**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-Q**





( **Mark
      One)**




x
            **Quarterly
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the quarterly period ended September 30, 2008**





**or**





o
            **Transition
                report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934**




**For
      the transition period from _____________ to _____________**





**Commission
      file number: 333-113564**





**WLG
      INC.**


(Exact
      name of registrant as specified in its charter)




**Delaware**
            **20-0262555**(State
                or other jurisdiction of
            (IRS
                Employer Identification No.)incorporation
                or organization)




**920
      East Algonquin Road, Suite 120**


**Schaumburg,
      IL 60173**


(Address
      of principal executive offices with zip code)





**224-653-2800**


(Registrant's
      telephone number, including area code)





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act (Check one):





Large
                accelerated filero
            
            Accelerated
                fileroNon-accelerated
                filero(Do not check if a smaller reporting company)
            
            Smaller
                reporting companyx





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





On
      November 14, 2008, the registrant had 31,400,094 shares of common stock, $0.001
      par value per share, issued and outstanding.









**WLG
      Inc.**





**TABLE
      OF CONTENTS**




Part
                I:
            
            Financial
                InformationItem
                1.
            
            Financial
                StatementsCondensed
                Consolidated Statements of Operations for the Three and Nine Months
                Ended
                September 30, 2007 and 2008
            
            F-1Condensed
                Consolidated Balance Sheets as of December 31, 2007 and September
                30,
                2008
            
            F-3Condensed
                Consolidated Statements of Cash Flows for the Nine Months Ended September
                30, 2007 and 2008
            
            F-5Notes
                to Condensed Consolidated Financial Statements
            
            F-6Item
                2.
            
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            3Item
                3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            15Item
                4.
            
            Controls
                and Procedures
            
            15Part
                II:
            
            Other
                Information
            
            16Item
                1.
            
            Legal
                Proceedings
            
            16Item
                1A.
            
            Risk
                Factors
            
            16Item
                6.
            
            Exhibits
            
            16Signatures
            
            17




**NOTE
      REGARDING FORWARD LOOKING STATEMENTS**




Certain
      statements in this report, including statements in the following discussion,
      may
      constitute forward-looking statements made pursuant to the Safe Harbor
      provisions of the Private Securities Litigation Reform Act of 1995. This report
      on Form 10-Q contains forward-looking statements concerning WLG Inc. (“WLG,” the
“Company” “we”, “our” or the “Group”) and its future operations, plans and other
      matters. Any statements that involve discussions with respect to predictions,
      expectations, beliefs, plans, projections, objectives, assumptions or future
      events or performance (often, but not always, using phrases such as “expects”,
      or “does not expect”, “is expected”, “anticipates“, or “does not anticipate”,
“plans”, “estimates”, or “intends”, or stating that certain actions, events or
      results “may”, “could”, “might”, or “will” be taken or occur, or be achieved)
      are not statements of historical fact and may be “forward looking
      statements.”




The
      Company cautions readers regarding certain forward-looking statements in this
      document and in all of its communications to shareholders and others, including
      press releases, securities filings and all other communications. WLG also
      cautions readers not to place undue reliance on any such forward-looking
      statements, which speak only as of the date made. Such forward-looking
      statements are based on the beliefs of WLG's management as well as on
      assumptions made by and information currently available to WLG at the time
      such
      statements were made. Forward-looking statements are subject to a variety of
      risks and uncertainties that could cause actual events or results to differ
      from
      those reflected in the forward-looking statements. Actual results could differ
      materially from those projected in the forward-looking statements, as a result
      of either the matters set forth or incorporated in this report generally or
      certain economic and business factors, some of which may be beyond the control
      of WLG. These factors include adverse economic conditions, entry of new and
      stronger competitors, inadequate capital, unexpected expenses, failure to gain
      or maintain approvals for the sale and expansion of WLG's services in the
      jurisdictions where WLG conducts its business, or the failure to capitalize
      upon
      access to new markets and those factors referred to or identified in Item 1A
      of
      our Report on Form 10-K for the year ended December 31, 2007, and in Item 1A
      of
      our Report on Form 10-Q for the six months ended June 30, 2008.  WLG
      disclaims any obligation subsequently to revise any forward-looking statements
      to reflect events or circumstances after the date of such statements or to
      reflect the occurrence of anticipated or unanticipated events.





