UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

FORM 10

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2007

[ ] 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: 000-49608

CHINA AGRITECH, INC.

|Delaware                                                           | 75-2955368                              
|------------------------------------------------------------------ | ----------------------------------------
|(State
    or other jurisdiction of incorporation or organization) | (I.R.S.
    Employer Identification No.)

|                                                                                      
|--------------------------------------------------------------------------------------
|A# Room 0706-0707, The Spaces
    International Center,                               
|No. 8 Dongdaqiao Road,                                                                
|Chaoyang District, Beijing 100020                                                     
|People's Republic of China                                                            
|(Address
    of principal executive offices, Zip Code)                                
|                                                                                      
|(86) 10-58702123                                                                      
|(Registrant's telephone number, including
    area code)                              
|                                                                                      
|N/A                                                                                   
|(Former name, former address and former fiscal year, if
    changed since last report)

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act 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 ___

Indicate by check mark whether the
registrant is a larger accelerated filer, an accelerated filer, or a
non-accelerated filer. See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer ___         Accelerated filer
___         Non-accelerated filer X

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

The number of shares outstanding of
each of the issuer's classes of common equity, as of May 14, 2007 is as follows:

|Class of Securities            | Shares Outstanding
|------------------------------ | ------------------
|Common Stock, $0.001 par value | 19,143,615        

---



PART I . FINANCIAL INFORMATION





ITEM 1.  FINANCIAL STATEMENTS.

CHINA AGRITECH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

|                                                                |   | MARCH 31, 2007 |   |                  
|--------------------------------------------------------------- | - | -------------- | - | -----------------
|                                                                |   | (UNAUDITED)    |   | DECEMBER 31, 2006
|                                                                |   |                |   |                  
|ASSETS                                                          |   |               
|Current Assets                                                  |   |                |   |                  
|Cash and cash equivalents                                       | $ | 4,910,594      | $ | 6,430,009        
|Restricted cash                                                 |   | 56,149         |   | 100,028          
|Accounts receivable, net                                        |   | 18,338,613     |   | 12,239,073       
|Inventories                                                     |   | 2,852,716      |   | 1,322,244        
|Advances to suppliers                                           |   | 5,300,016      |   | 8,038,974        
|Prepayments and other receivables                               |   | 386,672        |   | 382,463          
|                                                                |   |                |   |                  
|Total Current Assets                                            |   | 31,844,760     |   | 28,512,791       
|                                                                |   |                |   |                  
|Property, plant and equipment, net                              |   | 2,467,794      |   | 2,514,123        
|                                                                |   |                |   |                  
|Total Assets                                                    | $ | 34,312,554     | $ | 31,026,914       
|                                                                |   |                |   |                  
|LIABILITIES AND SHAREHOLDERS' EQUITY                            |   |               
|                                                                |   |                |   |                  
|Current Liabilities                                             |   |                |   |                  
|Accounts payable                                                | $ | 93,016         | $ | 108,886          
|Accrued liabilities and other payables                          |   | 997,865        |   | 871,495          
|Amount due to related parties                                   |   | 1,191          |   | 954              
|Income tax payable                                              |   | 1,557,786      |   | 1,028,885        
|                                                                |   |                |   |                  
|Total Current Liabilities                                       |   | 2,649,858      |   | 2,010,220        
|                                                                |   |                |   |                  
|Minority Interests                                              |   | 2,415,601      |   | 2,160,575        
|                                                                |   |                |   |                  
|Commitments                                                     |   | -              |   | -                
|                                                                |   |                |   |                  
|Stockholders' Equity                                            |   |                |   |                  
|Common stocks; $0.001 par value, 100,000,000 shares authorized, |   |                |   |                  
|19,143,615 shares issued and outstanding                        |   | 19,144         |   | 19,144           
|                                                                |   |                |   |                  
|Additional paid in capital                                      |   | 12,620,248     |   | 12,619,049       
|Statutory reserve                                               |   | 3,103,240      |   | 2,790,916        
|Accumulated other comprehensive income                          |   | 1,105,937      |   | 601,288          
|Retained earnings                                               |   | 12,398,526     |   | 10,825,722       
|                                                                |   |                |   |                  
|Total Stockholders' Equity                                      |   | 29,247,095     |   | 26,856,119       
|                                                                |   |                |   |                  
|Total Liabilities and Stockholders' Equity                      | $ | 34,312,554     | $ | 31,026,914       

The accompanying notes are an integral part of these condensed
consolidated financial statements.

---





CHINA AGRITECH, INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2007 and 2006 
(UNAUDITED)

|                                                                                                                              |   | MARCH 31,  
|----------------------------------------------------------------------------------------------------------------------------- | - | -----------
|                                                                                                                              |   | 2007       
|                                                                                                                              |   |            
|Net revenue                                                                                                                   | $ | 8,611,741  
|Cost of revenue                                                                                                               |   | (4,100,825)
|Gross profit                                                                                                                  |   | 4,510,916  
|Operating expenses                                                                                                            |   |            
|Selling expenses                                                                                                              |   | (614,002)  
|Operating and administrative expenses                                                                                         |   | (548,067)  
|Total operating
    expenses                                                                                                  |   | (1,162,069)
|Income from operations                                                                                                        |   | 3,348,847  
|Other income (expense)                                                                                                        |   |            
|Other (expense) income                                                                                                        |   | 27,896     
|Finance income (expense)                                                                                                      |   | (209)      
|Total other income
    (expense)                                                                                              |   | 27,687     
|Income before income taxes and minority
    interest                                                                          |   | 3,376,534  
|Provision for income taxes                                                                                                    |   | (1,260,055)
|Income before minority interests                                                                                              |   | 2,116,479  
|Minority interests                                                                                                            |   | (231,351)  
|Net income                                                                                                                    |   | 1,885,128  
|Other comprehensive income                                                                                                    |   |            
|Foreign currency
    translation adjustment                                                                                   |   | 504,648    
|Comprehensive income                                                                                                          | $ | 2,389,776  
|Basic and diluted weighted average shares outstanding                                                                         |   | 19,143,615 
|Basic and diluted net earnings per share                                                                                      | $ | 0.10       
|                                                                                                                              |   |            
|Basic and diluted weighted average number of shares is the
    same since the effect of dilutive securities is anti-dilutive.

