goodwill totaled approximately $2.74 million,  other intangible assets
amounted to approximately  $1.65 million and our long-lived  assets,  consisting
primarily of net property, plant and equipment, totaled $455,456.

                                                                              15
<PAGE>

         As  required  by SFAS No.  142,  goodwill  and  intangible  assets with
indefinite lives are no longer  amortized,  but rather are to be tested at least
annually for impairment. This pronouncement also requires that intangible assets
with definite lives be amortized over their  respective lives to their estimated
residual  value and reviewed for  impairment  in  accordance  with SFAS No. 144,
"Accounting  for the  Impairment or Disposal of Long-Lived  Assets".  During the
period from 2002 and 2004, we acquired the below companies and recorded goodwill
and intangibles associated with these acquisitions. It is summarized as follows:

<TABLE>
<CAPTION>


<S>     <C>    <C>    <C>    <C>    <C>    <C>
Date of Acquisition      Name of Company Acquired         Goodwill                  Intangible assets
                                                          (recorded at the time     (Customer relationships)
                                                          of Acquisition)
--------------------------------------------------------------------------------------------------------------

April 30, 2002           Airgate Int'l Corp.              $2.68 million             $2.86 million
April 30, 2004           Paradigm Int'l Inc.              $20,248                   $26,708
April 1, 2004            Shanghai Air Cargo Ground        $36,493                   $-
                         Handling Services Ltd
</TABLE>

         As required by SFAS No. 141, we  allocated  the  purchase  price to the
assets, liabilities,  intangibles and goodwill acquired, based on the fair value
at the date of acquisition.

         The intangible customer relationship assets are amortized over a period
of five years while goodwill is not amortized, but rather is tested annually for
impairment  in  accordance  with  SFAS No.  142.  The  above  acquisitions  were
accounted for in accordance with SFAS 141, and the results of operations of each
company since the date of  acquisition,  and its financial  condition as of each
balance  sheet  date  are  reflected  in our  condensed  consolidated  financial
statements.  All significant  inter-company  balances and transactions have been
eliminated in consolidation.

OVERVIEW

         The following  discussion  is  applicable  to the  Company's  financial
condition and results of operations  for the period ended June 30, 2004 and June
30,  2003.  Pacific  CMA,  Inc.  (Pacific  CMA) does not  directly  carry on any
business activities.  Through its Hong Kong based subsidiary, AGI Logistics (HK)
Ltd.  (AGI),  and its New York based  subsidiary,  Airgate  International  Corp.
(Airgate),   Pacific  CMA  facilitates  and  provides  supply  chain  management
solutions,  contract  logistics  services and international  freight  forwarding
services.

         Its wholly owned subsidiary, AGI Logistics (HK) Ltd. (AGI), operates an
integrated logistics and freight forwarding business which is based in Hong Kong
and which  primarily  handles  delivery of goods in South China and Hong Kong to
overseas  countries,  mainly  the Far East  region and the  United  States.  The
principal  services  provided by AGI are  airfreight  forwarding,  ocean freight
forwarding,  and  warehousing.  In the Far East  region,  Mainland  China is the
target market for AGI Group expansion.

                                                                              16

<PAGE>

         The  business  of AGI was  first  established  in  August  1998 and now
consists of its own operations, as well as those of its subsidiaries. On January
1, 2001, its Hong Kong  incorporated  subsidiaries  included  Sparkle  Shipping,
Godown,  Wharf & Transp.  Co., Ltd. (Sparkle),  Shenzehn Careship  International
Transportation  Ltd (SZ Careship),  formerly  known as Guangzhou  Huasheng Int'l
Forwarding Ltd., and AGI Logistics  (Shenzhen) Ltd. (AGI  (Shenzhen))  which was
incorporated  in The Peoples  Republic of China ("the PRC").  AGI (Shenzhen) and
Sparkle  were  disposed  of by AGI  Group  on May 11,  2001 and  April 2,  2002,
respectively,  in  conjunction  with a  decision  by AGI to  concentrate  on the
international  freight forwarding  business.  The business activities of Sparkle
were  concentrated  on local feeder  voyages and trucking  operations  along the
Jujiang Delta Area of Mainland  China and it was  determined  that Sparkle would
need to purchase its own boats and trucks to maintain its competitive  position.
As a result, its business  operations  diverged from the Group's non-asset based
strategic  plan.  AGI  Group  has  elected  to  concentrate  its  resources  and
investments  on the  operations  of AGI HK and SZ  Careship  in order to seek to
improve the tonnage performance in Hong Kong, South China, U.S. and Europe.

         On April 30, 2002,  Pacific CMA completed the acquisition of control of
Airgate,  a privately held New York-based freight forwarder that was established
in 1995.  Airgate is a  non-asset  based  logistics  services  company.  Airgate
primarily handles import air and ocean shipments from the Far East and Southwest
Asia to the U.S. Pacific CMA  International,  LLC, a Colorado limited  liability
company  that is wholly  owned by the  Company,  acquired  81% of the issued and
outstanding common stock of Airgate.

         On April 30,  2004,  the  acquisition  of Paradigm  International  Inc.
(Paradigm)  was  completed.  Paradigm is a non-asset  based  logistics  Services
Company based in Miami, Florida. It primarily handles air and ocean shipments in
Latin American.

         During  April 2004,  Shanghai Air Cargo  Ground  Handling  Services Ltd
(Shanghai Air Cargo)  started its  operation.  This company is located in Pudong
International Airport,  Shanghai, PRC. It is responsible for the ground handling
of air cargo in the Airport. Pacific CMA owns 35% of Shanghai Air Cargo.

         The following discussion concerning results of operations and liquidity
and  capital  resources  of  Pacific  CMA,  is based  solely  upon the  business
operations  which are  carried on by the group  consisting  of its wholly  owned
subsidiary  AGI and its  subsidiaries,  and the results of Airgate for the three
months and six months ended, 2004 and 2003.

         The  significant new  developments,  which have occurred during the six
months ended June 30, 2004, include the following:

         -        Pacific  CMA's  shares  of  common  stock  are  listed  on the
                  Frankfurt and Berlin Stock Exchanges and commenced  trading on
                  January 20, 2004, under the symbol "PWZ";
         -        Appointment  of Joel  Herskovits to be our Investor  Relations
                  person;
         -        Hiring of John M. Dauernheim as Chief Operating Officer;
         -        Being  designated  as Official  Freight  Forwarder of the ASAP
                  global Sourcing Show held in Las Vegas from February 22 to 25,
                  2004;

                                                                              17
<PAGE>

         -        Entering into contract rate agreements  with three  additional
                  airlines (Thai Airways, Singapore Airlines and Royal Brunei);
         -        Our  sales  and  marketing   team  in  the  Europe  Market  is
                  strengthened by engaging marketing staff in United Kingdom;
         -        Issuance  of $5 million  of 6%  Convertible  Preferred  Stock,
                  which will help the Company maintain its' growth;
         -        Completed  acquisition  of  Paradigm   International  Inc.,  a
                  non-asset  based  logistics  Services  Company based in Miami,
                  Florida;
         -        It's affiliate,  Shanghai Air Cargo Ground  Handling  Services
                  Ltd (Shanghai Air Cargo) started its operation;
         -        Appointment of Bill Stangland as Chief Financial Officer


RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2004 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2003

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.

