|   | WAKO                      LOGISTICS GROUP, INC.                                        |   |
|--------|----------------------------------------------------------------------------------------|--------|
|   | (Exact                      Name of Small Business Issuer as Specified in Its Charter) |   |

|   |                                                                                      |   |                                          |         |
|--------|-------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------------|
|   |                                                                                      |   |                                          |         |
|   |  Delaware                                                                  |   | 20-0262555                                    |    |
|   | (State                        or Other Jurisdiction                        of   |   |  (I.R.S.                        Employer |         |
|   | Incorporation                        or                        Organization)    |   | Identification                        No.)    |         |

|   |                                                                                                              |   |
|--------|-------------------------------------------------------------------------------------------------------------------|--------|
|   |  200                          Howard Avenue, Suite 232, Des Plaines,                          Illinois 60018 |   |
|   | (Address                          of Principal Executive                          Offices)              |   |

|   | (847)                          294-1600                                                                   |   |
|--------|----------------------------------------------------------------------------------------------------------------|--------|
|   | (Issuer’s                          Telephone Number, Including Area                          Code)  |   |

----

**WAKO        LOGISTICS GROUP, INC. **

**FORM        10-QSB**

**QUARTER        ENDED SEPTEMBER 30, 2005 **

| Item                    Number in                |                                                                           |      |
|--------------------------------------------------|--------------------------------------------------------------------------------|-----------|
| Form                    10-QSB                   |                                                                           | Page      |
|                                             |                                                                           |      |
| PART                    I. FINANCIAL INFORMATION |
|                                             |                                                                           |      |
| Item                    1.                       | Financial                    statements                                        |  F-1 |
| Item                    2.                       | Management's                    Discussion and Analysis or Plan of Operation   | 1         |
| Item                    3.                       | Controls                    and Procedures                                     |  11  |
|                                             |                                                                           |      |
| PART                    II. OTHER INFORMATION    |
|                                             |                                                                           |      |
| Item                    1.                       | Legal                    Proceedings                                           |  11  |
| Item                    2.                       | Unregistered                    Sales of Equity Securities and Use of Proceeds |  11  |
| Item                    3.                       | Defaults                    Upon Senior Securities                             |  12  |
| Item                    4.                       | Submission                    of Matters to a Vote of Security Holders         |  12  |
| Item                    5.                       | Other                    Information                                           |  12  |
| Item                    6.                       | Exhibits                                                                       |  13  |
|                                             |                                                                           |      |
| Signatures                                  |                                                                           |      |

----

**PART        I. FINANCIAL INFORMATION**

**ITEM        1.** **FINANCIAL        STATEMENTS (UNAUDITED)**

**Wako          Logistics Group, Inc. **

**Condensed          Consolidated Statements of Operations**

----

*(Dollars          in thousands except share data and per share amounts)*

|                                                              |   |   |   | **3                    months period ended****September                    30,** |   | **9                    months period ended****September                    30,** |   |
|-------------------------------------------------------------------|--------|--------|--------|----------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|--------|
|                                                              |   |   |   | **2004**                                                                         |   | **2005**                                                                         |   | **2004** |   | **2005** |   |
|                                                              |   |   |   | *US$*                                                                            |   | *US$*                                                                            |   | *US$* |   | *US$* |   |
|                                                              |   |   |   | *(unaudited)*                                                                    |   | *(unaudited)*                                                                    |   | *(unaudited)* |   | *(unaudited)* |   |
| **Revenues:**                                                     |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |
| Freight                                                           |   |   |   |                                                                             |   | 5,398                                                                            |   |   | 11,163 |   |   | 14,017 |   |   | 25,335 |   |
| Agency                    services                                |   |   |   |                                                                             |   | 124                                                                              |   |   | 382 |   |   | 345 |   |   | 625 |   |
| Other                    services                            |   |   |   |                                                                             |   |  407                                                                        |   |   |  1,538 |   |   |  1,324 |   |   |  3,381 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Total                    revenues**                             |   |   |   |                                                                             |   | 5,929                                                                            |   |   | 13,083 |   |   | 15,686 |   |   | 29,341 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Operating                    expenses**                         |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| Cost                    of forwarding                             |   |   |   |                                                                             |   | (5,044                                                                           | )      |   | (10,656 | ) |   | (13,235 | ) |   | (24,042 | ) |
| Selling                    and administrative expenses            |   |   |   |                                                                             |   | (739                                                                             | )      |   | (1,913 | ) |   | (2,097 | ) |   | (4,509 | ) |
| Depreciation                    and amortization                  |   |   |   |                                                                             |   | (13                                                                              | )      |   | (59 | ) |   | (36 | ) |   | (133 | ) |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| Total                    operating expenses                       |   |   |   |                                                                             |   | (5,796                                                                           | )      |   | (12,628 | ) |   | (15,368 | ) |   | (28,684 | ) |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Income                    from operations**                     |   |   |   |                                                                             |   | 133                                                                              |   |   | 455 |   |   | 318 |   |   | 657 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Other                    income (expense)**                     |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| Interest                    income                                |   |   |   |                                                                             |   | 1                                                                                |   |   | 2 |   |   | 3 |   |   | 8 |   |
| Interest                    expense                               |   |   |   |                                                                             |   | (1                                                                               | )      |   | (26 | ) |   | (1 | ) |   | (52 | ) |
| Other                    income, net                              |   |   |   |                                                                             |   | 6                                                                                |   |   | 35 |   |   | 37 |   |   | 74 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Income                    before income taxes**                 |   |   |   |                                                                             |   | 139                                                                              |   |   | 466 |   |   | 357 |   |   | 687 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| Provision                    for income taxes                     |   |   |   |                                                                             |   | (39                                                                              | )      |   | (142 | ) |   | (89 | ) |   | (222 | ) |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Income                    from operations**                     |   |   |   |                                                                             |   | 100                                                                              |   |   | 324 |   |   | 268 |   |   | 465 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Basic                    earnings per share**                   |   |   |   |                                                                             |   | —                                                                          |   |   | 0.02 |   |   | 0.01 |   |   | 0.02 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Diluted                    earnings per share**                 |   |   |   |                                                                             |   | —                                                                          |   |   | 0.01 |   |   | 0.01 |   |   | 0.02 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| **Weighted                    average common shares outstanding** |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| Basic                                                             |   |   |   |                                                                             |   | 20,441,000                                                                       |   |   | 20,641,000 |   |   | 20,441,000 |   |   | 20,575,066 |   |
|                                                              |   |   |   |                                                                             |   |                                                                             |   |   |   |   |   |   |   |   |   |   |
| Diluted                                                           |   |   |   |                                                                             |   | 20,441,000                                                                       |   |   | 22,204,000 |   |   | 20,441,000 |   |   | 21,840,417 |   |