The accompanying notes are an integral part of these condensed
consolidated financial statements.

---



CHINA AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006 
(UNAUDITED)

|                                                                                  |   | MARCH 31,  
|--------------------------------------------------------------------------------- | - | -----------
|                                                                                  |   | 2007       
|Cash flows from operating activities:                                             |   |            
|Net income                                                                        | $ | 1,885,128  
|Adjustments to reconcile
    net income to net cash used in operating activities: |   |            
|Stock based compensation                                                          |   | 1,199      
|Minority Interest                                                                 |   | 231,351    
|Depreciation                                                                      |   | 81,140     
|(Increase) Decrease in current assets:                                            |   |            
|Accounts receivable                                                               |   | (5,944,426)
|Prepayment and other receivable                                                   |   | 6,016      
|Inventory                                                                         |   | (1,340,544)
|Advances to suppliers                                                             |   | 2,810,417  
|Increase (Decrease) in current liabilities:                                       |   |            
|Accounts payable                                                                  |   | (272,030)  
|Other payable                                                                     |   | 245,294    
|Tax payable                                                                       |   | 515,789    
|Accrued expenses                                                                  |   | (38,641)   
|Net cash used in operating activities                                             |   | (1,819,307)
|                                                                                  |   |            
|Cash flows from investing activities:                                             |   |            
|Acquisition of property & equipment                                               |   | (34,811)   
|Restricted cash                                                                   |   | 43,883     
|Net cash provided by (used in) investing
    activities                           |   | 9,072      
|                                                                                  |   |            
|Cash flows from financing activities:                                             |   |            
|Advance/repayment from/to related parties                                         |   | -          
|Advance from shareholders                                                         |   | 1,246      
|Capital contributed                                                               |   | -          
|Net cash provided by financing activities                                         |   | 1,246      
|                                                                                  |   |            
|Net increase (decrease) in cash and cash
    equivalents                          |   | (1,808,989)
|                                                                                  |   |            
|Effect of exchange rate change on cash and
    cash equivalents                   |   | 289,574    
|                                                                                  |   |            
|Cash and cash equivalents, beginning of
    year                                  |   | 6,430,009  
|                                                                                  |   |            
|Cash and cash equivalents, end of year                                            | $ | 4,910,594  
|                                                                                  |   |            
|Supplement disclosure of cash flow
    information:                               |   |            
|Interest expense paid                                                             | $ | -          
|Income taxes paid                                                                 | $ | 3,760,570  

The accompanying notes are an integral part of these
consolidated financial statements.

---



CHINA AGRITECH, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND DESCRIPTION OF BUSINESS



China Agritech, Inc. (the "Company" or We) was originally incorporated on January 5, 1925 under the laws of the State of Nevada as Argyle Mining Company for the development of mining claims. Throughout our existence we have changed our business model several times, and conducted no substantive business from 1986 until February 2005 as discussed below.



On August 10, 2004, we merged with and into a newly formed wholly-owned Delaware subsidiary of the same name for the purpose of changing our corporate domicile from Nevada to Delaware.



We have experienced several corporate name changes as follows: Argyle Corporation in January 1960, Basic Empire in November 1963, Basic Empire Corp in December 1976 and China Agritech, Inc. in May 2005.



On December 25, 2004, the Company, China Tailong Holdings Company Limited ("Tailong"), and the stockholders of Tailong (the "Tailong stockholders") entered into the Agreement and Plan of Reorganization ("Reorganization Agreement"), as amended and such Reorganization became effective on February 3, 2005. The Reorganization Agreement provided for the acquisition by the Company from the Tailong stockholders of all of the issued and outstanding Tailong shares in exchange for 10,606,158 shares of newly issued restricted common stock of the Company, whereby the Tailong stockholders obtained control of the Company. In this connection, Tailong became a wholly-owned subsidiary of the Company.



As a result of the acquisition of Tailong, the Company became a fertilizer manufacturer and conducts operations in the People's Republic of China (the "PRC") through its wholly-owned subsidiary, Tailong and Tailong's 90% owned subsidiary, Pacific Dragon Fertilizers Co. Ltd. ("Pacific Dragon").



Tailong was incorporated on October 27, 2003 under the laws of Hong Kong. On October 9, 2004, Tailong acquired 90% of Pacific Dragon, which conducts Tailong's only business operation. Pacific Dragon is a foreign investment joint venture and was incorporated in the PRC on May 20, 1994. Pacific Dragon is classified as a Foreign Invested Enterprise ("FIE") in the PRC and is subject to the FIE laws of the PRC. Its legal structure is similar to a limited liability company organized under state laws in the United States. The Articles of Associations provide for a term of 15 years with registered capital of $500,000. Pacific Dragon engages in the business of manufacturing and marketing a series of organic liquid compound fertilizers. These products are marketed and sold to farmers in 11 provinces of China. Pacific Dragon conducts ongoing research and development to enhance concentration of the organic liquid compound fertilizer and lower the manufacturing cost. The principal researchers in Pacific Dragon are Liu Shuhua and Liu Kangde. Our major products include "LvLingBao II", LvLingBao III" and "Tailong I".



Prior to the acquisition of Tailong, the Company was a non-operating public shell corporation. Pursuant to Securities and Exchange Commission rules, the merger or acquisition of a private operating company into a non-operating public shell corporation with nominal net assets is considered a capital transaction in substance, rather than a business combination. Accordingly, for accounting purposes, the transaction has been treated as a reverse acquisition and a recapitalization, and pro-forma information is not presented. Transaction costs incurred in the reverse acquisition have been charged to expense.

---





1.   ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTD)



On April 21, 2005, the Company filed a Form Definitive 14C - Information Statement pursuant to Section 14(c) of the Securities Exchange Act of 1934 giving notice that the Company received written consents in lieu of a meeting from the holders of a majority of the Company's issued and outstanding common stock of a proposal to amend and restate the Company's Certificate of Incorporation (the "Restatement") to effect, among other things, a forward stock split whereby each share of issued and outstanding common stock is converted into 1.14 shares of the Company's common stock. The Form Definitive 14C became effective on May 12, 2005 when the Company filed its amended and restated Certificate of Incorporation with the Secretary of the State of Delaware. The effect of this action is reflected in the Company's financial statements as of the first day of the first period presented.