         Total   revenue  for  the  period   ended  June  30,   2004   increased
approximately  27.1%  compared  with  the  period  ended  June  30,  2003,  from
$16,961,821  in 2003 to  $21,563,487  in  2004.  The  increase  in  revenue  was
primarily the result of the organic growth of AGI and Airgate.

      Revenue derived from the operations of AGI increased  approximately  43.9%
during  second  quarter of 2004 as compared  with the same  period of 2003.  The
significant organic growth of AGI was the result of the following factors:

-        An increase in routed freight traffic from existing agency partners;

-        Improvements  in the agency  network  which  enabled  AGI to secure new
         freight business;
                                                                              18

<PAGE>

-        The  expansion  of  one  of  AGI's   subsidiaries,   Shenzhen  Careship
         Transportation  Limited in the Mainland  China.  Two additional  branch
         offices are established in Tianjin and Futian, PRC.

         The  revenue  of  Airgate  represented  approximately  75% of our total
revenue for the second  quarter  2004.  Airgate  focuses its  operations  on the
import of goods  from the Far East.  Airgate  currently  leases  its own  bonded
warehouse  where  deconsolidation  of cargo is performed.  In order to enter new
markets  in the  Midwest,  Airgate  established  a new  subsidiary  in  Chicago,
Illinois in June 2002.

         Revenue derived from the operation of Airgate  increased  approximately
20.6%  during the  second  quarter of 2004 as  compared  with that of 2003.  The
increase is the result of the effort of Airgate staff and the new  subsidiary in
Chicago.  During the first quarter 2003, the Chicago subsidiary was still in the
early development stage.

         As compared with 2003, the cost of forwarding  during second quarter of
2004 increased  approximately  25.3%, from $14,309,698 in 2003 to $17,923,509 in
2004.  This increase in costs was primarily the result of the organic  growth of
AGI and Airgate.

         Gross margin for the three months ended June 30, 2004 and June 30, 2003
increased  from  15.6% to  16.9%.  The  improvement  in gross  margin  is due to
economies  of  scale  and more  export  shipments  performed  by  Airgate  which
generates  higher  profit  margins.   Gross  profit,   (revenue  minus  cost  of
forwarding) for the second quarter of 2004 increased  37.2%,  from $2,652,123 in
2003, to $3,639,978 in 2004.

         Net income  decreased by 70.6% from  $203,793 in the second  quarter of
2003 to $59,839 in the same period of 2004.  The  decrease in net income was due
to an 580% or  $102,317  increase  in non-cash  compensation  cost,  which was a
result of the  Company  granting  2,105,000  shares of common  stock  during the
period from November 2003 to June 2004.  Another  reason for the decrease in net
income was the charge of  $211,867  Preferred  Stock  dividend  and its  related
issuance  cost,  as well as $62,979  amortization  of Preferred  Stock  discount
arising from the placement of Series A Preferred  Stock in the second quarter of
2004.  Details of such  expenses  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:

         Airfreight  Operations:  Revenue from airfreight  operations  increased
approximately  27.6%,  from $10,979,119 in second quarter of 2003 to $14,007,874
in the same period of 2004.  Airfreight  revenue  for AGI Group was  $5,014,573,
while airfreight revenue for Airgate and Paradigm were $10,511,002 and $ 173,545
respectively;  offsetting  inter-company  transactions  totaled $1,691,246.  The
volume of  airfreight  was  improved  in 2004  compared  with  2003.  The volume
improvement  is primarily due to (i) an increase in routing  orders from Asia to
the United States as a result of new customers and agents in India, Mombassa and
Africa who joined  during the second half of 2003,  (ii)  Airgate  International
Corp.  (Chicago)  was  established  in June of 2002 and is now coming out of the
early development stage and (iii) Paradigm was acquired on April 30, 2004.

                                                                              19
<PAGE>

         Costs  for the  airfreight  forwarding  operations  during  the  second
quarter  increased  approximately  25% from $9,090,408 in 2003 to $11,368,629 in
2004.  Airfreight cost attributable to AGI Group was $4,057,464 while airfreight
cost   attributable  to  Airgate  and  Paradigm  were  $8,883,354  and  $116,232
respectively;  offsetting inter-company costs were $1,688,421.  The gross profit
margin was increased by 9.30% from approximately  17.2% in 2003 to approximately
18.8% in 2004. This increase is the result of better  utilization of cargo space
with  better  arrangement  of  cargo  consolidation.  As a result  of  increased
revenues, overall gross profits increased approximately 39.7% to $2,639,245.

         Total  segment  overhead   attributable  to  the  airfreight  operation
increased  approximately  9.69%,  from  $815,717  in 2003 to  $894,737  in 2004.
Details  regarding the increase in overhead  expenses are discussed  below under
the section title "Other Operating Expenses."

         Overall,  net segment  income for the  airfreight  operation  increased
approximately 62.6% for the quarter ended June 30, 2004, from $1,072,994 in 2003
to $1,744,508 in 2004.  The increase in net segment income was mainly the result
of the organic growth of AGI and Airgate.

         Sea Freight Operation:  Revenue from sea freight  operations  increased
approximately  26.3% to $7,555,613 in 2004 from  $5,982,702 in 2003. Sea freight
revenue for AGI Group was $2,053,082,  while sea freight revenue for Airgate and
Paradigm were $5,663,001 and $13,680 respectively,  and offsetting inter-company
transactions was $174,150. The increase in revenue for the period was due to new
branch  offices of Shenzhen  Careship in PRC and an increase in the  quantity of
freight consolidation in the Chicago operation of Airgate.

      Costs for the sea freight  forwarding  operation  increased  approximately
25.6%,  from  $5,219,290  in 2003 to  $6,554,880  in  2004.  Sea  freight  costs
attributable to AGI Group were $1,665,735,  while costs  attributable to Airgate
were $5,053,013,  and those for Paradigm were $9,163,  and  inter-company  costs
were $173,031.

         The gross profit  margin  slightly  increased  from 12.7% in the second
quarter of 2003 to 13.2% during the same period of 2004.  This  increase was due
to better  management  of cargo  consolidation  as a result of the  increase  in
revenue.

         Total  segment  overhead  attributable  to the  sea  freight  operation
increased  approximately  13.8%,  from  $388,317  in second  quarter  of 2003 to
$441,773  in the same  period of 2004.  Overall  net income for the sea  freight
operation increased approximately 49.0%, from $375,095 in second quarter of 2003
to $558,960 for the same period in 2004.  The increase in net segment income was
mainly the result of increase in gross profit  margin for sea freight  operation
during the period.

                                                                              20
<PAGE>

OPERATING EXPENSES
GENERAL AND ADMINISTRATIVE EXPENSES

         General and  administrative  expenses  slightly  increased by 32.9%, to
$3,012,790 in second quarter of 2004 from $2,266,451 in the same period of 2003.
The following factors caused the increase in expenses:

         Sales commission:  Sales commission increased approximately 104.9% from
$289,526 in 2003 to $593,162  in 2004.  The  increase is a result of increase in
freight forwarding income during the second quarter of 2004.

         Salaries and allowance:  Salaries and allowance increased approximately
10.3% from  $1,103,325 for the period ended June 30, 2003 to $1,217,171 in 2004.
This increase was the result of the addition of  approximately  55 staff persons
during 2003 needed to keep pace with our growth.