2




**WLG
      Inc.**





**Part
      I: Financial Information**




**Item
      1. Financial Statements**




**WLG
        Inc.**
 
 **Consolidated
        Statements of Operations and Other Comprehensive Income**
 3
        and 9
        months ended September 30, 2007 and 2008
 
 *(Dollars
        in thousands except share data and per share amounts)*
  **3
                  months ended**
                **September
                  30,**
              
              **9
                  months ended**
                **September
                  30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***Notes*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$**(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)***Revenues:**Freight
              
              
              
              
              
              33,914
              
              
              31,604
              
              
              67,950
              
              
              98,963Agency
                  services
              
              
              
              
              
              1,003
              
              
              1,782
              
              
              3,160
              
              
              3,746Other
                  services
              
              
              
              
              
              19,996
              
              
              23,193
              
              
              44,994
              
              
              65,572**Total
                  revenues**
              
              
              
              
              
              54,913
              
              
              56,579
              
              
              116,104
              
              
              168,281**Operating
                  expenses**Cost
                  of forwarding/customs
              
              
              
              
              
              (48,200
              )
              
              (49,319
              )
              
              (99,619
              )
              
              (147,311
              )Selling
                  and administrative
              
              
              
              
              
              (5,806
              )
              
              (6,115
              )
              
              (14,413
              )
              
              (18,202
              )Depreciation
                  and amortization
              
              
              
              
              
              (324
              )
              
              (319
              )
              
              (810
              )
              
              (958
              )Total
                  operating expenses
              
              
              
              
              
              (54,330
              )
              
              (55,753
              )
              
              (114,842
              )
              
              (166,471
              )**Income
                  from operations**
              
              
              
              
              
              583
              
              
              826
              
              
              1,262
              
              
              1,810**Other
                  income (expense)**Interest
                  income
              
              
              
              
              
              11
              
              
              6
              
              
              45
              
              
              28Interest
                  expense
              
              
              
              
              
              (199
              )
              
              (241
              )
              
              (404
              )
              
              (680
              )Other
                  income (expenses), net
              
              
              
              
              
              23
              
              
              126
              
              
              85
              
              
              48**Income
                  before income taxes**
              
              
              
              
              
              418
              
              
              717
              
              
              988
              
              
              1,206Provision
                  for income taxes
              
              
              
              
              
              (217
              )
              
              (267
              )
              
              (427
              )
              
              (494
              )**Net
                  income**
              
              
              
              
              
              201
              
              
              450
              
              
              561
              
              
              712Dividend
                  on preferred stock
              
              
              
              
              
              (23
              )
              
              (23
              )
              
              (68
              )
              
              (68
              )**Income
                  applicable to common stock**
              
              
              
              
              
              178
              
              
              427
              
              
              493
              
              
              644Other
                  comprehensive income, net of taxes:Foreign
                  currency translation adjustment
              
              
              
              
              
              70
              
              
              (243
              )
              
              165
              
              
              (163
              )**Total
                  comprehensive income**
              
              
              
              
              
              **248**
              
              
              **184**
              
              
              **658**
              
              
              **481**
  The
          financial statements should be read in conjunction with the accompanying
          notes.
 
  F-1
  **WLG
            Inc.**
 
 **Consolidated
            Statements of Operations and Other Comprehensive Income**
 3
            and 9
            months ended September 30, 2007 and 2008
 *(Dollars
              in thousands except share data and per share
              amounts)*
  **3
                  months ended**
                **September
                  30,**
              
              **3
                  months ended**
                **September
                  30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***Notes*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$**(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)***Net
                  income per share:****Basic
                  earnings per share**
              
              
              ***2***
              
              
              **0.01**
              
              
              **0.01**
              
              
              **0.02**
              
              
              **0.02****Diluted
                  earnings per share**
              
              
              ***2***
              
              
              **0.01**
              
              
              **0.01**
              
              
              **0.02**
              
              
              **0.02****Weighted
                  average common shares outstanding**Basic
              
              
              
              
              
              29,813,024
              
              
              31,400,094
              
              
              27,742,500
              
              
              31,400,094Diluted
              
              
              
              
              
              29,867,089
              
              
              33,900,094
              
              
              27,830,353
              
              
              31,400,094
 
 The
        financial statements should be read in conjunction with the accompanying
        notes.