On June 29, 2006, the Company established a wholly owned subsidiary, Anhui Agritech Agriculture Development Limited (Anhui Agritech). Anhui Agritech engages in the business of manufacturing and marketing in series of organic liquid compound fertilizers.



On November 1, 2006, the Company and the stockholders of CAI Investment, Inc (the CAI stockholders) entered into an equity transfer agreement.  The CAI stockholders shall transfer 100% equity interest in CAI Investment, Inc. (CAI) to the Company in exchange for USD1,000.



Prior to the equity transfer, CAI established a wholly owned subsidiary, Agritech Fertilizer Limited (Agritech Fertilizer). Agritech Fertilizer engages in the business of manufacturing and marketing in series of organic liquid compound fertilizers.



2.  BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2006. The results of the three month period ended March 31, 2007 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2007.



a.   Principle of consolidation



The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Tailong, Anhui Agritech, Agritech Fertilizer and its 90% owned subsidiary, Pacific Dragon (collectively "the Company"). All significant inter-company accounts and transactions have been eliminated in consolidation.



b.   Use of estimates



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.



c.   Accounts receivable



The Company's policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of March 31, 2007 and December 31, 2006, the Company had accounts receivable of $18,338,613 and $12,239,073, net of allowance of $141,073 and $170,236, respectively.



---





2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)



d.   Advances to suppliers



The Company advances to certain vendors for purchase of its material. As of March 31, 2007 and December 31, 2006, the advances to suppliers amounted to $5,300,016 and $8,038,974, respectively.



e.   Revenue recognition



The Company's revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.



The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discount is normally not granted after products are delivered.



f.   Advertising costs



The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the three month periods ended March 31, 2007 and 2006were $90,027 and $164,289, respectively.



g.   Income taxes



The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.



The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized. If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company net income when those events occur. The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction.



h.   Foreign currency translation



The Company uses the United States dollar ("U.S. dollars") for financial reporting purposes. The Company's subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, the Company translates the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of the Company is Chinese Renminbi.

---





2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)



In particular, Renminbi ("RMB"), the PRC's official currency, is the functional currency of Pacific Dragon. Until July 21, 2005, RMB had been pegged to US$ at the rate of RMB8.28: US$1.00. On July 21, 2005, the PRC government reformed the exchange rate system into a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. In addition, the exchange rate of RMB to US$ was adjusted to RMB8.11: US$1.00 as of July 21, 2005. The People's Bank of China announces the closing price of a foreign currency such as US$ traded against RMB in the inter-bank foreign exchange market after the closing of the market on each working day, which will become the unified exchange rate for the trading against RMB on the following working day. The daily trading price of US$ against RMB in the inter-bank foreign exchange market is allowed to float within a band of 0.3% around the unified exchange rate published by the People's Bank of China. This quotation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts.



i.   Earning per share (EPS)



Earnings per share is calculated in accordance with the Statement of financial accounting standards No. 128 (SFAS No. 128), Earnings per share. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Earnings per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.



Basic and diluted earning per share were $0.10 and $0.05 for the three month periods ended March 31, 2007and 2006.



j.   Recent accounting pronouncements



In September 2006, FASB issued SFAS 157 Fair Value Measurements.  This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements.  However, for some entities, the application of this Statement will change current practice.  This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.



In September 2006, FASB issued SFAS 158 Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106, and 132(R) This Statement improves financial reporting by requiring an employer to recognize the over funded or under funded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:

---





2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)



1.     A brief description of the provisions of this Statement

2.     The date that adoption is required

3.     The date the employer plans to adopt the recognition provisions of this Statement, if earlier.



The requirement to measure plan assets and benefit obligations as of the date of the employers fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.



In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted subject to specific requirements outlined in the new Statement. Therefore, calendar-year companies may be able to adopt FAS 159 for their first quarter 2007 financial statements.



The new Statement allows entities to choose, at specified election dates, to measure eligible financial assets and liabilities at fair value that are not otherwise required to be measured at fair value. If a company elects the fair value option for an eligible item, changes in that item's fair value in subsequent reporting periods must be recognized in current earnings. FAS 159 also establishes presentation and disclosure requirements designed to draw comparison between entities that elect different measurement attributes for similar assets and liabilities. The management is currently evaluating the effect of this pronouncement on the consolidated financial statements.



k.   Reclassifications



Certain prior period amounts have been reclassified to conform to the current period presentation.



3. RESTRICTED CASH



Proceeds amounting $1,350,000 from the issuance of shares during the year 2005 were deposited in an escrow account. The purchase price was to be released from escrow. In accordance with the terms of the stock purchase agreement, $600,000 of the proceeds was kept in a trust account for certain corporate communication program. At March 31, 2007 and December 31, 2006, the Company had $56,149 and $100,028 in this account for the corporate communication program.



4. INVENTORIES



Inventories consist of the following as of March 31, 2007 and December 31, 2006:



|                  |   | March
    31, |   | December
    31,
|----------------- | - | ------------- | - | ----------------
|                  |   | 2007          |   | 2006            
|                  |   |               |   |                 
|Raw materials     | $ | 252,586       | $ | 483,100         
|Packing materials |   | 1,616,259     |   | 46,133          
|Finished goods    |   | 982,223       |   | 791,380         
|Work-in-progress  |   | 1,648         |   | 1,631           
|                  | $ | 2,852,716     | $ | 1,322,244       



---





5. PREPAYMENTS AND OTHER RECEIVABLE



As of March 31, 2007 and December 31, 2006, Company had prepayments and other receivable amounted to $386,672 and $382,463, respectively and include mainly prepaid rent and advanced travel expenses to employees.