COMPENSATION COST

         Compensation cost: Compensation cost is one of the main reasons for the
decrease  in net  income  for the  second  quarter  of 2004.  Compensation  cost
increased 580% from $17,656 for the three months ended June 30, 2003 to $119,973
for the same period in 2004.  During the period from November 2003 to June 2004,
the Company issued total 2,105,000 shares of its common stock to five employees,
an independent sales representative and a business advisor. Compensation cost is
measured at the grant date based on the estimated fair value of the  securities.
It is  recognized  as an expense  over the  service  period  required  under the
service agreements with those parties.  The unearned portion of the compensation
cost related to employees is recorded in equity as unearned  compensation  cost,
while the unearned portion of compensation cost related to the independent sales
representative is recorded as a prepaid asset.

         Details of the 2,105,000 shares are as follows:

                  On or about  November 7, 2003,  we entered  into four  service
agreements with three employees and an independent sales  representative.  Under
the  terms of the  agreements,  as  amended  in March  2004,  we  granted  these
employees and the sales  representative  an aggregate of 1,950,000 shares of our
common stock.  The shares are restricted as they have not been  registered  with
the  Securities and Exchange  Commission  (the "SEC" or the  "Commission").  The
agreements,  as amended,  with the employees require them to continue to provide
services to us from January 1, 2004 through  December  31, 2013.  The  agreement
with the  sales  representative  requires  him to  provide  services  to us from
January 1, 2004 through December 31, 2005.

                  Also  in  March  2004,  the  Company  entered  into a  service
agreement  with an  employee/director.  Under  the  terms of the  agreement  the
Company granted to the director  100,000 shares of Common Stock. The shares were
registered  with the SEC by filing  Form S-8 on March 29,  2004.  The  agreement
requires  the  director  to continue  to provide  services  to the Company  from
January  1,  2004  through   December  31,   2008.   On  June  11,  2004,   this
employee/director  resigned  the  position of director but agreed to continue to
act as an  independent  consultant  for the British  market  development.  These
shares are being  held by the  Company  pending  the  completion  of his term on
December 31, 2008.

                  Also in March 2004 and May 2004,  the  Company  issued  50,000
shares of common  stock to a business  advisor and 5,000  shares to an employee.
The Company  recorded an expense of $64,100 which is the estimated fair value of
the stock on the grant date.


                                                                              21


<PAGE>

DEPRECIATION AND AMORTIZATION

         Depreciation  and  amortization  decreased   approximately  1.47%  from
$193,635 in 2003 to $190,792 in 2004.  The  decrease is due to the  reduction of
depreciation of property and equipment.

         Amortization  arises from an  intangible  customer  relationship  asset
recorded in  conjunction  with the  acquisition of Airgate on April 30, 2002. We
recorded  this  asset  at  cost  of  $2,860,000  and  are  amortizing  it  on  a
straight-line  basis over a period of 5 years.  During the period ended June 30,
2003 and 2004, the amortization  expense attributable to this asset was $143,000
respectively.

         The  acquisition  of  Paradigm  International  Inc.  on April 30,  2004
recorded an intangible customer  relationship asset of $26,708. Same as Airgate,
the  cost  of  intangible  customer   relationship  asset  is  amortizing  on  a
straight-line  basis over a period of 5 years.  In the  second  quarter of 2004,
$890 was expensed as amortization.

NON-OPERATING EXPENSES
INTEREST AND OTHER INCOME
         Interest and other income  increased from $38,643 in second quarters of
2003  to  $53,953  in  the  same  period  of  2004.  This  was  due  to  various
miscellaneous handling charges received from third parties.

INTEREST EXPENSE

         Interest expense increased to $72,940 in 2004 from $39,235 in 2003. The
increase  in interest  expense is  primarily  due to an  increase in  short-term
working capital financing

PREFERRED STOCK DIVIDEND AND AMORTIZATION OF ISSUANCE COST

         During  April  and May  2004,  the  Company  sold to two  institutional
investors  $5,000,000  stated amount of its Series A Preferred  Stock and issued
warrants  to purchase  1,562,500  shares of common  stock at per share  exercise
price $1.76 for 718,250  shares and $2.00 for  718,250.  Such Series A Preferred
Stock is mandatory  redeemable and was recorded in accordance with Statement 150
Accounting  for  Certain  Financial  Instruments  With  Characteristics  of Both
Liabilities  and Equity.  The dividends paid and accrued are charged as expenses
to the income  statements.  In accordance with EITF 98-5, the intrinsic value of
the beneficial conversion option of $166,667 was recorded as additional expenses
and credited to additional paid-in-capital for the quarter ended June 30, 2004.

      Again,  the  issuance  cost  related  to the  placement  of the  Series  A
Preferred  Stock  is  amortize  over  its  term to  maturity,  which is 4 years.
Together  with  dividend and the intrinsic  value of the  beneficial  conversion
option  mentioned  above,  a total of $211,867  was  expensed  during the second
quarter of 2004.


                                                                              22
<PAGE>

AMORTIZATION OF PREFERRED STOCK DISCOUNT

         In accordance  with Opinion 14,  Accounting  for  Convertible  Debt and
Debts  Issued With Stock  Purchase  Warrants,  the Series A Preferred  Stock and
detachable  stock  warrants were recorded at their relative fair values with the
value of the warrants recorded in additional paid-in-capital.  The fair value of
the warrants was determined based on the Black-Scholes method. Effectively,  the
Series A Preferred Stock was recorded at a discount of $1,163,910. This discount
is amortized ratably over the term of the Series A Preferred Stock. As a result,
$62,979 was expensed during the second quarter of June 30, 2004.

SIX MONTHS ENDED JUNE 30, 2004 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2003
OVERALL RESULTS

         Total  revenue for the six months ended June 30, 2004  increased  22.7%
compared  with the  period  ended June 30,  2003,  from  $30,988,201  in 2003 to
$38,018,000  in 2004.  The increase in revenue was  primarily  the result of the
organic growth of AGI and Airgate.

         Revenue  derived from the  operations  of AGI  increased  approximately
26.3%  during first half of 2004 as compared  with the same period of 2003.  The
significant organic growth of AGI was the result of the following factors:

         -        An increase in routed  freight  traffic from  existing  agency
                  partners;
         -        Improvements in the agency network which enabled AGI to secure
                  new freight business
         -        Establishment of branch offices in Mainland China.

         The  revenue  of  Airgate  represented  approximately  77% of our total
revenue  for the first  half of 2004.  Revenue  derived  from the  operation  of
Airgate increased  approximately 20.1% during the first half of 2004 as compared
with that of 2003. The increase is the result of the effort of Airgate staff and
the new  subsidiary  in  Chicago.  During  the first half of 2003,  the  Chicago
subsidiary was still in the early development stage.

         As compared with 2003, the cost of forwarding during first half of 2004
increased 22.0%,  from $26,003,696 in 2003 to $31,715,123 in 2004. This increase
in costs was primarily the result of the organic growth of AGI and Airgate.

         Gross  margin  for the six  months  ended  June  30,  2004 and 2003 was
constant at approximately 16%. Gross profit,  (revenue minus cost of forwarding)
for the  first  half of 2004  increased  26.4%,  from  $4,984,505  in  2003,  to
$6,302,877 in 2004.


                                                                             23
<PAGE>

      Due to the  increase in  non-cash  compensation  cost and the  charging of
various expenses  relating to the Series A Preferred Stock sold during 2004, the
company  recorded net loss of $63,458 compared with the net income of $95,820 in
2003,  a decrease of 166%.  Details of non-cash  compensation  cost and expenses
related to the Series A Preferred Stock were discussed in the section "Operating
expenses" and "Non-operating expenses."