F-2
 **WLG
          Inc.**
 
 **Consolidated
          Balance Sheets**
 At
          December 31, 2007 and September 30, 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
  **At**
                **December
                  31,**
                **2007**
              
              **At**
                **September
                  30,**
                **2008***Notes*
              
              *US$*
              
              *US$**(unaudited)***ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              
              
              
              
              1,631
              
              
              2,487Restricted
                  cash
              
              
              
              
              
              649
              
              
              713Trade
                  receivables, net of allowance*(2007:
                  $798; 2008: $530)*
              
              
              
              
              
              22,198
              
              
              20,616Deposits,
                  prepayments and other current assets
              
              
              
              
              
              894
              
              
              1,081Tax
                  prepaid
              
              
              
              
              
              18
              
              
              18**Total
                  current assets**
              
              
              
              
              
              25,390
              
              
              24,915Property,
                  plant and equipment, net
              
              
              
              
              
              1,396
              
              
              1,278Deposits
                  and other non-current assets
              
              
              
              
              
              208
              
              
              57Deferred
                  tax assets
              
              
              
              
              
              246
              
              
              309Intangible
                  assets, net
              
              
              
              
              
              5,505
              
              
              4,454Goodwill
              
              
              
              
              
              9,328
              
              
              9,328**Total
                  assets**
              
              
              
              
              
              42,073
              
              
              40,341**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Bank
                  overdrafts
              
              
              *3*
              
              
              471
              
              
              554Trade
                  payables
              
              
              
              
              
              11,650
              
              
              10,012Other
                  accrued liabilities
              
              
              
              
              
              3,868
              
              
              3,322Bank
                  loans - maturing within one year
              
              
              *3*
              
              
              7,854
              
              
              6,390Current
                  portion of capital lease obligations
              
              
              
              
              
              102
              
              
              71Due
                  to directors
              
              
              *5*
              
              
              1,710
              
              
              1,065Income
                  tax payable
              
              
              
              
              
              314
              
              
              533**Total
                  current liabilities**
              
              
              
              
              
              25,969
              
              
              21,947**Non-current
                  liabilities**Non-current
                  portion of capital lease obligations
              
              
              
              
              
              163
              
              
              109Other
                  non-current liabilities
              
              
              
              
              
              232
              
              
              239Due
                  to a director
              
              
              *5*
              
              
              -
              
              
              150Deferred
                  tax liabilities
              
              
              
              
              
              9
              
              
              8404
              
              
              506Commitments
                  and contingencies
              
              
              *4*
              
              
              -
              
              
              -Series
                  B convertible redeemable preferred stock, $0.001 par value, 1.7
                  million
                  shares authorized and issued (Redemption and liquidation value
                  $1,700)
              
              
              *9*
              
              
              -
              
              
              1,700
  The
          financial statements should be read in conjunction with the accompanying
          notes.
  F-3
  **WLG
          Inc.**
 
 **Consolidated
          Balance Sheets**
 At
          December 31, 2007 and September 30, 2008
 
 *(Dollars
          in thousands except share data and per share
          amounts)*
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **September
                  30,**
                **2008***US$*
              
              *US$**(unaudited)***Stockholders'
                  equity**Preferred
                  stock, US$0.001 par value, 5 million sharesauthorized
                  and none issued
              
              
              -
              
              
              -Series
                  A convertible redeemable preferred stock, $0.001 par
                value,
                  2.0 million shares authorized and issued
                (Redemption
                  and liquidation value $1,500)
              
              
              2
              
              
              2Common
                  stock, US$0.001 par value, 55 million shares
                authorized,
                  31,400,094 shares issued and outstanding
              
              
              31
              
              
              31Additional
                  paid-in capital
              
              
              12,760
              
              
              12,767Accumulated
                  other comprehensive income-
                  Foreign currency translation adjustments
              
              
              220
              
              
              57Retained
                  earnings
              
              
              2,687
              
              
              3,331**Total
                  stockholders' equity**
              
              
              15,700
              
              
              16,188**Total
                  liabilities and stockholders' equity**
              
              
              42,073
              
              
              40,341
 The
            financial statements should be read in conjunction with the accompanying
            notes.
  F-4
  **WLG
            Inc.**
 
 **Consolidated
            Statements of Cash Flows**
 9
            months
            ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 **9
                  months ended**
                **September
                  30,****2007**
              
              **2008***US$*
              
              *US$**(unaudited)*
              
              *(unaudited)***Cash
                  flows from****operating
                  activities:**Netincome
              
              
              561
              
              
              712**Adjustments
                  to reconcile net income to net cash provided by****operating activities**Depreciation
              
              
              270
              
              
              307Amortization
              
              
              540
              
              
              651Allowance
                  for doubtful debts
              
              
              229
              
              
              190Other
                  non-cash items
              
              
              40
              
              
              7**Changes
                  in working capital:**Trade
                  receivables
              
              
              (1,616
              )
              