6. PROPERTY, PLANT AND EQUIPMENT



Property, plant and equipment consist of the following as of March 31, 2007 and
December 31, 2006:



|                               |   | March 31, 2007 |   | December 31, 2006
|------------------------------ | - | -------------- | - | -----------------
|                               |   |                |   |                  
|Manufacturing machinery        | $ | 2,414,327      | $ | 2,388,716        
|Leasehold improvements         |   | 58,306         |   | 57,706           
|Office equipment               |   | 232,534        |   | 228,172          
|Motor vehicles                 |   | 344,695        |   | 342,570          
|Construction-in-progress       |   | 2,113          |   | -                
|                               |   | 3,051,975      |   | 3,017,164        
|Less: Accumulated depreciation |   | (584,181)      |   | (503,041)        
|                               |   |                |   |                  
|                               | $ | 2,467,794      | $ | 2,514,123        



Depreciation expenses for the three month periods ended March 31, 2007 and 2006 were $81,140 and $25,420, respectively.



7. AMOUNT DUE TO RELATED PARTIES



The amount due to related parties were the advances to the Companys officers and shareholders, and was unsecured, non-interest bearing and due on demand. As of March 31, 2007 and December 31, 2006, due to related parties amounted to $1,191 and $954, respectively.



8.   ACCOUNTS PAYABLE



Accounts payable consist of the following as of March 31, 2007 and December 31, 2006:



|                                               |   | March
    31, 2007 |   | December
    31, 2006
|---------------------------------------------- | - | ------------------ | - | ---------------------
|                                               |   |                    |   |                      
|Accounts payable are mainly payable to vendors | $ | 93,016             | $ | 108,886              



9.   ACCRUED EXPENSES AND OTHER PAYABLES



Accrued expenses and other payables of the following as of March 31, 2007 and December 31, 2006:



|                                                    |   | March 31, 2007 |   | December 31, 2006
|--------------------------------------------------- | - | -------------- | - | -----------------
|Accrued liabilities
    for normal business purpose | $ | 563,264        | $ | 685,249          
|Other payables for
    normal business purpose      |   | 434,601        |   | 186,246          
|                                                    | $ | 997,865        | $ | 871,495          

---





As of March 31, 2007, accrued expenses include $521,136 accrued commission payables, and $42,128 other accrued expenses. Other payables include $345,568 vendor deposits and $89,033 payables to other parties.



As of December 31, 2006, accrued expenses include $577,571 accrued commission payables, $90,000 accrued professional expenses, and $17,678 other accrued expenses. Other payables include $148,395 vendor deposits and $37,851 payables to other parties.



10.  TAX PAYABLES



Tax payables consist of the following as of March 31, 2007 and December 31, 2006:

|                              |   | March
    31, 2007 |   | December
    31, 2006
|----------------------------- | - | ------------------ | - | ---------------------
|                              |   |                    |   |                      
|Income tax payable            | $ | 1,221,224          | $ | 880,716              
|VAT tax payable               |   | 327,904            |   | 144,641              
|Individual income tax payable |   | 274                |   | 1,002                
|Others                        |   | 8,384              |   | 2,526                
|                              | $ | 1,557,786          | $ | 1,028,885            



11.  INCOME TAXES



The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.



The Company is subject to PRC Enterprise Income Tax at a rate of 33% on the net income. The income tax expenses for the three month periods ended March 31, 2007 and 2006 are $1,260,055 and $768,041, respectively.



12. MINORITY INTEREST



The amounts of $2,415,601 and $2,160,575, as of March 31, 2007 and December 31, 2006, represent the minority shareholder, Harbin Yinlong Enterprise Co., Ltd., a related party of the Company, interest in Pacific Dragon, a 90% subsidiary.

---





13. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS



Pacific Dragon's operations are all carried out in the PRC. Accordingly, Pacific Dragon's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.



Pacific Dragon's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Pacific Dragon's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.



MAJOR CUSTOMERS AND VENDORS  Four major customers gave 52% of the total net revenue for the three month periods ended March 31, 2007 with each customer individually accounting for about 17%, 13%, 12% and 10%. There were no major customers which accounting over 10% of the total net revenue
and its ten major customers accounted for 34% for the year ended December 31, 2006. The Company had $2,042,341 and $2,982,820 accounts receivable to theses customers as of March 31, 2007 and December 31, 2006, respectively.  Four vendors provided 80% of the Companys purchase of raw materials for the three month periods ended March 31, 2007 with each individually accounting for about 34%, 21%, 13% and 12%. Three vendors provided 76% of the Companys purchase of raw materials for the year ended December 31, 2006 with each vendor individually accounting for about 34%, 27% & 15%.  The Company had $29,384 and $74,785 accounts payable to these vendors as of March 31, 2007 and December 31, 2006, respectively.  The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant.




14. STOCKHOLDERS EQUITY



On January 13, 2006, the Company entered into a stock purchase agreement for the sale of 4,800,000 shares of the Company's common stock for $2.50 per share for a total of $12,000,000. The proceeds have been received in March, 2006.The direct costs related to this stock sale, including legal and professional fees, were deducted from the related proceeds and the net amount in excess of par value was recorded as additional paid-in capital.



15. STOCK OPTIONS



The Company adopted SFAS No. 123 (Revised 2004), Share Based Payment("SFAS No. 123R"), under the modified-prospective transition method on January 1, 20066. SFAS No. 123R requires companies to measure and recognize the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value. Share-based compensation recognized under the modified-prospective transition method of SFAS No. 123R includes share-based compensation based on the grant-date fair value determined in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation,for all share-based payments granted prior to and not yet vested as of January 1, 2006 and share-based compensation based on the grant-date fair-value determined in accordance with SFAS No. 123R for all share-based payments granted after January 1, 2006. SFAS No. 123R eliminates the ability to account for the award of these instruments under the intrinsic value method proscribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and allowed under the original provisions of SFAS No. 123. Prior to the adoption of SFAS No. 123R, the Company accounted for our stock option plans using the intrinsic value method in accordance with the provisions of APB Opinion No. 25 and related interpretations.



Primarily as a result of adopting SFAS No. 123R, the Company recognized $1,197 in share-based compensation expense for the three months ended March 31, 2007, and $0 for the three months ended March 31, 2006. The impact of this share-based compensation expense on the Company's basic and diluted earnings per share was $0.10 per share. The fair value of our stock options was estimated using the Black-Scholes option pricing model.