----

**Wako          Logistics Group, Inc.**

**Condensed          Consolidated Balance Sheets**

----

*(Dollars          in thousands except share data and per share amounts)*

|                                                               |   |   |   | **At****December                    31,****2004** |   | **At****September                    30,****2005** |   |
|--------------------------------------------------------------------|--------|--------|--------|---------------------------------------------------|--------|----------------------------------------------------|--------|
|                                                               |   | *Note* |   | *US$*                                             |   | *US$*                                              |   |
|                                                               |   |   |   |                                              |   | *(unaudited)*                                      |   |
| **ASSETS**                                                         |   |   |   |                                              |   |                                               |   |
|                                                               |   |   |   |                                              |   |                                               |   |
| **Current                    assets**                              |   |   |   |                                              |   |                                               |   |
| Cash                    and cash equivalents                       |   |   |   |                                              |   | 306                                                |   |   | 456 |   |
| Restricted                    cash                                 |   |   |   |                                              |   | 345                                                |   |   | 409 |   |
| Certificate                    of deposit                          |   |   |   |                                              |   | 115                                                |   |   | 115 |   |
| Trade                    receivables, net                          |   |   |   |                                              |   | 3,690                                              |   |   | 7,401 |   |
| Deposits,                    prepayments and other current assets  |   |   |   |                                              |   | 155                                                |   |   | 280 |   |
| Due                    from related parties                        |   |   | *4*    |                                              |   | 369                                                |   |   | 46 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| **Total                    current assets**                        |   |   |   |                                              |   | 4,980                                              |   |   | 8,707 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| Goodwill                                                           |   |   | *5*    |                                              |   | —                                            |   |   | 766 |   |
| Intangible                    assets                               |   |   | *5*    |                                              |   | —                                            |   |   | 461 |   |
| Property,                    plant and equipment, net              |   |   |   |                                              |   | 166                                                |   |   | 337 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| **Total                    assets**                                |   |   |   |                                              |   | 5,146                                              |   |   | 10,271 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| **LIABILITIES                    AND STOCKHOLDERS' EQUITY**        |   |   |   |                                              |   |                                               |   |   |   |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| **Current                    liabilities**                         |   |   |   |                                              |   |                                               |   |   |   |   |
| Bank                    overdrafts                                 |   |   |   |                                              |   | 139                                                |   |   | 375 |   |
| Trade                    payables                                  |   |   |   |                                              |   | 2,342                                              |   |   | 4,573 |   |
| Accrued                    charges and other creditors             |   |   |   |                                              |   | 219                                                |   |   | 639 |   |
| Bank                    loan - maturing within one year            |   |   | *2*    |                                              |   | 241                                                |   |   | 793 |   |
| Current                    portion of capital lease obligation     |   |   |   |                                              |   | —                                            |   |   | 4 |   |
| Due                    to related parties                          |   |   | *4*    |                                              |   | 53                                                 |   |   | — |   |
| Due                    to directors                                |   |   | *4*    |                                              |   | 733                                                |   |   | 418 |   |
| Income                    tax payable                              |   |   |   |                                              |   | 124                                                |   |   | 317 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| Total                    current liabilities                       |   |   |   |                                              |   | 3,851                                              |   |   | 7,119 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| **Non-current                    liabilities**                     |   |   |   |                                              |   |                                               |   |   |   |   |
| Bank                    loan - maturing after one year             |   |   | *2*    |                                              |   | 187                                                |   |   | — |   |
| Non-current                    portion of capital lease obligation |   |   |   |                                              |   | —                                            |   |   | 9 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
|                                                               |   |   |   |                                              |   | 187                                                |   |   | 9 |   |
|                                                               |   |   |   |                                              |   |                                               |   |   |   |   |
| Commitments                    and contingencies                   |   |   | *3*    |                                              |   | —                                            |   |   | — |   |

----

**Wako          Logistics Group, Inc.**

**Condensed          Consolidated Balance Sheets**

----

*(Dollars          in thousands except share data and per share amounts)*

|                                                                                                                                                                                                                      |   |   |      | **At****December                      31,****2004** |   | **At****September                      30,****2005** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|-----------------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                                                                                                                                                                      |   | *Note* |      | *US$*                                               |   | *US$*                                                |   |
|                                                                                                                                                                                                                      |   |   |      |                                                |   | *(unaudited)*                                        |   |
|                                                                                                                                                                                                                      |   |   |      |                                                |   |                                                 |   |
| **Stockholders'                      equity**                                                                                                                                                                             |   |   |      |                                                |   |                                                 |   |
| Preferred                      stock US$0.001 par value, 5 million shares authorized and none                      issued                                                                                                 |   |   |      | —                                             |   | —                                              |   |
| Convertible                      and redeemable preferred stock subscribed (2.0 million shares)                      (Liquidation value $1.5 million)                                                                     |   |   | *6*       |                                                |   | —                                              |   |   | 1,500 |   |
| Common                      stock US$0.001 par value, 55 million shares authorized, 20,641,000                      *(At                      12-31-2004: 20,441,000)*                      shares issued and outstanding |   |   |      |                                                |   | 20                                                   |   |   | 20 |   |
| Common                      stock subscribed (724,780 shares)                                                                                                                                                             |   |   | *6*  |                                                |   |                                                 |   |   | 725 |   |
| Additional                      paid-in capital                                                                                                                                                                           |   |   |      |                                                |   | 456                                                  |   |   | 529 |   |
| Accumulated                      other comprehensive income                                                                                                                                                               |   |   |      |                                                |   | 3                                                    |   |   | 9 |   |
| Common                      stock subscribed receivable                                                                                                                                                                   |   |   |      |                                                |   | —                                              |   |   | (725 | ) |
| Employee                      benefit compensation                                                                                                                                                                        |   |   |      |                                                |   | —                                              |   |   | (9 | ) |
| Retained                      earnings                                                                                                                                                                                    |   |   |      |                                                |   | 629                                                  |   |   | 1,094 |   |
|                                                                                                                                                                                                                      |   |   |      |                                                |   |                                                 |   |   |   |   |
| **Total                      stockholders' equity**                                                                                                                                                                       |   |   |      |                                                |   | 1,108                                                |   |   | 3,143 |   |
|                                                                                                                                                                                                                      |   |   |      |                                                |   |                                                 |   |   |   |   |
| **Total                      liabilities and stockholders' equity**                                                                                                                                                       |   |   |      |                                                |   | 5,146                                                |   |   | 10,271 |   |

----

**Wako              Logistics Group, Inc.  **

**Condensed              Consolidated Statements of Cash Flows**

----

*(Dollars              in thousands except share data and per share amounts)*

|                                                                                                           |   | **9                        months period ended****September                        30,** |    |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|---------|
|                                                                                                           |   | **2004**                                                                                 |    | **2005** |   |
|                                                                                                           |   | *US$*                                                                                    |    | *US$* |   |
|                                                                                                           |   | *(unaudited)*                                                                            |    | *(unaudited)* |   |
| **Cash                        flows from****operating                        activities:**                     |   |                                                                                     |    |   |   |
| Net                        income                                                                              |   |                                                                                     | 268     |   |   | 465 |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Adjustments                        to reconcile net income to net cash provided by****operating activities** |   |                                                                                     |    |   |   |   |   |
| Depreciation                                                                                                   |   |                                                                                     | 36      |   |   | 82 |   |
| Stock                        based compensation                                                                |   |                                                                                     | — |   |   | 7 |   |
| Bad                        debts written off                                                                   |   |                                                                                     | 16      |   |   | — |   |
| Amortization                        of intangible asset                                                        |   |                                                                                     | — |   |   | 51 |   |
| Other                        non-cash items                                                                    |   |                                                                                     | 61      |   |   | 6 |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Changes                        in working capital:**                                                         |   |                                                                                     |    |   |   |   |   |
| Trade                        receivables                                                                       |   |                                                                                     | (941    | ) |   | (2,472 | ) |
| Deposit                        and prepayments                                                                 |   |                                                                                     | 23      |   |   | (72 | ) |
| Due                        from related parties                                                                |   |                                                                                     | 956     |   |   | 195 |   |
| Trade                        payables                                                                          |   |                                                                                     | 649     |   |   | 1,150 |   |
| Accrued                        charges and other creditors                                                     |   |                                                                                     | 41      |   |   | 198 |   |
| Due                        to related parties                                                                  |   |                                                                                     | (49     | ) |   | (53 | ) |
| Income                        tax payable                                                                      |   |                                                                                     | 89      |   |   | 194 |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Net                        cash provided by operating activities**                                           |   |                                                                                     | 1,149   |   |   | (249 | ) |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Cash                        flows from investing activities:**                                               |   |                                                                                     |    |   |   |   |   |
| Acquisitions                        of property, plant and equipment                                           |   |                                                                                     | (124    | ) |   | (227 | ) |
| Acquisition                        of subsidiary                                                               |   |                                                                                     | — |   |   | (1,000 | ) |
| Due                        from related parties                                                                |   |                                                                                     | (11     | ) |   | 128 |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
|                                                                                                           |   |                                                                                     | (135    | ) |   | (1,099 | ) |
| **Cash                        flows from financing activities:**                                               |   |                                                                                     |    |   |   |   |   |
| Restricted                        cash                                                                         |   |                                                                                     | (193    | ) |   | (64 | ) |
| Bank                        overdrafts                                                                         |   |                                                                                     | (198    | ) |   | 236 |   |
| New                        bank loan                                                                           |   |                                                                                     | 67      |   |   | 325 |   |
| Bank                        loan repaid                                                                        |   |                                                                                     | (34     | ) |   | (185 | ) |
| Dividend                        paid                                                                           |   |                                                                                     | (538    | ) |   | — |   |
| Due                        to directors                                                                        |   |                                                                                     | (59     | ) |   | 186 |   |
| Loan                        from a director                                                                    |   |                                                                                     | — |   |   | 1,000 |   |
| Issue                        of new shares                                                                     |   |                                                                                     | 159     |   |   | — |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Net                        cash****(used                        in) provided by financing activities**       |   |                                                                                     | (796    | ) |   | 1,498 |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Net                        increase in cash and cash equivalents**                                           |   |                                                                                     | 218     |   |   | 150 |   |
| **Cash                        and cash equivalents at beginning of period**                                    |   |                                                                                     | 70      |   |   | 306 |   |
|                                                                                                           |   |                                                                                     |    |   |   |   |   |
| **Cash                        and cash equivalents at end of period**                                          |   |                                                                                     | 288     |   |   | 456 |   |