BUSINESS SEGMENT OPERATING RESULTS

         The results of operations for each segment are as follows:

         AIRFREIGHT  OPERATIONS:  Revenue from airfreight  operations  increased
approximately  22.6%,  from  $20,033,792 in first half of 2003 to $24,570,705 in
the same period of 2004. Airfreight revenue for AGI Group was $8,732,027,  while
airfreight  revenue for Airgate and  Paradigm  was  $18,831,494,  and  $173,545,
respectively,  and the offsetting inter-company transactions totaled $3,166,361.
The volume  improvement  is primarily  due to (i) an increase in routing  orders
from Asia to the United States as a result of new customers and agents in India,
Mombassa  and Africa who joined  during the second  half of 2003,  (ii)  Airgate
International Corp.  (Chicago) was established in June of 2002 and is now coming
out of the early development  stage, (iii) the Company was adversely affected in
the first  quarter 2003 due to the outbreak of the SARS virus in Asia,  and (iv)
the acquisition of Paradigm International Inc. in April 30, 2004.

         Costs for the airfreight forwarding operations during the first half of
2004 increased  approximately  20.5%, from $16,614,202 in 2003 to $20,016,847 in
2004.  Airfreight cost attributable to AGI Group was $7,043,023 while airfreight
cost  attributable  to Airgate  and  Paradigm  was  $16,023,953,  and  $116,232,
respectively  and  offsetting  inter-company  costs were  $3,166,361.  The gross
margin was increased by 8.19% from approximately  17.1% in 2003 to approximately
18.5% in 2004. This increase is the result of better  utilization of cargo space
with  better  arrangement  of  cargo  consolidation.  As a result  of  increased
revenues, overall gross profits increased approximately 33.2% to $4,553,858

         Total  segment  overhead   attributable  to  the  airfreight  operation
increased  approximately  11.5%,  from $1,564,649 in 2003 to $1,744,691 in 2004.
Details  regarding the increase in overhead  expenses are discussed  below under
the section title "Other Operating Expenses."

         Overall,  net segment  income for the  airfreight  operation  increased
approximately  51.4% for the six months ended June 30, 2004,  from $1,854,941 in
2003 to  $2,809,166 in 2004.  The increase in net segment  income was mainly the
result of the organic growth of AGI and Airgate.

         SEA FREIGHT OPERATION:  Revenue from sea freight  operations  increased
approximately 22.8% to $13,447,295 in 2004 from $10,954,409 in 2003. Sea freight
revenue for AGI Group was $3,304,925,  while sea freight revenue for Airgate and
Paradigm was $10,456,386 and $13,681 respectively,  and offsetting inter-company
transactions  were  $327,697.  The increase in revenue for the period was due to
our new agents in India,  Japan and Turkey,  who introduced  more customers into
our network. These new customers generated more revenue from the Shanghai market
starting  in the second  quarter  of 2003.  There was also an  increment  in the
quantity of freight consolidation in the Chicago operation of Airgate. Costs for
the  sea  freight  forwarding  operation  increased  approximately  24.6%,  from
$9,389,494 in 2003 to $11,698,276 in 2004. Sea freight costs attributable to AGI
Group were  $2,627,839,  while costs  attributable  to Airgate and Paradigm were
$9,388,970  and $9,163,  respectively  with  offsetting  inter-company  costs of
$327,696.


                                                                              24
<PAGE>

         The gross profit margin decreased  approximately 10% from 14.3% in 2003
to 13.0% in 2004 due to our market penetration strategy in Shanghai and Chicago.
In spite of the  reduction in gross margin,  overall gross profits  increased by
approximately 11.8%, to $1,749,019 as a result of increase in trade volume.

         Total  segment  overhead  attributable  to the  sea  freight  operation
increased  approximately  18.2%, from $718,077 in first half of 2003 to $848,759
in the same period of 2004.  Overall  net income for the sea  freight  operation
increased 6.31%, from $846,838 in first quarter of 2003 to $900,260 for the same
period in 2004.  The  increase  in net  segment  income was mainly the result of
improvement of gross profit as a result of trade volume increase.

OPERATING EXPENSES
GENERAL AND ADMINISTRATIVE EXPENSES

         General and  administrative  expenses increased by 22.8%, to $5,596,834
in first half of 2004 from  $4,554,794 in the same period of 2003. The following
factors caused the increase in expenses:

      Sales  commission:  Sales commission  increased  approximately  60.7% from
$639,814 in 2003 to $1,028,424 in 2004.  The increase is a result of increase in
freight forwarding income during the first half of 2004.

         Salaries and  allowance:  Salaries and allowance  increased  12.0% from
$2,068,409  for the period six months ended June 30, 2003 to $2,317,251 in 2004.
This increase was the result of the addition of  approximately  55 staff persons
during 2003 needed to keep pace with our growth.

COMPENSATION COST

         Compensation  cost:  During the period from November 2003 to June 2004,
the Company issued total 2,105,000 shares of its common stock to five employees,
an  independent  sales  representative  and a business  advisor.  During the six
months ended June 30, 2004,  compensation  cost  increased  711% from $35,313 in
2003 to $286,396 in 2004.

DEPRECIATION AND AMORTIZATION

         Depreciation  and  amortization  decreased   approximately  4.23%  from
$386,736 in 2003 to $370,401 in 2004.  The  decrease is due to the  reduction of
depreciation of property and equipment.


                                                                              25
<PAGE>

         Amortization  arises  from  intangible  customer   relationship  assets
recorded in conjunction  with the  acquisitions of Airgate on April 30, 2002 and
Paradigm  on  April  30,  2004.  These  intangible  assets  are  amortized  on a
straight-line  basis over a period of 5 years.  During the six months ended June
30, 2004, the amortization expense  attributable to this asset was $286,890,  an
increase of $890 as compared with the same period of 2003.
..
NON-OPERATING EXPENSES
INTEREST AND OTHER INCOME

         Interest and other income  increased  from $86,143 in first  quarter of
2003  to  $149,602  in the  same  period  of  2004.  This  was  due  to  various
miscellaneous handling charges received from third parties.

INTEREST EXPENSE

         Interest  expense  increased  to $162,661 in 2004 from $82,961 in 2003.
The increase in interest  expense is primarily  due to an increase in short-term
working capital financing.

PREFERRED STOCK DIVIDEND AND AMORTIZATION OF ISSUANCE COST

      The Series A Preferred  Stock and detachable  stock warrants issued during
April and May 2004 were recorded in accordance with Statement 150 Accounting for
Certain  Financial  Instruments  With  Characteristics  of Both  Liabilities and
Equity and EITF 98-5.  Accordingly,  a total of $211,867 was expensed during the
six months  ending June 30, 2004.  It  represented  73.6% of the  "non-operating
expenses."

AMORTIZATION OF PREFERRED STOCK DISCOUNT

         In accordance  with Opinion 14,  Accounting  for  Convertible  Debt and
Debts  Issued With Stock  Purchase  Warrants,  the Series A Preferred  Stock and
detachable  stock  warrants were recorded at their relative fair values with the
value of the warrants recorded in additional paid-in-capital.  The fair value of
the warrants was determined based on the Black-Scholes method. Effectively,  the
Series A Preferred Stock was recorded at a discount of $1,163,910. This discount
is amortized ratably over the term of the Series A Preferred Stock. As a result,
$62,979 was expensed during the six months ending June 30, 2004.