---







On May 10, 2006, the Company granted an unrelated party 125,000 stock options vesting over 5 years proportionately.  The option exercise price is $3.50. The fair value of the shares at the time of granting of the options was $3.00. Following is a summary of the stock option activity:



|                               |             | Weighted             |                    
|------------------------------ | ----------- | -------------------- | -------------------
|                               | Options     | Average
    Exercise | Aggregate Intrinsic
|                               | outstanding | Price                | Value              
|                               |             |                      |                    
|Outstanding, December 31, 2006 | 0           | $0.00                | $0.00              
|Granted                        | 125,000     | $3.50                | $0.00              
|Forfeited                      | -           | -                    | -                  
|Exercised                      | -           | -                    | -                  
|Outstanding, March 31, 2007    | 125,000     | $3.50                | $0.00              



Following is a summary of the status of options outstanding at March 31, 2007:



|               | Outstanding Options |                  | Exercisable Options
|-------------- | ------------------- | ---------------- | -------------------
|               |                     | Average          |                    
|               |                     | Remaining        | Average            
|Exercise Price | Number              | Contractual Life | Exercise
    Price 
|$3.50          | 125,000             | 4.00             | $3.50              



The assumptions used in calculating the fair value of options granted using the Black-Scholes option- pricing model are as follows:



|Risk-free interest rate      | 6.0%          
|---------------------------- | --------------
|Expected life of the options | 5.00
    years
|Expected volatility          | 80%           
|Expected dividend yield      | 0             
|                             |               

---





16. STATUTORY RESERVES



As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:



i)    Making up cumulative prior years' losses, if any;



ii)   Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;



iii)  Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and



iv)  Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting.



In accordance with the Chinese Company Law, the company has allocated 10% of its net income to surplus. The amount included in the statutory reserves in the statutory reserves for the three month periods ended March 31, 2007 and December 31, 2006 amounted to $2,068,827 and $1,860,610, respectively.



The Company established a reserve for the annual contribution of 5% of net income to the common welfare fund. The amount included in the statutory reserves for there month period ended March 31, 2007 and December 31, 2006 amounted to $1,034,413, and $930,306 respectively.



17.RELATED PARTY TRANSACTIONS AND COMMITMENTS AND LEASES



On January 6, 2005, Pacific Dragon entered into a License Agreement with Mr. Chang Yu, director of the Company. Under this License Agreement, Mr. Chang Yu authorized Pacific Dragon to use the know-how in manufacturing organic liquid compound fertilizer owned by him for free until December 31, 2009.



The Company's PRC subsidiary, Pacific Dragon, has entered into a tenancy agreement with Harbin Yinlong Enterprise Co. Ltd. ("Yinlong"), the joint venture partners holding 10% equity interest in Pacific Dragon to lease two factory plants and one office building with a total floor area of 7,018 sq. meters for a term of 10 years from January 1, 2004 to December 31, 2013 at an annual rent of RMB1,200,000 (equivalent to $144,578). The tenancy agreement was revised by increasing the annual rent to RMB3,600,000 (equivalent to $442,800) effective from July 1, 2005.



The Company incurred rent expenses $137,808
and $135,016 for three month periods ended March 31, 2007 and 2006. The rent expenses for the next five years after March 31, 2007 are as follows:



|Year 2007                | $ | 536,855  
|------------------------ | - | ---------
|Year 2008                |   | 482,149  
|Year 2009                |   | 471,303  
|Year 2010                |   | 471,303  
|Year 2011                |   | 471,303  
|Year 2012 and thereafter |   | 872,488  
|                         |   | 3,305,401

---





ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.



Except as otherwise indicated by the context, references in this Report to the Company, China Agritech, we, us or our are references to the combined business of China Agritech, Inc. and its consolidated subsidiaries.  References to "Tailong" are references to our wholly-owned subsidiary, China Tailong Holdings Company Limited, references to "Pacific Dragon" are references to Tailongs 90% owned subsidiary, Pacific Dragon Fertilizers Co. Ltd., references to CAI are to our wholly owned subsidiary, CAI Investment Inc., references to Beijing Agritech are to our wholly-owned indirect subsidiary, Beijing Agritech Fertilizer Ltd. and references to Anhui Agritech are to our wholly-owned subsidiary, Anhui Agritech Development Co. Ltd. References to "China" or "PRC" are references to the People's Republic of China.  References to "RMB" are to Renminbi, the legal currency of China, and all references to "$" and dollar are to the U.S. dollar, the legal currency of the United States.



Special Note Regarding Forward Looking Statements



This Quarterly Report on Form 10-Q, including the following Managements Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events.  You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results of the Company to differ materially from those anticipated, expressed or implied in the forward-looking statements.  The words believe, expect, anticipate, project, targets, optimistic, intend, aim, will or similar expressions are intended to identify forward-looking statements.



All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including statements regarding new and existing products, technologies and opportunities; statements regarding market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; uncertainties related to conducting business in China; any statements of belief or intention; any of the factors mentioned in the "Risk Factors" section of the Companys Form 10-K originally filed with the SEC on April 2, 2007, as amended; and any statements or assumptions underlying any of the foregoing.  We assume no obligation and do not intend to update these forward-looking statements, except as required by law.



Overview



Overall, during the first quarter of 2007, we continued to see consistent sales performance of our liquid compound fertilizer products and growth in our customer base.  We have also made progress in expanding our operations through our recently formed Anhui Agritech and Beijing Agritech operating subsidiaries, which we expect will contribute to our financial results in 2007.



During the first quarter of 2007, the continued demand for the our fertilizer products resulted in an approximate
51.6% increase in sales during the first quarter of 2007 as compared with the first quarter of 2006 and an
87.1% increase in net income for period ended March 31, 2007 as compared to same period in 2006.  The Companys consolidated balance sheet as of March 31, 2007 included current assets of
$31,844,760 and total assets of $34,312,554.  The Company had no long-term debt during the first quarter of 2007 or at March 31, 2007.