**S**
**UPPLEMENTAL            DISCLOSURES OF CASH FLOW INFORMATION**

| **Cash                      paid for:**                                                                                      |   |   |    |
|------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|
|                                                                                                                         |   |   |    |   |   |
| Interest                      expense                                                                                        |   |   | 1       |   |   | 52 |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Income                      tax                                                                                              |   |   | — |   |   | 29 |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Preferred                      stock subscribed                                                                              |   |   | — |   |   | 1,500 |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Common                      stock subscribed                                                                                 |   |   | — |   |   | 725 |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Non-cash                      transaction:                                                                                   |   |   |    |   |   |   |   |
|                                                                                                                         |   |   |    |   |   |   |   |
| Conversion                      of director’s loan and Note to preferred stock subscribed                      $1,500. |   |   |    |   |   |   |   |

----

**Wako              Logistics Group, Inc.  **

**Notes              to the Consolidated Financial Statements**

----

*(Dollars              in thousands except share data and per share              amounts)*

| **1.** | **BASIS                    OF PRESENTATION** |
|--------|----------------------------------------------|

|   | Wako                          Logistics Group, Inc.’s (“Wako”, the “Company” or the “Group”)                          consolidated financial statements for the three months                          and nine months                          ended September 30, 2005 and 2004, have been prepared by                          the Company,                          without audit. Following the change of the Company’s financial year end                          date from April 30 to December 31, these consolidated financial                          statements, including the corresponding comparative figures,                          are prepared                          based on the newly adopted financial year                          end. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Certain                      information and footnote disclosures normally included in financial                      statements prepared in accordance with accounting principles                      generally                      accepted in the United States of America have been condensed                      or omitted                      pursuant to such rules and regulations. However, the Company                      believes that                      the disclosures herein are adequate to make the information                      presented not                      misleading. These consolidated financial statements should                      be read in                      conjunction with the consolidated financial statements and                      the notes                      thereto included in the Company’s audited annual financial statements for                      the eight months ended December 31,                      2004. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                      preparation of financial statements in conformity with accounting                      principles generally accepted in the United States of America                      requires                      management to make estimates that affect the reported amounts                      of assets,                      liabilities, revenues and expenses and the disclosure of contingent                      assets                      and liabilities. Actual results could differ from these                      estimates. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                      the opinion of management, all adjustments (which include only                      normal                      recurring adjustments) necessary to present fairly the financial                      position,                      results of operations for the three and nine months ended September                      30,                      2005 and 2004 and cash flows for the nine months ended September                      30, 2005                      and 2004, have been made. The results of operations for the                      nine months                      ended September 30, 2005 and 2004 are not necessarily indicative                      of the                      operating results for the full                      year. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **2.** | **BANKING                      FACILITIES** |
|--------|---------------------------------------------|

|   | Wako                        has obtained bank facilities from creditworthy commercial                        banks in the                        United States and in Hong Kong as                        follows: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                                                                                                                           |   |   |   | **At****December                      31,****2004** |   | **At****September                      30,****2005** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                           |   |   |   | *US$*                                               |   | *US$*                                                |   |
|                                                                                                                                                                                                                                                           |   |   |   |                                                |   | *(unaudited)*                                        |   |
| **                                Facilities granted**                                                                                                                                                  |   |   |   |                                                |   |                                                 |   |
|                             Committed line - bank guarantee                                                                                                                                                                      |   |   |   |                                                |   | 446                                                  |   |   | 510 |   |
|                                      -                      bank loan |   |   |   |                                                |   | 516                                                  |   |   | 1,199 |   |
|                                                                                                                                                                                                                                                           |   |   |   |                                                |   |                                                 |   |   |   |   |
|       Total                      committed bank facilities                                                                                                                                                                       |   |   |   |                                                |   | 962                                                  |   |   | 1,709 |   |

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **2.** | **BANKING                      FACILITIES (CONTINUED)** |
|--------|---------------------------------------------------------|

|                                                                                                 |   |   |   | **At****December                      31,****2004** |   | **At****September                      30,****2005** |   |
|------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                                                 |   |   |   | *US$*                                               |   | *(unaudited)*                                        |   |
|                                                                                                 |   |   |   |                                                |   | *US$*                                                |   |
| **                                Utilized**  |   |   |   |                                                |   |                                                 |   |
|                             Committed line - bank guarantee            |   |   |   |                                                |   | 446                                                  |   |   | 510 |   |
|                         - bank loan                                                        |   |   |   |                                                |   | 428                                                  |   |   | 793 |   |
|                                                                                                 |   |   |   |                                                |   |                                                 |   |   |   |   |
|                            Total bank facilities utilized                   |   |   |   |                                                |   | 874                                                  |   |   | 1,303 |   |

|   | The                      loan facility amounts are agreed by the banks and Wako from                      time to time.                      The bank guarantees are fully cash-collateralized. Of the total                      loan                      facility of $1,199, $449 is unsecured and repayable within                      two years by                      monthly installments. The remaining loan facility of $750 is                      secured by                      substantially all of the assets of Kay O’Neill, a Group subsidiary and a                      personal guarantee provided by an employee of the Group. As                      of September                      30, 2005, these bank loans carried interest rates of 5.75%                      to 6.75% per                      annum. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **3.** | **COMMITMENTS                      AND CONTINGENCIES** |
|--------|--------------------------------------------------------|

|   | ***Commitments                      under operating                      leases*** |
|--------|------------------------------------------------------------------------------------|