RISK FACTORS AFFECTING COMPANY OPERATIONS

         The  Company's  ability to provide  service to its  customers is highly
dependent  on good  working  relationships  with a variety of  entities  such as
airlines, steamship carriers and governmental agencies.

         Unlike other U.S. logistics companies,  the Company bears a significant
amount of inventory  risk. We pay for the  guarantees we put up to the carriers,
even if we do not have any customer cargo to fill the space.  We are not able to
ask our clients to make these guarantees and, accordingly,  we assume all of the
risks.

                                                                              26
<PAGE>

         The Company has freight forwarders  liability  insurance that covers it
against claims from clients.  We take  responsibility  for the cargo, and we are
responsible  for its safe delivery.  Therefore,  we can be held  responsible and
incur losses if anything goes wrong.

         Changes in governmental deregulation efforts, regulations governing the
Company's products,  and/or the international trade and tariff environment could
all affect the Company's business in unpredictable ways.

         Management  believes the Company's  business has not been significantly
or adversely  affected by inflation in the past.  Historically,  the Company has
generally been successful in passing cost increases to its customers by means of
price increases.  However,  competitive market place conditions could impede the
Company's  ability to pass on future cost increases to customers and could erode
the Company's operating margins.

         The Company continues to assess and improve financial controls, and has
negotiated  successfully  with its banks to get  credit  facilities  for  future
financial needs.

         Additional risks and uncertainties include:

-        Governmental deregulation efforts,  regulations governing the Company's
         products  and/or  the  international   trade  and  tariff   environment
         adversely affecting our ability to provide services to customers.
-        Competitive  marketplace conditions impeding the ability of the Company
         to pass future cost increases to customers.
-        The  Company's   dependence  on  international   trade  resulting  from
         favorable worldwide economic conditions.
-        The Company's dependence on retaining and adding significant customers.
-        The  Company's  ability to recruit and retain  skilled  employees  in a
         tight labor market.
-        The ability of the Company to develop and implement information systems
         to keep pace with the increasing complexity and growth of the Company's
         business.
-        Following the September 11 attacks,  airlines charge  additional  costs
         such as a fuel surcharge,  insurance  surcharge and war risk surcharge.
         These   surcharges  are  generally   passed  through  to  shippers  and
         consignees,  which increases their shipping costs. As a result of these
         increased costs, the shipping  incentive of customers has been reduced,
         and the rate of order cancellation has increased.
-        During March of 2003, The World Health Organization received reports of
         'Severe Acute Respiratory Syndrome' in various parts of the world. SARS
         caused  airlines to reduce  capacity and  adversely  affected  external
         trade  from  Hong  Kong  and  the  Pearl  River  Delta.  The  Company's
         operations were adversely affected by this health problem.


                                                                              27
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         We used  approximately  $2,313,945  and $491,984 of cash from operating
activities for the six months ended June 30, 2004 and 2003 respectively. The use
of cash was mainly attributable to additional amounts used in other receivables.
It is also due to an  increase  in trade  receivables  as a  result  of  company
growth..

         Net cash used in investing activities was $603,522 during first half of
2004 while the net cash provided by investing  activities during the same period
of 2003 was  $349,686.  During  2004,  we used  $186,737  to  acquire  plant and
equipment to improve our office  facilities and IT system. We also used $246,493
to  acquire a 35%  equity  investment  in  Shanghai  Air Cargo  Ground  Handling
Services  Ltd.,  as well as the  deposits of a potential  equity  investment  in
United States and joint venture in Hong Kong SAR.
..
         Net cash provided by financing activities was approximately  $3,621,006
and $355,084 for the period  ended June 30, 2004 and 2003  respectively.  During
the first half of 2004,  the Company had payment of notes  payables to banks for
$1,031,626  and payment of short-term  bank debt from for $372,558.  At the same
time the Company issued $5 million of Series A Convertible  Preferred  Stock and
detachable stock warrants.

         Working  capital  was  $6,328727   (inclusive  of  restricted  cash  of
approximately  $5.7 million) and $1,850,649 as of June 30, 2004 and December 31,
2003  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
June 30, 2004. 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.

         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,  and
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

         From  time  to  time,   we  have  entered   into  various   contractual
obligations, which may be summarized as follows:

<TABLE>
<CAPTION>


                                                PAYMENTS DUE BY PERIOD
                                               -----------------------------------------------------------

<S>                              <C>             <C>           <C>               <C>
CONTRACTUAL OBLIGATIONS         TOTAL          LESS   THAN  1 1-3 YEARS       4 - 5 YEARS  THEREAFTER
                                               YEAR

                                     $               $               $             $             $

Finance lease Obligations            143,411           61,713          81,698            -              -

Unsecured Bank Loans                  35,817           35,817               -            -              -

Income tax loans                     151,930          151,930               -            -              -

Operating Leases                   1,594,983          534,859         743,709      316,415              -

Cargo Space Commitments            4,579,199        4,579,199               -            -              -

Material           Employment        748,500          499,000         249,500            -              -
Agreements
</TABLE>

                                                                              28
<PAGE>

         We have finance lease  obligations  of $143,411 as of June 30, 2004, of
which  $61,713 is repayable  within one year,  and $81,698 is repayable  after 1
year.

         The amount due to directors, totaling $13,849, represents amount due to
Alfred Lam.

         Debts maturing within one year amounted to $187,747.

         We also entered into various lease  commitments for office premises and
warehouses  in the United  States,  Hong Kong and China.  The total  outstanding
lease  commitments  under  non-cancelable  operating leases are $1,594,983 as of
June 30, 2004. The current  portion of these  commitments of $534,859 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 June 30, 2004,  the amount  outstanding  for such  commitments to be
entered into in 2004 was approximately $4.78 million.

      In connection with the acquisition of Airgate  International  Corporation,
we also entered into  three-year  employment  agreements,  dated April 30, 2002,
with Mr. Turner and Mr. Zambuto,  respectively, as described in a Current Report
on Form 8-K filed on May 14, 2002. Under these agreements, we agreed to pay each
of them an annual base salary of $249,500 per annum commencing  January 1, 2003,
and for each year thereafter during the term of their employment agreements.

         As of June 30, 2004,  our commercial  commitments  may be summarized as
follows:
<TABLE>
<CAPTION>

<S>                                          <C>                             <C>
OTHER COMMERCIAL COMMITMENTS         TOTAL AMOUNTS COMMITTED        AMOUNT OF COMMITMENT EXPIRATION
                                                                    PER PERIOD
-----------------------------------------------------------------------------------------------------

                                                                    LESS THAN 1 YEAR

Line of credit                                    $2,500,000                              $2,500,000

Overdraft                                          1,256,380                               1,256,380

Invoice Trust Receipt                              1,220,587                               1,220,587

Income tax loan                                      151,930                                 151,930

Short-tern bank loans                                 35,817                                  35,817

Guarantees by bank                                   474,359                                 474,359

</TABLE>

         As of June 30,  2004 to finance  our  working  capital,  our  available
banking  facilities were  approximately  $11,000,000  obtained from creditworthy
commercial  banks in Hong Kong and $2,500,000 from a bank in the U.S. As of that
date, the total amount of bank credit facilities  utilized was $5,639,073.  This

                                                                              29
<PAGE>

was made up of (i)  $1,256,380 of overdrafts;  (ii)  $1,220,587 of invoice trust
receipts  and  (iii)  $2,500,000  line of  credit.  In  addition  to the  credit
facilities, the Company has a $151,930 Income Tax Loan and $35,817 of short-term
bank loan outstanding as of June 30, 2004.  Moreover,  there is $474,359 of bank
guarantees  for  granting  credit  facilities  to a  subsidiary  for  airfreight
payment. While these 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.