Our Business



China Agritech is a holding company whose direct and indirect subsidiaries manufacture and sell organic liquid compound fertilizers and related agricultural products. Our business operations are primarily conducted through our  direct and indirect subsidiaries, primarily Beijing Agritech, Tailong and Tailongs subsidiary, Pacific Dragon,

---





Our main products include "LvLingBao III," "LvLingBao IV," "Tailong I" and other customized, crop specific fertilizers that are tailored to our customers' specific requirements.  Our products promote photosynthesis, root system growth and transmission of nutrients to seeds; equilibrate absorption of nutrients and speed a plant's maturity; eliminate the damage of harmful radicals to plants and increase protein and vitamin content levels; accelerate the accumulation of photosynthesis materials and cell concentration; increase reservation ability, resistance and the utilization rate of basic fertility; and foster the development of plant life along with neutral or acidic pesticides. Our products can be applied on a widespread basis via spraying by machine or aircraft.



China is the principal market for our products which are primarily sold to farmers in 12 provinces in China: Heilongjiang, Hebei, Liaoning, Jilin, Shandong, Inner Mongolia, Henan, Sichuan, Guangdong, Xinjiang, Yunnan and Guizhou. In 2006, we had annual production capacity of approximately 9,000 metric tons of organic liquid compound fertilizers.



Our revenues are derived primarily from the sale of our organic liquid compound fertilizers and related agricultural products to our customers.



Our Background



We were originally incorporated as Argyle Mining Company under the laws of the State of Nevada on January 5, 1925, for the purpose of developing mining claims. Over the years, we changed our name, business model and strategy several times prior to engaging in our current business.  On August 10, 2004, we merged with and into a newly formed wholly-owned Delaware subsidiary for the purpose of changing our corporate domicile from Nevada to Delaware.  We had no active business operations during the period from 1986 until February 3, 2005



On February 3, 2005, we completed a reverse acquisition transaction with Tailong in which we acquired all of the issued and outstanding securities of Tailong from its stockholders in exchange for 10,606,158 shares of our common stock and Tailongs stockholders became our majority stockholders.  In May 2005, we changed our name to China Agritech, Inc.



Recent Developments Affecting Our Business



We recently initiated operations through two new subsidiaries, Anhui Agritech and Beijing Agritech and expect that sales will be made through these subsidiaries in 2007.  Beijing Agritech supervises our Beijing operations, which serve as a research and development center and our primary syrup production center and converting factory.  While these new operations did not have a material effect on our first quarter 2007 financial results, management expects these new operating subsidiaries will contribute to our financial results during the 2007 fiscal year.



On March 16, 2007, the National Peoples Congress of the PRC determined to adopt a new corporate income tax law in its fifth plenary session. The new corporate income tax law unifies the application scope, tax rate, tax deduction and preferential policy for both domestic and foreign-invested enterprises and will become effective on January 1, 2008.  Under the new corporate income tax law, we expect the applicable income tax rate for our PRC subsidiaries is subject to change.



Industry Wide Trends that are Relevant to Our Business



The fertilizer industry in China is in the process of rapid and continuous development.  China is the largest producer, importer and consumer of fertilizers in the world.  Based on recently available statistics, the total consumption of fertilizers in China in 2005 amounted to approximately 48.9 million tons, with an annual growth rate of 5.7%.  The total consumption of fertilizers is expected to increase to 51 million tons by 2010 and 56 millions by 2020. We believe this trend favorably influenced the demand for our products in the first quarter of 2007 as demonstrated by the increase in our customer base, and will continue to result in the growth in sales of our  fertilizer products and our revenues.



Management believes that the Chinese government, through regulation and other measures, will continue to encourage the development of the agriculture industry and encourages companies in the agriculture sector to become bigger and build name recognition.  We plan to utilize this regulatory and political policy support to expand our operations in various parts of China and to improve our name recognition in the market.



---





Competition



China is the world's largest consumer of fertilizer and fertilizer products and we believe that the prospects for continued growth are positive. Our experience is that the compound fertilizer industry in China is highly fragmented, consisting of numerous smaller regional manufacturers and larger, domestic and international competitors.



Management expects that a fairly recent development has the potential change the competitive landscape in the Chinese fertilizer market in the near future.  Due to the Chinese governments WTO commitment, China started to allow foreign companies to gain the right to distribute and make retail sales of fertilizers beginning on December 11, 2006. Because fertilizer products usually need to be specifically formulated for local plant, soil and climate conditions, we believe that there are not many foreign competitors in our selected markets that are capable of producing customized fertilizers that compete with our products.  Nevertheless, as a result of the opening of the fertilizer market to foreign producers, we expect that the amount of fertilizer imported to China will rise significantly and that we will face increasing competition from non-Chinese fertilizer manufacturers.  Judging by China Agritechs
first quarter 2007 financial performance, management remains optimistic that our
company can remain competitive in its markets notwithstanding the entry of
non-Chinese fertilizer manufacturers into the marketplace, although we can make
no assurances of this belief in light of the anticipated increase in
competition.



Results of Operations



Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006



The following table summarizes our results of operations for the three month periods ended March 31, 2007 and March 31, 2006, and provides information regarding the dollar and percentage increase or (decrease) for the three-month period ended March 31, 2007 as compared to the three month period ended March 31, 2006.

(all amounts, other than percentages, in millions of U.S. dollars )

|                                      | Three Month Period
Ended March 31, | Increase | % Increase
|------------------------------------- | ---------------------------------- | -------- | ----------
|Item                                  | 2007                               | 2006     | (Decrease)
|Sales Revenue                         | $8.61                              | $5.68    | 2.93      
|Costs of Goods Sold                   | 4.10                               | 2.87     | 1.23      
|Selling Expenses                      | 0.61                               | 0.47     | 0.14      
|Operating and Administrative Expenses | 0.55                               | 0.41     | 0.14      
|Income from Operations                | 3.35                               | 1.93     | 1.42      
|Other income (expenses)               | 0.03                               | (0.01)   | 0.04      
|Income tax                            | 1.26                               | 0.77     | 0.49      
|Minority interest                     | 0.23                               | 0.15     | 0.08      
|Net income                            | 1.89                               | 1.01     | 0.88      



Sales Revenues.  Our sales revenue for the three months ended March 31, 2007 increased $2.93 million or
51.6% to $8.61 million from $5.68 million for the same period ended on March 31, 2006.  This increase in sales was mainly attributable to the expansion of our customer base.