|   | Wako                      rents office space, directors’ quarters and certain office equipment under                      non-cancelable operating leases. The following table summarizes                      these                      approximate future minimum lease payments as of September 30,                      2005: |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                    |   | **At****December                      31,****2004** |   | **At****September                      30,****2005** |   |
|---------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|--------|------------------------------------------------------|--------|
|                                                                                                    |   | *US$*                                               |   | *US$*                                                |   |
|                                                                                                    |   |                                                |   | *(unaudited)*                                        |   |
|                                                                                                    |   |                                                |   |                                                 |   |
|                                 Within one year       |   |                                                | 242    |                                                 |   | 404 |   |
|                             Over one year but not exceeding two years     |   |                                                | 96     |                                                 |   | 254 |   |
|                             Over two years but not exceeding three years  |   |                                                | 13     |                                                 |   | 237 |   |
|                             Over three years but not exceeding four years |   |                                                | 13     |                                                 |   | 7 |   |
|                             Over four years but not exceeding five years  |   |                                                | 4      |                                                 |   | — |   |
|                                                                                                    |   |                                                |   |                                                 |   |   |   |
|                             Total operating lease commitments             |   |                                                | 368    |                                                 |   | 902 |   |

|   | Rent                      expense under operating leases for the 9 months ended September                      30, 2004                      and 2005 was US$176 and US$295                      respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako          Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **3.** | **COMMITMENTS                      AND CONTINGENCIES                      (CONTINUED)** |
|--------|-----------------------------------------------------------------------------------------|

|   | ***Cargo                          space commitments*** |
|--------|--------------------------------------------------------|

|   | The                          Group, in the course of its business, enters into written                          agreements with                          various carriers pursuant to which the Group is committed                          to utilize a                          minimum amount of cargo space each year. As of September                          30, 2005, the                          cost for the minimum amount of such cargo space to be utilized                          in                          the coming 12 months is                          Nil. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ***Contingencies                          – outstanding                          claims*** |
|--------|--------------------------------------------------------------------------------------------------|

|   | Wako                          is subject to claims that arise primarily in the ordinary                          course of                          business. In general, such claims are covered by insurance                          policies issued                          for the Group’s                          businesses. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | As                      of September 30, 2005, the aggregate outstanding amount of                      claims was                      US$78. Management believes that the disposition or ultimate                      resolution of                      such claims will not have a material adverse effect on the                      financial                      position of the Group. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **4.** | **RELATED                      PARTY TRANSACTIONS** |
|--------|-----------------------------------------------------|

| **Name                      and relationship of related parties**                   |   |                                                                                                          |
|-------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|
|                                                                                |   |                                                                                                          |
| Name                                                                                |   | Relationship                      to Wako                                                                     |
|                                                                                |   |                                                                                                          |
|  Christopher                      Wood (“CW”)                      |   |  Shareholder,                      Chief Executive Officer and sole director of Wako                     |
|  Yip                      King Lin, Paul (“PY”)                    |   |  Director                      of the Group’s subsidiaries                                         |
|  Wako                      Express (China) Company Limited (“WEC”) |   |  Common                      shareholders and directors                                                  |
|  Asean                      Cargo Services Pty Ltd (“ACSP”)        |   |  CW                      was a shareholder and director of ACSP until June 25,                      2004 |
|  Asean                      Logistics Inc (“ALI”)                  |   |  PY                      was a shareholder of ALI until January 3, 2005                                  |
|  Wako                      Logistic (Thailand) Co. Ltd (“WLT”)     |   |  CW                      is a shareholder and director of WLT                                            |
|  Mountland                      Development Limited (“MDL”)        |   |  CW                      is a shareholder and director of MDL                                            |
|  Join                      Wing Properties Limited (“JWP”)         |   |  CW                      is a shareholder and director of JWP                                            |
|  Yadley                      Hong Kong Limited (“YHKL”)            |   |  PY                      is a shareholder and director of                      YHKL                      |

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **4.** | **RELATED                        PARTY TRANSACTIONS                        (CONTINUED)** |
|--------|------------------------------------------------------------------------------------------|

| **Details                      of related parties** |
|-----------------------------------------------------|
|                                                |   |   |   |   |   |   |
| Name                                                |   | Principal                      activities |   | Ownership                      (as of September 30, 2005) |
|                                                |   |   |   | *Name                      of owner* |   | *%                      held* |
|                                                |   |   |   |   |   |   |
| WEC                                                 |   | Provision                      of sea freight and air freight forwarding services in the PRC                      # |   | CWPY |   | 50%50% |
|                                                |   |   |   |   |   |   |
| ACSP                                                |   | Provision                      of sea freight and air freight forwarding services in Australia                      # |   | CW                      (up to June 25, 2004)Others |   | 40%60% |
|                                                |   |   |   |   |   |   |
| ALI                                                 |   | Provision                      of sea freight and air freight forwarding services in the United                      States                      # |   | PY                      (up to January 3, 2005)Others |   | 35%65% |
|                                                |   |   |   |   |   |   |
| WLT                                                 |   | Provision                      of sea freight and air freight forwarding services in Thailand                      # |   | CWOthers |   | 50%50% |
|                                                |   |   |   |   |   |   |
| MDL                                                 |   | Property                      holding for letting to the Group until February 2004 |   | CW |   | 100% |
|                                                |   |   |   |   |   |   |
| JWP                                                 |   | Property                      holding for letting to the Group |   | CW |   | 100% |
|                                                |   |   |   |   |   |   |
| YHKL                                                |   | Property                      holding for letting to the Group |   | PY                      and spouse |   | 100% |

|  | #: | In                          the normal course of business, Wako enters into agency                          agreements with                          various overseas agents so that both Wako and these overseas                          agents can                          jointly handle shipments of cargo in both the port of loading                          and the port                          of destination. |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | Under                      these agency agreements, both Wako and the overseas agents                      are obliged to                      perform their respective services at their own places of business                      and, in                      return, earn their respective service fees from the other party                      and either                      the shipper or the consignee. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | In                      addition to the above, under the agency agreements, sometimes                      either Wako                      or the overseas agent is obliged to act as “collection agent” to collect                      the freight revenue from customers (either the shipper or the                      consignee).                      Since the decision as to who has to pay the freight cost is                      solely                      determined by either the shipper or the consignee, both Wako                      and the                      overseas agent only act in accordance with the customers’ instructions in                      the collection process. In case the collecting party is not                      the party who                      pays the freight cost to the carrier, the collecting party                      has to                      reimburse the other party to enable it to settle the freight                      cost. |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   | In                      both cases, either Wako or the overseas agent has to submit                      an invoice to                      the other party for an amount attributable that party. The                      invoice amounts                      include the services fees earned and may also include the freight                      cost                      collected by the other party. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | During                          the periods covered by these unaudited consolidated financial                          statements,                          certain overseas agents are related parties as mentioned                          above. For the                          purposes of identifying the related party transactions                          for disclosure in                          these consolidated financial statements, only the handling                          fees earned by                          Wako from the related party overseas agents and the handling                          fees paid by                          Wako to the related party overseas agents are disclosed                          as related party                          transactions |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **4.** | **RELATED                      PARTY TRANSACTIONS                      (CONTINUED)** |
|--------|--------------------------------------------------------------------------------------|