OUTLOOK

         Despite a global economic  downturn,  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 a recent research report issued by Barrow Street Research,
Inc.  (The "Barrow  Report")  between 1990 and 2003,  China's total exports grew
eight times to over $380 billion. China's share of global exports is anticipated
to reach 6% in 2003, a 54% growth from 2000.  The Barrow Report also states that
China accounted for 16% of the growth in the world economy,  ranking second only
to the US. 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

         The Closer Economic Partnership Arrangement ("CEPA") that was signed on
June 29, 2003,  originally  focused on  stimulating  and  enhancing  Hong Kong's
economic recovery.  In theory,  CEPA significantly  lowers the barriers for Hong
Kong enterprises to tap the Mainland China market.

         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.  In addition, it eliminates the import tariffs to Mainland China on
a host of goods made in Hong Kong,  allowing  most Hong Kong  companies  to sell
high value-added products across the border. In terms of economic benefits,  the
CEPA has good potential to open up many new business  opportunities  in Mainland
China for Hong Kong.  Although it is difficult to quantify the potential benefit
we may realize from CEPA,  through our Hong  Kong-based  AGI Logistics (HK) Ltd,
Shenzhen Careship  Transportation  Limited, as well as AGI China Ltd, 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  China's
regulations and business practices. We believe that our existing offices in Hong
Kong and Mainland  China can also  respond more quickly than other U.S.  freight
forwarders to ongoing developments in China.

                                                                              30

<PAGE>


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.

A SHIFT TOWARDS A DECREASING NUMBER OF GLOBAL SUPPLY CHAIN MANAGEMENT PROVIDERS

         Companies are  decreasing  the number of freight  forwarders and supply
chain management providers with which they interact so that they might work with
a  limited  number  of  providers  who are  familiar  with  their  requirements,
processes and procedures,  and who can function as long-term partners.  As such,
these 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.

EXPIRATION OF GARMENT QUOTA IN 2005

         The garment  quota in the U.S expires in 2005.  With the  expiration of
this garment quota, exporters are uncertain of the business environment and as a
result, the Company  anticipates that garment exporters will attempt to increase
their sales and exports in 2004 before the quota expires with a potential for an
increase in the volume of trade.

 ITEM 7A. 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
<PAGE>

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  rates  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 the major subsidiaries uses the Hong Kong Dollar (HKD), which has been linked
to the U.S.  Dollar  at a rate of HKD7.8 to USD1,  as its  functional  currency,
there  has been no  material  change  in the  Company's  foreign  exchange  risk
exposure.  However,  if HKD  was  unlinked  to the US  Dollar,  an  average  10%
weakening of the U.S.  Dollar,  throughout the period ended June 30, 2004, would
have had the  effect of  raising  operating  income  approximately  $58,000.  An
average 10% strengthening of the U.S. Dollar, for the same period would have had
the effect of reducing operating income by approximately $48,000.

         The  Company  currently  does not utilize  any the  derivate  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 June 30, 2004, the Company had
cash and cash  equivalents  and  restricted  cash of $7.3 Million and short-term
borrowings of $5.2 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 2003 and 2004.

ITEM 3.           CONTROLS AND PROCEDURES

         The Registrant's  Chief Executive Officer and Chief Financial  Officer,
after evaluating the effectiveness of the Registrant's  disclosure  controls and
procedures  (as defined in Rules  13a-14(c) and 15d-14(c)  under the  Securities
Exchange Act of 1934, as amended) as of June 30, 2004 (the  "Evaluation  Date"),
have concluded  that, as of the Evaluation  Date,  the  Registrant's  disclosure
controls  and  procedures  were  effective  to  ensure  the  timely  collection,
evaluation,  and disclosure of information relating to the Registrant that would
potentially be subject to disclosure under the Securities  Exchange Act of 1934,
as amended, and the rules and regulations promulgated under that Act. There were
no significant changes in the Registrant's internal controls or in other factors
that  could  significantly  affect  the  internal  controls  subsequent  to  the
Evaluation Date.

                                                                              32


<PAGE>

                                     PART II

                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         In March 2004, the Company filed a complaint (the  "Complaint")  in the
United States  District Court for the Southern  District of New York,  captioned
Pacific CMA, Inc. and Alfred Lam a/k/a Alfred Lam King Ko v.  Frascona,  Joiner,
Goodman and  Greenstein,  P.C.,  Gary S. Joiner,  Thomas K Russell and John Does
1-10 (Case No. 04 CV 2213 (NRB)) (the "Action").  In the Complaint,  the Company
alleged  various  violations  of  the  anti-fraud   provisions  of  the  Federal
Securities  Laws  involving  the  purchase  and sale of  securities  against the
defendants  including,  but not limited to, the Company's prior counsel, as well
as  breaches  of  fiduciary  duty  by that  counsel.  Pursuant  to a  Settlement
Agreement  by and between the Company and certain  defendants  (the  "Settlement
Agreement"),  in exchange for the Company  agreeing to dismiss the Action solely
against each of Thomas K. Russell,  Scott  Saunders and Saunders'  Family Trusts
(the "Settling  Defendants"),  the Settling  Defendants  agreed to return to the
Company and/or Mr. Lam, an aggregate of 725,000  shares of the Company's  common
stock held by such persons, and the Company agreed to register and has, in fact,
registered  for  resale  under  the  Securities  Act of 1933,  as  amended,  the
remaining  aggregate 660,000 shares of common stock held by such persons.  Under
the  Settlement  Agreement,  however,  such  660,000  shares of common stock are
subject  to a  lock-up  agreement  providing  that  such  persons  may not sell,
transfer or otherwise dispose of any of such 660,000 shares until August 3, 2004
(the  "Effective  Date") by the  Commission,  and then following that date, such
persons only may sell ten (10%)  percent of their  aggregate  holdings  (660,000
shares) every thirty days. The Action continues as to the remaining defendants.

ITEM 2.  CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

         (a), (b) AND (c)

         As previously reported in Registrant's Form 10-QSB for the period ended
March 31, 2004, the Registrant  reincorporated from the State of Colorado to the
State of Delaware.

         On April 12,  2004,  Registrant  filed a  Certificate  of  Preferences,
Rights  and  Limitations  of its  Series  A  Convertible  Preferred  Stock  (the
"Certificate").  The  foregoing  Certificate  was  amended  on May 6,  2004 (the
"Amendment").  The purpose of filing the  Certificate  and the  Amendment was to
create a series of Preferred Stock denominated as Series A Convertible Preferred
Stock.

         On April 14, 2004,  pursuant to a Securities  Purchase Agreement by and
among  Registrant,  dated as of April 8,  2004 and two  institutional  investors
(collectively,  the "Investors"),  the Registrant sold (the "April Offering") to
the Investors  $3,000,000  aggregate amount of its Series A Preferred Stock (the
"Preferred Stock") (2,000 and 1,000 shares of Preferred Stock, respectively). In
the Offering,  the Registrant also issued to Investors warrants (the "Warrants")
to purchase  937,500  shares (the "Warrant  Shares") of common stock,  par value
$.001 per share (the "Common  Stock") at per share exercise  prices of $1.76 for
468,750 shares and $2.00 for 468,750 shares.