Cost of Goods Sold.  Our cost of goods sold increased $1.23 million to $4.10 million for the three month period ended March 31, 2007 from $2.87 million for the same period ended on March 31, 2006.  This increase was mainly attributable to an increase in sales of our fertilizer products, which required us to purchase more raw materials to satisfy the demand for our products.  As a percentage of sales revenues, the cost of goods sold decreased to 47.6% for the three months ended March 31, 2007 from 50.5% in the same period of 2006.  Such increase of gross margin was mainly attributable to the reduced material cost as a result of improved production cost control measures, as well as increased sales of our higher margin products.



---





Gross Profit.  Our gross profit increased $1.70 million to $4.51 million for the three months ended March 31, 2007 from $2.82 million for the same period in 2006, in which our cost of goods sold was $4.51 million.  Gross profit as a percentage of net revenues was 52.4% for the three months ended March 31, 2007, as compared to 49.5% during the same period in 2006.  The increase in gross profit as a percentage of revenues was due to reduced material costs resulting from improved production cost control measures, as well as increased sales of higher margin products.



Administrative Expenses.  Our administrative expenses increased $0.14 million to $0.55 million for the three months ended March 31, 2007 from $0.41
million for the same period ended on March 31, 2006. This increase directly
correlates to the increase in administrative functions, such as billing and
accounting, associated with the increased sales of our products.  As a percentage of sales revenues, administrative expenses decreased to 6.4% for the three months ended March 31, 2007 from 7.2% for the same period in 2006.  This percentage decrease was primarily attributable to more efficient controls of our administrative expenses.



Selling expenses.  Our selling expenses increased $0.14 million, or 29.8%
to $0.61 million for the three months ended March 31, 2007 from $0.47 million for the same period
in 2006. This increase directly correlates to the increase in marketing and
advertising expenses that resulted in our increased sales.  As a percentage of sales revenues, for the same period in 2006, our selling expenses decreased to
6.4% for the three months ended March 31, 2007 from 7.2% for the same period in 2006.  This percentage decrease was primarily attributable to an increase in our revenue is greater than an increase in our selling expenses.



Total
operating expenses.  Our total operating expenses increased $0.28 million, or
31.8%, to $1.16 million for the three month period ended March 31, 2007 from $0.88 million for the same period in 2006.  Total expense increased on a dollar basis for the reasons stated above.  As a percentage of sales revenues, our total expenses decreased to 13.5% for the three month period ended March 31, 2007 from 15.5% for the same period in 2006.  This decrease was primarily attributable to an increase in our revenue is greater than an increase in the total expenses.



Income from operations.  Income from operations  increased $1.42 million, or
72.7%, to $3.35 million for the three month period ended March 31, 2007 from $1.93 million for the same period in 2006.  Income from operations before taxes as a percentage of sales revenues increased to 38.9%
during the three month period ended March 31, 2007 from 34.2% during the same
period in 2006 as a results of higher sales during the first quarter of 2007.



Provision for income taxes.  Provision for income taxes increased $0.49 million, or
63.6%, to $1.26 million for the three month period ended March 31, 2007 from $0.77 million for the same period in 2006.  Our effective tax rate for the year ended December 31, 2006, was 40.6%.  Our 2007 effective tax rate expected to be 33%.



Net income.  Net income increased $0.88 million, or
87.1%, to $1.89 million for the three months period ended March 31, 2007 from $1.01 million during the same period in 2006.  Such increase is due to the increase of our sales revenue, and reduced operating and administrative expenses.



Minority Interest.  Our financial statements reflect an adjustment to our consolidated group net income equal to $0.23 million and $0.15 million for the three month period ended March 31, 2007 and 2006, respectively, reflecting the minority interest held by Yinlong Industrial Co. Ltd. in our subsidiary Pacific Dragon.

---





Foreign Currency Translation Gains



We had a foreign currency translation gain of $0.129480 for the three month period ended March 31, 2007 as compared with a foreign currency translation gain of $0.124700 in the same period ended March 31, 2006.  On July 21, 2005, China reformed its foreign currency exchange policy, revalued the RMB by 2.1 percent and allowed RMB to appreciate as much as 0.3% per day against the U.S. dollar.  As a result, we implemented different exchange rates in translating RMB into U.S. dollars in our financial statements for the three month period ended March 31, 2007.  The exchange rates of RMB 1.0 : US $0.1265 and RMB 1.0 : US $0.1249 were implemented in calculating the total assets/liabilities and statement of income, respectively.  This results in a $430,356 increase in the foreign currency translation gain for the three month period ended March 31, 2007 as compared with $74,292 for the three month period ended March 31, 2007.



Liquidity and Capital Resources



As of March 31, 2007, we had cash and cash equivalents of $4,910,594.   Our current assets were $31,844,760 and our current liabilities were $2,649,858 as of March 31, 2007 which results in a current ratio of approximately 12.0.   Total stockholders' equity as of March 31, 2007 was $28,247,095.  We had no bank loans or other interest bearing borrowings as of March 31, 2007.  The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.



|Cash Flows (in thousands of U.S. Dollars)          
|---------------------------------------------------
|                                                   
|                                                   
|Net cash  used in operating activities             
|Net cash provided by (used in) investing activities
|Net cash provided by  financing activities         
|Net cash                                           



Operating Activities:



Net cash used in operating activities was $1.8 million for the three month period ended March 31, 2007 which is a decrease of $0.2 million from the $1.7 million net cash provided by operating activities for the same period in 2006.  The
increase is mainly due to a decrease in the outstanding advances to suppliers.



Investing Activities:



Our main uses of cash for investing activities are payments for the acquisition of property, plant and equipment and restricted cash pledged as deposit for bills payable issuance.



Net cash provided by investing activities in the three month period ended March 31, 2007 was $0.01 million, which is a decrease of $0.17 million from net cash used for investing activities of $0.18 million in the same period of 2006 due to an acquisition of property,
plant and equipment.



Financing Activities:



Net cash used in financing activities in the three month period ended March 31, 2007 totaled $0 million as compared to $11.0 million used for financing activities in the same period of 2006. The decrease of the cash provided by financing activities was mainly attributable to the fact that we engaged in no capital raising activities during the three month period ended March 31, 2007.