|   | The                      following is a summary of the amounts included in the accompanying                      balance                      sheets: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | **At****December                      31,****2004** |   | **At****September                      30,****2005** |   |
|--------------------------------------------------------------|--------|-----------------------------------------------------|--------|------------------------------------------------------|--------|
|                                                         |   | *US$*                                               |   | *(unaudited)*                                        |   |
|                                                         |   |                                                |   | *US$*                                                |   |
| **Due                      from related parties (Note (i))** |   |                                                |   |                                                 |   |
| WEC                                                          |   |                                                | 258    |                                                 |   | 45 |   |
| ALI                                                          |   |                                                | 97     |                                                 |   | — |   |
| WLT                                                          |   |                                                | 14     |                                                 |   | 1 |   |
|                                                         |   |                                                |   |                                                 |   |   |   |
|                                                         |   |                                                | 369    |                                                 |   | 46 |   |
|                                                         |   |                                                |   |                                                 |   |   |   |
| **Due                      to related parties (Note (i))**   |   |                                                |   |                                                 |   |   |   |
| WEC                                                          |   |                                                | 50     |                                                 |   | — |   |
| WLT                                                          |   |                                                | 3      |                                                 |   | — |   |
|                                                         |   |                                                |   |                                                 |   |   |   |
|                                                         |   |                                                | 53     |                                                 |   | — |   |
|                                                         |   |                                                |   |                                                 |   |   |   |
| **Due                      to directors**                    |   |                                                |   |                                                 |   |   |   |
| CW                                                           |   |                                                | 733    |                                                 |   | 418 |   |

|   | Notes: |
|--------|--------|

|  | (i) | The                      amounts due from / to related parties and director(s) are unsecured,                      interest-free and repayable on                      demand. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **4.** | **RELATED                      PARTY TRANSACTIONS                      (CONTINUED)** |
|--------|--------------------------------------------------------------------------------------|

|   | **Summary                      of transactions with related entities                      (unaudited):** |
|--------|----------------------------------------------------------------------------------------------------------|

|                                                     |   | **WEC** |    | **ACSP** |   | **ALI** |   | **WLT** |    | **Total** |   |
|----------------------------------------------------------|--------|---------|---------|----------|--------|---------|--------|---------|---------|-----------|--------|
|                                                     |   | *US$*   |    | *US$*    |   | *US$*   |   | *US$*   |    | *US$*     |   |
|                                                     |   |    |    |     |   |    |   |    |    |      |   |
| Balance                      at January 1, 2004          |   |    | 700     |     |   | 224     |   |    | 213     |      |   | 25 |   |   | 1,162 |   |
|                                                     |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Trade                      transactions                  |   |    | 274     |     |   | 576     |   |    | 233     |      |   | 30 |   |   | 1,113 |   |
| Expenses                      paid                       |   |    | 332     |     |   | 68      |   |    | 9       |      |   | — |   |   | 409 |   |
| Net                      settlements                     |   |    | (1,140  | )        |   | (432    | )      |    | (373    | )         |   | (38 | ) |   | (1,983 | ) |
| Reclassified                      as non-related parties |   |    | — |     |   | (436    | )      |    | — |      |   | — |   |   | (436 | ) |
|                                                     |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Balance                      at September 30, 2004       |   |    | 166     |     |   | — |   |    | 82      |      |   | 17 |   |   | 265 |   |
|                                                     |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Balance                      at January 1, 2005          |   |    | 208     |     |   | — |   |    | 97      |      |   | 11 |   |   | 316 |   |
|                                                     |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Trade                      transactions                  |   |    | 202     |     |   | — |   |    | — |      |   | 10 |   |   | 212 |   |
| Expenses                      paid                       |   |    | 128     |     |   | — |   |    | — |      |   | — |   |   | 128 |   |
| Net                      settlements                     |   |    | (493    | )        |   | — |   |    | — |      |   | (20 | ) |   | (513 | ) |
| Reclassified                      as non-related parties |   |    | — |     |   | — |   |    | (97     | )         |   | — |   |   | (97 | ) |
|                                                     |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Balance                      at September 30, 2005       |   |    | 45      |     |   | — |   |    | — |      |   | 1 |   |   | 46 |   |

|   | Notes: |
|--------|--------|

| ·   | Trade                      transactions include revenues earned by the Group and amounts                      collected on                      behalf of the Group (or freight costs incurred by the Group                      and amounts                      collected on behalf of the agents) in the ordinary course of                      business. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Expenses                      include amounts incurred by the Group on the agents’ behalf (or incurred                      by the agents on the Group’s                      behalf). |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                      settlements are the amounts which the Group paid (or                      received). |
|--------------------|---------------------------------------------------------------------------------------------------------------|

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **4.** | **RELATED                      PARTY TRANSACTIONS                      (CONTINUED)** |
|--------|--------------------------------------------------------------------------------------|

|   | **Additional                      details of transactions:** |
|--------|--------------------------------------------------------------|

|                                                                          |   |   |   |                                                                                |   |                                                                                 |   |
|-------------------------------------------------------------------------------|--------|--------|--------|-------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|
|                                                                          |   |   |   | **3                      months period ended****September                      30** |   | **9                      months period ended****September                      30,** |   |
|                                                                          |   |   |   | **2004**                                                                            |   | **2005**                                                                             |   | **2004** |   | **2005** |   |
|                                                                          |   |   |   | *(unaudited)*                                                                       |   | *(unaudited)*                                                                        |   | *(unaudited)* |   | *(unaudited)* |   |
|                                                                          |   |   |   | *US$*                                                                               |   | *US$*                                                                                |   | *US$* |   | *US$* |   |
| **Handling                    income                    received/receivable** |   |   |   |                                                                                |   |                                                                                 |   |   |   |   |   |
| ACSP                                                                     |   |   |   | —                                                                             |   | —                                                                              |   | 8 |   | — |   |
| ALI                                                                           |   |   |   | 3                                                                                   |   | —                                                                              |   | 8 |   | — |   |
| WEC                                                                           |   |   |   |                                                                                |   | 26                                                                                   |   |   | — |   |   | 36 |   |   | 5 |   |
| WLT                                                                           |   |   |   |                                                                                |   | —                                                                              |   |   | — |   |   | 1 |   |   | 1 |   |
|                                                                          |   |   |   |                                                                                |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |
| **Handling                      fee paid/payable**                            |   |   |   |                                                                                |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |
| ACSP                                                                          |   |   |   |                                                                                |   | —                                                                              |   |   | — |   |   | 83 |   |   | — |   |
| ALI                                                                           |   |   |   |                                                                                |   | 10                                                                                   |   |   | — |   |   | 63 |   |   | — |   |
| WEC                                                                           |   |   |   |                                                                                |   | 6                                                                                    |   |   | — |   |   | 35 |   |   | 16 |   |
| WLT                                                                           |   |   |   |                                                                                |   | —                                                                              |   |   | — |   |   | 1 |   |   | — |   |
|                                                                          |   |   |   |                                                                                |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |
| **Rental                      paid/payable**                                  |   |   |   |                                                                                |   |                                                                                 |   |   |   |   |   |   |   |   |   |   |
| MDL                                                                           |   |   |   |                                                                                |   | —                                                                              |   |   | — |   |   | 12 |   |   | — |   |
| JWP                                                                           |   |   |   |                                                                                |   | 11                                                                                   |   |   | 27 |   |   | 33 |   |   | 70 |   |
| YHKL                                                                          |   |   |   |                                                                                |   | 12                                                                                   |   |   | — |   |   | 35 |   |   | — |   |

|   | **Summary                      of transactions during the periods with directors /                      shareholders:** |
|--------|-------------------------------------------------------------------------------------------------------------------------|