                                                                              33
<PAGE>

         In connection with this April Offering, the Registrant paid commissions
of seven (7%)  percent of the gross  proceeds  raised in the April  Offering and
issued  warrants  to  purchase  65,625  shares of Common  Stock to a  registered
broker/dealer (the "Agent Warrants").

         On May 7, 2004,  pursuant to a  Securities  Purchase  Agreement  by and
among the Registrant dated as of May 6, 2004, and one (i) institutional investor
(the  "Investor"),  the  Registrant  sold (the "May  Offering")  to the Investor
$2,000,000  aggregate  amount  of its  Series  A  Preferred  Stock.  In the  May
Offering,  the  Registrant  also  issued to the  Investor  Warrants  to purchase
625,000 Warrant Shares of Common Stock at per share exercise prices of $1.76 for
312,500 shares and $2.00 for 312,500 shares.

         In connection with the May Offering, the Registrant made payments equal
to eleven (11%) percent of the gross proceeds received in the May Offering,  and
issued  warrants to purchase  70,000  shares of Common  Stock (the "Third  Party
Warrants").

         The following is a description of our issued and standing capital stock
at June 30, 2004 including  their  respective  rights,  powers,  limitations and
qualifications:

         Common Stock.  We are authorized to issue up to  100,000,000  shares of
common  stock,  $.001 par value per  share,  25,830,590  of which are issued and
outstanding  as of July 1, 2004.  The  foregoing  25,830,590  shares do not give
effect to the  surrender of shares of our common stock by certain of the Selling
Stockholders pursuant to a settlement agreement with them. The holders of shares
of our common stock are entitled to receive  dividends  equally  when, as and if
declared by the Board of Directors, out of funds legally available therefor.

         Subject to the rights that may be  designated by the Board of Directors
to the holders of any shares of Preferred Stock then outstanding, the holders of
the common stock have voting rights, one vote for each share held of record, and
are entitled upon  liquidation of the Company to share ratably in the net assets
of the Company  available  for  distribution.  Shares of our common stock do not
have  cumulative  voting  rights.  Therefore,  the  holders of a majority of the
shares of common stock may elect all of the directors of the Company and control
its  affairs  and  day-to-day  operations.  The  shares of common  stock are not
redeemable and have no preemptive or similar rights.  All outstanding  shares of
our common stock are fully paid and non-assessable.


                                                                              34


<PAGE>

         Preferred  Stock.  Pursuant to our  Certificate of  Incorporation,  our
Board of Directors is authorized,  subject to any limitations prescribed by law,
to provide for the  issuance of shares of up to  10,000,000  shares of preferred
stock  from time to time in one or more  series and to  establish  the number of
shares to be included in each such  series and to fix the  designation,  powers,
preferences  and relative,  participating,  optional and other special rights of
the  shares  of  each  such  series  and  any  qualifications,   limitations  or
restrictions thereof. Because the Board of Directors has such power to establish
the powers,  preferences and rights of each series, it may afford the holders of
preferred stock preferences,  powers and rights (including voting rights) senior
to the  rights  of the  holders  of  common  stock.  The  issuance  of shares of
preferred  stock,  or the issuance of rights to purchase  such shares,  could be
used to discourage an unsolicited acquisition proposal.

         There  are  currently   one  series  of  preferred   stock  issued  and
outstanding:  Series A Preferred Stock,  with 10,000 shares being authorized and
5,000 shares being issued and outstanding.  Up to an additional 9,990,000 shares
of Preferred Stock remain  authorized.  Set forth below is a summary only and it
is  qualified  by our  Certificate  of  Incorporation  and  the  Certificate  of
Designation for our Series A Preferred Stock, copies of which are available from
the Company upon request.

         Description of Series A Preferred  Stock.  You can find  definitions of
certain terms used in this description of the features of our Series A Preferred
Stock under the subheading "Certain Definitions" below.

<TABLE>
<CAPTION>

<S>                                              <C>
         Shares Outstanding:                     5,000; an additional  5,000 shares issuable  pursuant
         ------------------                      to the Investment Option,  subject to satisfaction of
                                                 certain conditions.

         Amount Paid Per Share:                  $1,000
         ---------------------

         Stated Amount Per Share:                $1,000
         -----------------------

         Par Value Per Share:                    $.001
         -------------------

         Dividends:                              Cumulative; 6% per annum on the
         ---------                               stated value of $1,000  payable
                                                 in  arrears  beginning  June 1,
                                                 2004  payable  in  cash  or  in
                                                 shares of  common  stock at the
                                                 Company's   election   (in  the
                                                 event  certain  conditions  are
                                                 met).

         Liquidation Preference:                 Prior to common stock;  liquidation payment of $1,000
         -----------------------                 per share  outstanding  plus any  outstanding  unpaid
                                                 dividends and damages.
</TABLE>

                                                                              35
<PAGE>

         Voting Rights:                          None,  except as required
         --------------                          by  Delaware  law or if we
                                                 (i) alter or  change  adversely
                                                 the  powers,   preferences   or
                                                 privileges   of  the  Series  A
                                                 Preferred  Stock  or  alter  or
                                                 amend   the    Certificate   of
                                                 Designation;  (ii) authorize or
                                                 create   any   class  of  stock
                                                 senior or otherwise  pari passu
                                                 with  the  Series  A  Preferred
                                                 Stock;    (iii)    amend    our
                                                 Certificate of Incorporation or
                                                 other  charter  documents so as
                                                 to affect  adversely any rights
                                                 of the  holders of the Series A
                                                 Preferred Stock;  (iv) increase
                                                 the authorized number of shares
                                                 of  Preferred   Stock;  or  (v)
                                                 enter into any  agreement to do
                                                 any of the foregoing.

         Conversion Price:                       $1.44 per share, subject to
         ----------------                        adjustment.


         Conversion Time:                        By the Holders: At any time and
         ---------------                         from time to time.


         Adjustments to
         Conversion Price:                       The  conversion  price is
         -----------------                       subject to  adjustment  for
                                                 stock splits,  stock  dividends
                                                 and    similar    events.    In
                                                 addition,  if  we  sell  common
                                                 stock or securities convertible
                                                 into or exchangeable for common
                                                 stock at a price  less than the
                                                 conversion price in effect (the
                                                 "Lower Price"),  the conversion
                                                 price will be adjusted to equal
                                                 the Lower Price.

         Mandatory Redemption
         on Fourth Anniversary:                  In or about April and May
         ----------------------                  2008, the Company
                                                 is   required   to  redeem  all
                                                 outstanding   shares   of   the
                                                 Series A Preferred Stock for an
                                                 amount   equal  to  the  stated
                                                 value of said shares,  plus all
                                                 accrued  and  unpaid  dividends
                                                 and liquidated damages.

         Mandatory Redemption:                   Certain   events,   such
         --------------------                    as  the  Company  filing  a
                                                 petition   under  the   federal
                                                 bankruptcy  laws,  a change  in
                                                 control  (as  defined)  of  the
                                                 Company,  the Company's failure
                                                 to    timely     obtain     the
                                                 effectiveness       of      the
                                                 Registration    Statement    or

                                                                            36

<PAGE>

                                                 deliver    shares    upon    an
                                                 investor's     conversion    or
                                                 maintain  its  common   stock's
                                                 listing or quoted for more than
                                                 ten (10) days will also  result
                                                 in a mandated redemption but at
                                                 a differing  price. If based on
                                                 one of these specified  events,
                                                 the Company will be required to
                                                 pay  an  amount  equal  to  the
                                                 greater  of 110% of the  Stated
                                                 Value of the outstanding shares
                                                 of Series A Preferred  Stock or
                                                 VWAP  at  the  time,  plus  all
                                                 accrued  and  unpaid  dividends
                                                 and liquidated damages.