---





On January 13, 2006, we sold 4,800,000 shares of our common stock to 22
investors for a total of $12,000,000 in a private placement transaction, but
engaged in no similar financing activities during the fiscal quarter ended March
31, 2007.



Our debt to equity ratio was 0% as of March 31, 2007 as we have no bank loans or other borrowings.



We believe that our currently available working capital will be sufficient to maintain our operations at our current levels for the next twelve months.  As of March 31, 2007, we did not have any material commitments for capital expenditures.



Critical Accounting Policies



The preparation of financial statements in conformity with U.S. GAAP requires our management to make assumptions, estimates and judgments that affect the amounts reported in the financial statements, including the notes thereto, and related disclosures of commitments and contingencies, if any.  We consider our critical accounting policies to be those that require the more significant judgments and estimates in the preparation of financial statements, including the following:



•     Use of Estimates.  The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.



•     Accounts Receivable.  Our policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. We had accounts receivable of $18,338,613 and $12,239,073, net of allowance of $141,073 and $170,236 as of March 31, 2007 and
December 31, 2006, respectively.



•     Advances to suppliers.  We permit advances to certain vendors for purchase of our material. The advances to suppliers amounted to $5,300,016 and $8,038,974 as of March 31, 2007 and
December 31, 2006, respectively.



•     Inventories.  Inventories are valued at the lower of cost (determined on a first-in first-out basis) or net realizable value. Our management compares the cost of inventories with the net realizable value and an allowance is made for writing down the inventories to their net realizable value, if lower than the cost.



•     Impairment.  We apply the provisions of Statement of Financial Accounting Standard No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS No. 144"), issued by the Financial Accounting Standards Board ("FASB"). FAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.



We test long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate we utilize to evaluate potential investments. We estimate fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets as of the three months periods ended March 31, 2007 and 2006.

---





•      Revenue Recognition.  Our revenue recognition policies are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of our company exist and collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Our revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discounts are normally not granted after products are delivered. All of our products that are sold in the PRC are subject to a Chinese value-added tax at a predetermined rate of 6% of the gross sales price. The total VAT paid for the three month periods ended March 31, 2007 and 2006 were $609,758 and $132,622, respectively.



•     Foreign currency translation.  We use U.S. dollars for financial reporting purposes. Our subsidiaries maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted. In general, for consolidation purposes, we translate the subsidiaries' assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Gain or loss on foreign currency transactions are reflected on the income statement. Gain or loss on financial statement translation from foreign currency are recorded as a separate component in the equity section of the balance sheet, as component of comprehensive income. The functional currency of our Company is Chinese Renminbi.



In particular, Renminbi is the functional currency of our operating subsidiary Pacific Dragon. Until July 21, 2005, RMB had been pegged to the U.S. dollar at the rate of RMB 8.28 : $1.00. On July 21, 2005, the PRC government reformed the exchange rate system into a managed floating exchange rate system based on market supply and demand with reference to a basket of currencies. In addition, the exchange rate of RMB to U.S. dollars was adjusted to RMB 8.11 : $1.00 as of July 21, 2005. The People's Bank of China announces the closing price of a foreign currency such as U.S. dollar traded against RMB in the inter-bank foreign exchange market after the closing of the market on each working day, which will become the unified exchange rate for the trading against RMB on the following working day. The daily trading price of U.S. dollars against RMB in the inter-bank foreign exchange market is allowed to float within a band of 0.3% around the unified exchange rate published by the People's Bank of China. This quotation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the Peoples Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People's Bank of China. Approval of foreign currency payments by the Peoples Bank of China or other institutions required submitting a payment application form together with invoices, shipping documents and signed contracts.



Off-Balance Sheet Arrangements



We do not have any off-balance sheet arrangements.



Seasonality



We may experience seasonal variations in our future revenues and our operating costs due to seasonality, however, we do not believe that these variations will be material. However, demand for our organic liquid compound fertilizer products fluctuates significantly with weather conditions, which may delay the application of the fertilizer or render it unnecessary at all thereby reducing demand for our products.

---





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



Interest Rate Risk



We had no bank loans or other interest bearing borrowings as of March 31, 2007; therefore, we are not exposed to interest rate risk.



Foreign Exchange Risk



While our reporting currency is the U.S. dollar, all of our consolidated revenues and consolidated costs and expenses are denominated in RMB.  All of our assets are denominated in RMB except for cash.  As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between U.S. dollars and RMB.  If the RMB depreciates against the U.S. dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. dollar financial statements will decline.  We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.



Inflation



Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results.  Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not
increase with these increased costs.



ITEMS 4 AND 4T. CONTROLS AND PROCEDURES



Our management, with the participation of our Chief Executive Officer and President, Yu Chang, and our chief financial officer, Lijun Peng, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report.  The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the Exchange Act) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this Form 10-Q, that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.  Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Based on that evaluation, Mr. Chang and Ms. Peng concluded that as of March 31, 2007, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.



There were no changes in our internal controls over financial reporting identified in connection with the evaluation performed that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II.  OTHER INFORMATION



ITEM 1.  LEGAL PROCEEDINGS



From time to time,  we may become  involved in various  lawsuits  and legal proceedings which arise in the ordinary course of business.  However, litigation is subject to inherent  uncertainties,  and an adverse  result in these or other matters  may  arise  from  time to time  that may harm our  business.  We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

---





ITEM 1A.  RISK FACTORS



There have been no material changes to the risk factors disclosed in Item 1A of Part 1 in our annual report on Form 10-K for the year ended December 31, 2006.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



During the three month period ended March 31, 2007, there were no unregistered sales of equity securities by the Company.



ITEM 3.  DEFAULTS UPON SENIOR SECURITIES



None.



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



None.



ITEM 5.  OTHER INFORMATION



None.



ITEM 6.  EXHIBITS



EXHIBITS.



31.1          Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2          Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.1          Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32.2          Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---







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.



DATED:  May 15, 2007



CHINA AGRITECH, INC.By: /s/ Lijun PengLijun PengChief Financial Officer(On behalf of the Registrant and
      asPrincipal Financial Officer)


---





EXHIBIT INDEX



Exhibit

Number

Description



31.1          Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2          Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.1          Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32.2          Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---