|                                                          |   | **CW**        |   | **PY**        |   | **Total**     |   |
|---------------------------------------------------------------|--------|---------------|--------|---------------|--------|---------------|--------|
| Due                      (To)/From Director                   |   | *(unaudited)* |   | *(unaudited)* |   | *(unaudited)* |   |
|                                                          |   | *US$*         |   | *US$*         |   | *US$*         |   |
|                                                          |   |          |   |          |   |          |   |
| Balance                      at January 1, 2004               |   |          | (1,007 | )             |   | (87           | )      |   | (1,094 | ) |
| Dividends                      declared by subsidiaries       |   |          | (404   | )             |   | (135          | )      |   | (539 | ) |
| Expenses/repayments                                           |   |          | 651    |          |   | 222           |   |   | 873 |   |
|                                                          |   |          |   |          |   |          |   |   |   |   |
| Balance                      at September 30, 2004            |   |          | (760   | )             |   | —       |   |   | (760 | ) |
|                                                          |   |          |   |          |   |          |   |   |   |   |
| Balance                      at January 1, 2005               |   |          | (733   | )             |   | —       |   |   | (733 | ) |
| Advances                                                      |   |          | (1,261 | )             |   | —       |   |   | (1,261 | ) |
| Conversion                      to preferred stock subscribed |   |          | 1,500  |          |   | —       |   |   | 1,500 |   |
| Expense/repayments                                            |   |          | 76     |          |   | —       |   |   | 76 |   |
|                                                          |   |          |   |          |   |          |   |   |   |   |
| Balance                      at September 30, 2005            |   |          | (418   | )             |   | —       |   |   | (418 | ) |

|   | Notes: |
|--------|--------|

| ·   | Dividends                      include the amounts declared as dividends and which are                      payable. |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | Expenses/Repayments                      include amounts that were either paid directly to or for the                      benefit of CW                      or PY |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **5.** | **ACQUISITION                      OF SUBSIDIARY** |
|--------|----------------------------------------------------|

|   | On                      April 1, 2005, Wako completed the acquisition of 100% of the                      voting                      interests in Kay O'Neill (USA) LLC ("KON"), an Illinois limited                      liability                      company based in Chicago, Illinois that provides logistics                      and freight                      forwarding services. Management considers that the acquisition                      of KON will                      strengthen the position of the Group in the U.S. freight forwarding                      and                      international logistics markets. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | KON’s                      operating results from July 1, 2005 to September 30, 2005 are                      included in                      the Group’s consolidated financial statements for the three months ended                      September 30, 2005. Also, KON’s operating results from April 1, 2005 to                      September 30, 2005 are included in the Group’s consolidated financial                      statements for the nine months ended September 30, 2005 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                      total purchase price consists of a cash payment of $1,000 and                      professional                      fees of $50. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                      cash payment of $1,000 was advanced by Wako’s Chief Executive Officer, who                      is also a director and shareholder of the Group, in exchange                      for a                      promissory note with a face amount of $1.0 million (the “Promissory Note”)                      issued on April 1, 2005. The Promissory Note matures on March                      31, 2008 and                      carries interest at the rate of 6% per annum compounded on                      a quarterly                      basis. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | At                      any time prior to the maturity date, the holder of the Promissory                      Note                      may, at his sole election, convert all or a portion of the                      principal                      amount into shares of common stock of Wako, at a price per                      share of common                      stock equal to the lesser of the fair market value of the common                      stock or                      $0.5 per share. (See Note 6 to the financial                      statements) |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | For                        the purpose of the calculating fully-diluted shares, the                        full amount of                        the Promissory Note is assumed to have been converted to                        common stock at a                        price of $0.5 per share, reflecting an increase in common                        stock of                        2,000,000 shares. A professional fee of $50 incurred for                        assistance in                        completing the acquisition was settled by issuing 200,000                        restricted                        shares of the Company’s common                        stock. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                      acquisition of KON was recorded using the purchase method of                      accounting in                      accordance with SFAS No. 141. The purchase price was allocated                      to the                      assets, liabilities, intangible assets and goodwill acquired,                      based on the                      fair value of these assets at the date of acquisition. At March                      31, 2005,                      the fair value of identifiable assets and liabilities of KON                      was                      approximately $284, which comprised                      tangible net liabilities of $228 and an intangible asset (representing                      customer relationships) of $512. Goodwill of approximately                      $766 is not                      being amortized, but is tested annually for impairment in accordance                      with                      SFAS No. 142. The customers list is being amortized over a                      period of five                      years. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako            Logistics Group, Inc. **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share amounts)*

| **5.** | **ACQUISITION                      OF SUBSIDIARY (CONTINUED)** |
|--------|----------------------------------------------------------------|

|   | Net                      assets acquired of: |
|--------|----------------------------------------------|

|                                                          |   |  *US$* |   |
|---------------------------------------------------------------|--------|-------------|--------|
|                                                          |   |        |   |
|  Property,                      plant and equipment, net |   |        | 26     |   |
| Intangible                      asset                         |   |        | 512    |   |
| Trade                      and other receivables              |   |        | 1,286  |   |
| Trade                      and other payables                 |   |        | (1,302 | ) |
| Capital                      lease obligation                 |   |        | (13    | ) |
| Bank                      loan                                |   |        | (225   | ) |
|                                                          |   |        |   |   |
|                                                          |   |        | 284    |   |
|                                                          |   |        |   |   |
| Cash                      consideration                       |   |        | 1,000  |   |
| Fees                      paid                                |   |        | 50     |   |
|                                                          |   |        |   |   |
| Total                      consideration                      |   |        | 1,050  |   |
|                                                          |   |        |   |   |
| Goodwill                      arising on acquisition          |   |        | 766    |   |

|   | The                      following unaudited pro forma information assumes the KON acquisition                      occurred as of the beginning of each period presented. The                      unaudited pro                      forma information is provided for informational purposes only.                      It is based                      on historical information and does not necessarily reflect                      the actual                      results that would have occurred nor is it necessarily indicative                      of                      future results of operations of                      Wako. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      |   |                                                                                 |   |                                                                                 |   |
|-----------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|
|                                                      |   | **3                      months period ended****September                      30,** |   | **9                      months period ended****September                      30,** |   |
|                                                      |   | **2004**                                                                             |   | **2005**                                                                             |   | **2004** |   | **2005** |   |
|                                                      |   | *(unaudited)*                                                                        |   | *(unaudited)*                                                                        |   | *(unaudited)* |   | *(unaudited)* |   |
|                                                      |   | *US$*                                                                                |   | *US$*                                                                                |   | *US$* |   | *US$* |   |
|                                                      |   |                                                                                 |   |                                                                                 |   |   |   |   |   |
| Revenue                                                   |   |                                                                                 | 7,332  |                                                                                 |   | 13,083 |   |   | 19,694 |   |   | 30,936 |   |
|                                                      |   |                                                                                 |   |                                                                                 |   |   |   |   |   |   |   |   |   |
| Net                      income after tax                 |   |                                                                                 | 145    |                                                                                 |   | 324 |   |   | 390 |   |   | 490 |   |
|                                                      |   |                                                                                 |   |                                                                                 |   |   |   |   |   |   |   |   |   |
| Net                      income per share of common stock |   |                                                                                 |   |                                                                                 |   |   |   |   |   |   |   |   |   |
| -                      Basic                              |   |                                                                                 | 0.01   |                                                                                 |   | 0.02 |   |   | 0.02 |   |   | 0.02 |   |
| -                      Diluted                            |   |                                                                                 | 0.01   |                                                                                 |   | 0.01 |   |   | 0.02 |   |   | 0.02 |   |