         Liquidated Damages for Failure
         to Meet Registration Deadlines:         If sales of our common
         ------------------------------          stock cannot be made  pursuant
                                                 to the  Registration  Statement
                                                 after it is declared  effective
                                                 for  15  consecutive   business
                                                 days or a total of 25  business
                                                 days   during   any  12   month
                                                 period,  a penalty  of two (2%)
                                                 percent per month on the Stated
                                                 Value of any Series A Preferred
                                                 Shares  issued and  outstanding
                                                 is to be  paid  to the  holders
                                                 until  any  such   failure   is
                                                 cured.

         Liquidated Damages for Failure
         to Deliver Shares on Time:              Damages for failure to timely
         -------------------------               deliver  common  stock
                                                 issuable upon conversion of the
                                                 Series A Preferred  Stock up to
                                                 $10 per  trading  day for  each
                                                 $2,000  in value of  shares  of
                                                 common  stock   underlying  the
                                                 Series   A   Preferred    Stock
                                                 increasing  to $20 per  trading
                                                 day for continuing failures.

         Other:                                  No  issuances  of common
         -----                                   stock that would  cause the
                                                 holder  to own more  than
                                                 4.9% of our  total  common
                                                 stock at any given time;

                                                 Six month right to  participate
                                                 in any equity  financing by the
                                                 Company   up  to  fifty   (50%)
                                                 percent   of  such   subsequent
                                                 financing.

Certain Definitions.

         "Change of Control"  includes the following:  (a) a change in ownership
of in excess of 40% of the Company's  voting  securities  within a year; (b) the
replacement  within a year of more than  one-half of the members of the Board of
Directors  which is not  approved  by a majority  of the members of the Board on
April 8, 2004;  or (c) the Company  entering  into an  agreement  providing  for
either (a) or (b).

         "Principal  Market"  means the AMEX and shall also include the New York
Stock  Exchange,  the NASDAQ  Small-Cap  Market on the NASDAQ  National  Market,
whichever is at the time the principal trading exchange or market for our common
stock, based upon share volume.

                                                                              37

<PAGE>

         "Registration  Statement" means the registration statement covering the
shares of common stock underlying the shares of Series A Preferred Stock and the
warrants sold to the investor.

         "VWAP" means,  for any date,  the price  determined by the first of the
following clauses that applies: (a) if the common stock is then listed or quoted
on a Principal  Market,  the daily volume  weighted  average price of the common
stock for such date (or the nearest  preceding date) on the Principal  Market on
which  the  common  stock is then  listed or quoted  as  reported  by  Bloomberg
Financial L.P. (based on a trading day from 9:30 a.m.  Eastern Time to 4:02 p.m.
Eastern  Time);  (b) if the  common  stock is not then  listed  or  quoted  on a
Principal  Market and if prices for the common  stock are then quoted on the OTC
Bulletin Board,  the volume weighted  average price of the common stock for such
date (or the  nearest  preceding  date) on the OTC  Bulletin  Board;  (c) if the
common  stock is not then  listed  or quoted  on the OTC  Bulletin  Board and if
prices for the common stock are then reported in the "Pink Sheets"  published by
the Pink  Sheets  LLC (or a similar  organization  or agency  succeeding  to its
functions  of  reporting  prices),  the most  recent  bid price per share of the
common stock so reported;  or (d) in all other cases, the fair market value of a
share of common stock as determined by an independent appraiser selected in good
faith by the investors and reasonably acceptable to the Company.

         Warrants.  The Warrants issued to the two institutional  investors,  as
part of our April and May 2004 private placements  contain provisions  providing
for an  adjustment  in the  exercise  price and number of shares  issuable  upon
exercise  of the  Warrants  in the  event of stock  dividends,  subdivisions  or
combinations of our shares of common stock,  reclassifications of our securities
and anti-dilution  adjustments in the event of issuances of shares of our common
stock or securities  convertible  into or  exercisable  for our shares of common
stock for a purchase,  conversion or exercise  price,  as the case may be, below
the  exercise  prices of the  Warrants  that are  substantially  similar  to the
adjustment provisions of our Series A Preferred Stock.

         On November 18, 2003, we issued an aggregate of 1,242,240 shares of our
common stock and Warrants to purchase  621,120  shares of our common stock to 14
private  investors for an aggregate of $2,000,000  (the  "November  2003 Private
Placement").  One half of said Warrants are  exercisable at $1.61 per share with
the remaining one-half of said Warrants exercisable at $2.17 per share.

         In connection with the November 2003 Private Placement described above,
we also issued  warrants to purchase  (a) 186,335  shares of common  stock at an
exercise price of $1.93 per share to Rockwood,  Inc., an SEC and NASD registered
broker-dealer  as partial  compensation  for its efforts in connection with that
offering  and  (b)  100,000  shares  of  common  stock  to  Duncan  Capital  LLC
("Duncan"),  an investment  banking firm. The warrants  issued to Duncan were in
consideration  of advice by Duncan to the  registrant  in  connection  with that
offering. One-half of the warrants issued to Duncan are exercisable at $0.80 per
share and one-half are exercisable at $1.20 per share.

         On November 18, 2003,  the  registrant  issued  warrants to purchase an
aggregate of 200,000 shares of common stock to Strategic  Growth  International,
Inc.  ("Strategic") in consideration  for future public relation  services to be
performed by Strategic. Such amount subsequently was reduced to 50,000 shares of
common stock.

                                                                              38
<PAGE>

         For a  discussion  of other  warrants,  options  and  other  rights  to
purchase our securities,  please refer to our Annual Report, Item 5, "Market For
Registrant's  Common  Equity and Related  Stockholder  Matters - Recent Sales of
Unregistered Securities."

         (d) Not applicable.
         (e) Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         On June 11,  2004,  the  Registrant  held  its  Annual  Meeting  of its
Stockholders.  The results of that meeting were  reported  upon in  Registrant's
Current Report on Form 8-K filed with the Securities and Exchange  Commission on
June 15, 2004.

ITEM 5.           OTHER INFORMATION

                  None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (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-4(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)).

         (b) Reports on Form 8-K

                  During  the  fiscal  quarter  covered  by  this  Report,   the
                  Registrant filed the following Reports on Form 8-K:

                                                                              29
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                                  <C>
                  Event Date                Filing Date                Items in Form 8-K Reported Upon
                  --------------            ------------                ------------------------------
                  March 31, 2004            April 8, 2004                                 5
                  April 14, 2004            April 15, 2004                                5
                  May 7, 2004               May 10, 2004                                  5
                  June 11, 2004             June 15, 2004                                 5

</TABLE>
                                                                             30
<PAGE>





                                   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:  August 13, 2004          By: /s/ Alfred Lam
                                    -------------------------------------------
                                      Name:  Alfred Lam
                                      Title: Chairman of the Board of Directors
                                             (Principal Executive Officer)


Date:  August 13, 2004          By: /s/ Daisy Law
                                    -------------------------------------------
                                     Name:  Daisy Law
                                     Title: Chief Financial Officer
                                            (Principal Financial and Accounting
                                            Officer)