----

**Wako          Logistics Group, Inc.  **

**Notes          to the Consolidated Financial Statements**

----

*(Dollars          in thousands except share data and per share amounts)*

| **6.** | **STOCKHOLDERS’                    EQUITY** |
|--------|---------------------------------------------------|

|   | Issuances                    of Common Stock |
|--------|----------------------------------------------|

|   | During                    September 2005, the Company through a private transaction for                    the sale of                    shares of its common stock received subscriptions for 724,780                    shares of                    its common stock at a price of $1.00 per share. As of the end                    of September                    2005, the Company had received no payments for the shares of                    common stock                    subscribed. The 724,780 shares of common stock subscribed are                    reflected as                    common stock subscribed in the accompanying financial statements,                    because                    the shares had not been issued as of the balance sheet date and                    no                    proceeds had been received. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Subsequent                    to September 30, 2005, the Company through a private transaction                    for the                    sale of shares of its common stock received subscriptions for                    203,300                    shares of its common stock at a price of $1.00 per share. In                    total, the                    Company has received subscriptions for 928,080 shares of it common                    stock                    for gross proceeds of $928,080. As of the date of these financial                    statements, the Company had received the full proceeds of $928,080                    in                    payment for all of the subscribed shares. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In                    addition, the Company as part of the agreements and/or understandings                    with                    certain of its employees and a consultant is obligated to issue                    63,000                    shares of its common stock to such employees as compensation                    for services.                    None of the shares were issued as of September 30, 2005. The                    appropriate                    expense for these shares is recorded as compensation expense                    in the                    accompanying financial statements. The fair market value of the                    shares has                    been recorded as an addition to paid-in-capital as of September                    30, 2005,                    and the liability is recorded as an employee benefit in the shareholders’                    equity section of the accompanying financial statements. As compensation                    expense is amortized and recorded in each period, the employee                    benefit                    account is reduced by a like                    amount. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Issuances                    of Preferred Stock: |
|--------|--------------------------------------------------|

|   | In                    September 2005, the Company approved the designation of a new                    series of                    preferred stock, which consists of two million (2,000,000) shares                    of                    Preferred Stock designated as Series A Convertible Preferred                    Stock,                    par value $.001 (the “Series A Preferred Stock”). Effective as of                    September 30, 2005, the Company’s controlling shareholder (the “Holder”)                    subscribed to all of the Series A Preferred Stock in exchange                    for $1.5                    million in debt represented by a Promissory Note (the “Note”) in the face                    amount of $1.0 million and other debt of $500,000 owed to the                    Holder by                    the Company. At                    the option of the Holder, the Note was convertible into shares                    of Wako’s                    common stock at a price per share equal to the lesser of (i)                    the fair                    market value of the common stock, or (ii) $0.50. Thus, the minimum                    number                    of shares of common stock the Holder could have received on conversion                    of                    the Note would have been two million (2,000,000)                    shares. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                    Series A Preferred Stock has a stated value of $0.50 per share                    and has a                    liquidation and redemption value of $0.75 per share. The Series                    A                    Preferred Stock shall pay a 6% annual cumulative dividend, and                    for                    purposes of determining the amount of the 6% dividend, the Series                    A                    Preferred Stock shall be deemed to have a stated value of $0.75                    per                    share. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The                        Series A Preferred Stock may be redeemed solely by and in                        the sole                        discretion of the Company at any time or from time to time                        commencing on                        the date twenty four (24) months from the date of issuance                        of the Series A                        Preferred Stock, provided, at the time of redemption, the                        Company has at                        least three (3) Directors on its Board of Directors, of which                        the majority                        of such Directors are “independent” (as such term is defined in Section                        121(a) of the American Stock Exchange Company Guide).                        In                        addition, the Company has the right to require the Holder                        to convert all                        of the Series A Preferred Stock to common stock in the event                        of certain                        change of control                        transactions. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako          Logistics Group, Inc.  **

**Notes          to the Consolidated Financial Statements**

----

*(Dollars          in thousands except share data and per share amounts)*

| **6.** | **STOCKHOLDERS’                        EQUITY (CONTINUED)** |
|--------|-------------------------------------------------------------------|

|   | Because                    none of the shares of the Series A Preferred Stock was issued                    as of                    September 30, 2005, the Series A Preferred is reflected in the                    accompanying financial statements as Series A Preferred Stock                    subscribed. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**Wako            Logistics Group, Inc.   **

**Notes            to the Consolidated Financial Statements**

----

*(Dollars            in thousands except share data and per share            amounts)*

| **7.** | **SEGMENTS                    OF THE BUSINESS** |
|--------|-------------------------------------------------|

| **(a)** | **Business                    segments** |
|---------|------------------------------------------|

|   | The                    Group operates mainly in two business segments, providing (i)                    air                    forwarding and (ii) sea forwarding services. The                    following table summarizes the Group’s                    operations for the two segments. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **(i)** | **During                    the 3 months ended September 30, 2004 and 2005                    (unaudited)** |
|--|---------|-------------------------------------------------------------------------------------------------------------|

|                                                                            |   | **Air                    forwarding** |    | **Sea                    forwarding** |   | **Elimination** |   | **Total** |    |
|---------------------------------------------------------------------------------|--------|---------------------------------------|---------|---------------------------------------|--------|-----------------|--------|-----------|---------|
|                                                                            |   | **2004**                              |    | **2005**                              |   | **2004**        |   | **2005**  |    | **2004** |   | **2005** |   | **2004** |   | **2005** |   |
|                                                                            |   | *US$*                                 |    | *US$*                                 |   | *US$*           |   | *US$*     |    | *US$* |   | *US$* |   | *US$* |   | *US$* |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |
|                        Revenue                                   |   |                                  | 3,585   |                                  |   | 6,604           |   |      | 2,344   |   |   | 6,479 |   |   |   |   |   |   |   |   | 5,929 |   |   | 13,083 |   |
|                        Cost of forwarding                        |   |                                  | (3,227  | )                                     |   | (5,557          | )      |      | (1,817  | ) |   | (5,099 | ) |   |   |   |   |   |   |   | (5,044 | ) |   | (10,656 | ) |
|                        Depreciation                              |   |                                  | (4      | )                                     |   | (14             | )      |      | (9      | ) |   | (19 | ) |   |   |   |   |   |   |   | (13 | ) |   | (33 | ) |
|                        Interest income                           |   |                                  | 1       |                                  |   | 1               |   |      | — |   |   | 1 |   |   |   |   |   |   |   |   | 1 |   |   | 2 |   |
|                        Interest expenses                         |   |                                  | — |                                  |   | (5              | )      |      | (1      | ) |   | (6 | ) |   |   |   |   |   |   |   | (1 | ) |   | (11 | ) |
|                        Other segment income                      |   |                                  | 1       |                                  |   | 25              |   |      | 5       |   |   | 114 |   |   |   |   |   | (103 | ) |   | 6 |   |   | 36 |   |
|                        Other segment expenses                    |   |                                  | (270    | )                                     |   | (800            | )      |      | (458    | ) |   | (1,139 | ) |   |   |   |   | 103 |   |   | (728 | ) |   | (1,836 | ) |
|                        Taxation                                  |   |                                  | (15     | )                                     |   | (61             | )      |      | (24     | ) |   | (81 | ) |   |   |   |   |   |   |   | (39 | ) |   | (142 | ) |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |                                  | 71      |                                  |   | 193             |   |      | 40      |   |   | 250 |   |   |   |   |   |   |   |   | 111 |   |   | 443 |   |
|                        Corporate expenses                        |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | (11 | ) |   | (119 | ) |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Segment income before income taxes        |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 100 |   |   | 324 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Segment assets                            |   |                                  | 3,094   |                                  |   | 5,684           |   |      | 1,144   |   |   | 3,353 |   |   | (65 | ) |   |   |   |   | 4,173 |   |   | 9,037 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Unallocated assets                        |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 323 |   |   | 1,234 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Total assets                              |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 4,496 |   |   | 10,271 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Property, plant and equipment - additions |   |                                  | 8       |                                  |   | 44              |   |      | 2       |   |   | 46 |   |   |   |   |   |   |   |   | 10 |   |   | 90 |   |

----

**Wako          Logistics Group, Inc.   **

**Notes          to the Consolidated Financial Statements**

----

*(Dollars          in thousands except share data and per share amounts)*

| **7.** | **SEGMENTS                    OF THE BUSINESS                    (CONTINUED)** |
|--------|--------------------------------------------------------------------------------|

|   | The                    Group operates mainly in two business segments, providing (i)                    air                    forwarding and (ii) sea forwarding services. The                    following table summarizes the Group’s                    operations for the two segments. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | **(ii)** | **During                    the 9 months ended September 30, 2004 and 2005                    (unaudited)** |
|--|----------|-------------------------------------------------------------------------------------------------------------|

|                                                                            |   | **Air                    forwarding** |    | **Sea                    forwarding** |   | **Elimination** |   | **Total** |    |
|---------------------------------------------------------------------------------|--------|---------------------------------------|---------|---------------------------------------|--------|-----------------|--------|-----------|---------|
|                                                                            |   | **2004**                              |    | **2005**                              |   | **2004**        |   | **2005**  |    | **2004** |   | **2005** |   | **2004** |   | **2005** |   |
|                                                                            |   | *US$*                                 |    | *US$*                                 |   | *US$*           |   | *US$*     |    | *US$* |   | *US$* |   | *US$* |   | *US$* |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |
|                        Revenue                                   |   |                                  | 9,285   |                                  |   | 15,683          |   |      | 6,400   |   |   | 13,658 |   |   |   |   |   |   |   |   | 15,686 |   |   | 29,341 |   |
|                        Cost of forwarding                        |   |                                  | (8,408  | )                                     |   | (13,626         | )      |      | (4,827  | ) |   | (10,416 | ) |   |   |   |   |   |   |   | (13,235 | ) |   | (24,042 | ) |
|                        Depreciation                              |   |                                  | (12     | )                                     |   | (31             | )      |      | (24     | ) |   | (51 | ) |   |   |   |   |   |   |   | (36 | ) |   | (82 | ) |
|                        Interest income                           |   |                                  | 3       |                                  |   | 6               |   |      | — |   |   | 2 |   |   |   |   |   |   |   |   | 3 |   |   | 8 |   |
|                        Interest expenses                         |   |                                  | — |                                  |   | (10             | )      |      | (1      | ) |   | (13 | ) |   |   |   |   |   |   |   | (1 | ) |   | (23 | ) |
|                        Other segment income                      |   |                                  | 20      |                                  |   | 38              |   |      | 17      |   |   | 230 |   |   |   |   |   | 195 |   |   | 37 |   |   | 73 |   |
|                        Other segment expenses                    |   |                                  | (759    | )                                     |   | (1,715          | )      |      | (1,257  | ) |   | (2,851 | ) |   |   |   |   | 195 |   |   | (2,017 | ) |   | (4,371 | ) |
|                        Taxation                                  |   |                                  | (23     | )                                     |   | (87             | )      |      | (66     | ) |   | (135 | ) |   |   |   |   |   |   |   | (89 | ) |   | (222 | ) |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                            |   |                                  | 106     |                                  |   | 258             |   |      | 242     |   |   | 424 |   |   |   |   |   |   |   |   | 348 |   |   | 682 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Corporate expenses                        |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | (81 | ) |   | (217 | ) |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Segment income before income taxes        |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 267 |   |   | 465 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Segment assets                            |   |                                  | 3,094   |                                  |   | 5,684           |   |      | 1,144   |   |   | 3,353 |   |   | (65 | ) |   |   |   |   | 4,173 |   |   | 9,037 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Unallocated assets                        |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 323 |   |   | 1,234 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Total assets                              |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 4,496 |   |   | 10,271 |   |
|                                                                            |   |                                  |    |                                  |   |            |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                        Property, plant and equipment - additions |   |                                  | 84      |                                  |   | 94              |   |      | 40      |   |   | 133 |   |   |   |   |   |   |   |   | 124 |   |   | 227 |   |

----

** **

**Wako          Logistics Group, Inc.   **

**Notes          to the Consolidated Financial Statements**

----

*(Dollars          in thousands except share data and per share amounts)*

| **8.** | **SUBSEQUENT                    EVENTS** |
|--------|------------------------------------------|

----

**Wako          Logistics Group, Inc.   **

**Notes          to the Consolidated Financial Statements**

----

*(Dollars          in thousands except share data and per share amounts)*

| **8.** | **SUBSEQUENT                    EVENTS (CONTINUED)** |
|--------|------------------------------------------------------|

----

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

----

----

*Salaries            and Allowances*

** **

**Segment            Information**

***Airfreight            operations***

----

***Sea            freight operations:***

**Other            Operating Expenses**

*Salaries            and allowances*

----

*Sales            Commissions*

*Rent*

*Depreciation            and Amortization*

*Interest            Expenses*

*Provision            for Income Taxes*

**.**

*Salaries            and Allowances*

----

**Segment            Information**

***Airfreight            operations***

***Sea            freight operations***
***:***

----

**Other            Operating Expenses**

*Salaries            and allowances*

*Sales            Commissions*

*Rent*

*Depreciation            and Amortization*

*Interest            Expenses*

----

*Provision            for Income Taxes*

**.**

****LIQUIDITY            AND CAPITAL RESOURCES****

----

|                                                                                        |   | **Payments                      Due by Period** **(in                        thousands)**   |
|---------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------|
|                                                                                   |   |                                                                                                  |
| **Contractual                      Obligations**                                       |   |                                                                                                       | **Total** |   |   | **Less                      than 1 year** |   |   | **1-3                      years** |   |   | **4-5                      years** |   |   | **After                      5 years** |   |
| Facilities                      Obligations; Equipment leases and office rental obligations |   | $                                                                                                          | 886 |   | $ | 399 |   | $ | 480 |   | $ | 7 |   | $ | — |   |
|                                                                                        |   |                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**CRITICAL            ACCOUNTING POLICIES AND ESTIMATES **

**Use            of estimates in preparation of financial statements **

**Revenue            Recognition Policy **

----

**Recognition            of Cost of Forwarding **

**Accounting            for Income Taxes **

**Accounting            for Stock-Based Compensation**

----

**ITEM            3.**
**CONTROLS            AND PROCEDURES**

**PART            II. OTHER INFORMATION**

**ITEM            1.**
**LEGAL            PROCEEDINGS**

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

----

**ITEM            3. DEFAULTS UPON SENIOR SECURITIES.**

**.**

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

**ITEM            5. OTHER INFORMATION**

----

**ITEM            6. EXHIBITS **

| 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 to Section 302 of the Sarbanes-Oxley                      Act of                      2002 (Rule 13a-4(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)). |
|------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Remainder            of Page Intentionally Left Blank***

----

**SIGNATURES**

|                                              |                                                                                                                                                        |                                           |
|---------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------|
|                                              | WAKO                        LOGISTICS GROUP, INC.                                                                                                           |
|                                         |                                                                                                                                                   |                                      |
| Date: November                      14, 2005 | By:                                                                                                                                               | /s/ Christopher                      Wood |
|                                              | Christopher                      WoodChief                          Executive Officer, ( Principal Executive Officer) and                          Director |

|                                              |                                                                                                              |                                          |
|---------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|-----------------------------------------------|
|                                              |                                                                                                              |                                          |
| Date: November                      14, 2005 | By:                                                                                                     | /s/ David                      L. Koontz |
|                                              | David                      L. KoontzChief                        Financial Officer, (Principal Financial Officer) |
|                                              |                                                                                                              |

----

**EXHIBIT            INDEX**

| **Exhibit                    Number** |   | **Description                    of Exhibit**                                                                                                                                                                                                                                    |
|---------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                  |   |                                                                                                                                                                                                                                                                             |
| 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 to Section 302 of the Sarbanes-Oxley                      Act of                      2002 (Rule 13a-4(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)).           |
|                                  |   |                                                                                                                                                                                                                                                                             |

----