              1,262Deposits,
                  prepayments and other current assets
              
              
              109
              
              
              (36
              )Due
                  from related parties
              
              
              (18
              )
              
              -Trade
                  payables
              
              
              853
              
              
              (1,638
              )Other
                  accrued liabilities
              
              
              699
              
              
              (140
              )Due
                  to directors
              
              
              (112
              )
              
              (432
              )Income
                  tax payable
              
              
              132
              
              
              155**Net
                  cash provided by operating activities**
              
              
              1,687
              
              
              1,038**Cash
                  flows from investing activities:**Acquisitions
                  of property, plant and equipment
              
              
              (377
              )
              
              (221
              )Acquisition
                  of WCS
              
              
              (2,550
              )
              
              -**Net
                  cash used in investing activities**
              
              
              (2,927
              )
              
              (221
              )**Cash
                  flows from financing activities:**Restricted
                  cash
              
              
              8
              
              
              (64
              )Bank
                  overdrafts
              
              
              305
              
              
              83Bank
                  loans repaid
              
              
              (28
              )
              
              (1,464
              )Capital
                  lease obligations paid
              
              
              (101
              )
              
              (85
              )Payment
                  of dividend on preferred stock
              
              
              (68
              )
              
              (68
              )Loans
                  from directors
              
              
              1,500
              
              
              1,637**Net
                  cash****provided
                  by financing activities**
              
              
              1,616
              
              
              39**Net
                  increase in cash and cash equivalents**
              
              
              376
              
              
              856**Cash
                  and cash equivalents at beginning of period**
              
              
              1,528
              
              
              1,631**Cash
                  and cash equivalents at end of period**
              
              
              1,904
              
              
              2,487
  The
          financial statements should be read in conjunction with the accompanying
          notes.
 
  F-5
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 **1.**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION**
 
 WLG
        Inc.
        (“WLG”, the “Company”, or the “Group”) (formerly known as Wako Logistics Group,
        Inc.) was incorporated on December 2, 2003 pursuant to the laws of Delaware
        in
        the United States of America, with authorized and outstanding share capital
        of
        100 million shares of common stock, par value of $0.001 per share. All
        outstanding common stock was issued to Mr. Christopher Wood (“Mr
        Wood”).
 
 On
        January 8, 2004, WLG changed its name to Wako Logistics Group, Inc. On the
        same
        date, its authorized number of shares was reduced to 60 million shares, of
        which
        55 million shares were common stock, and 5 million shares were preferred
        stock.
 
 Pursuant
        to the Share Exchange Agreements entered into between WLG and Mr. Wood (and
        his
        nominee) on January 18, 2004, WLG consummated a combination with Wako Express
        (H.K.) Company Limited (“WEHK”) and Wako Air Express (H.K.) Company Limited
        (“WAE”) (collectively, “Operating Subsidiaries”) by the issuance of 20,000,900
        shares of WLG common stock to Mr. Wood in exchange for 100% of the outstanding
        stock of WEHK and WAE.
 
 After
        the
        share exchanges, WLG became the parent and controlling company of the Operating
        Subsidiaries, and Mr. Wood became the controlling shareholder of
        WLG.
 
 The
        transfer of Mr. Wood’s interests in the Operating Subsidiaries to WLG was a
        reorganization of companies under common control and has been accounted for
        effectively as a pooling of interests, and the consolidated financial statements
        of the Group have been presented as if the Operating Subsidiaries had been
        owned
        by WLG since the earliest date covered by these financial
        statements.
 
 WEHK
        was
        incorporated in Hong Kong on June 4, 1982. Since its inception, WEHK’s principal
        activity has been the provision of sea freight forwarding services.
 
 WAE
        was
        incorporated in Hong Kong on February 24, 1989, and since that date, WAE’s
        principal activity has been the provision of air freight forwarding
        services.
 
 In
        July
        and November 2004, the Group established two 100% owned subsidiaries, Wako
        Express (China) Co. Ltd. (“WE China”) in the People’s Republic of China (“PRC”)
        and Wako Express (China) Co. Limited (“WECCL”) in Hong Kong. WE China began
        business in China in February 2005 as a full-service freight forwarding company.
        WECCL had not commenced business as of September 30, 2008.
 
 On
        April
        1, 2005, WLG 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. KON changed its name to WLG (USA) LLC (“WLG (USA)”) in June
        2005, and, as of the end of 2006, had discontinued the use of the name KON.
        The
        purchase price for KON consisted of a cash payment of $1,000 and a professional
        fee of $50. WLG (USA) is a non-asset based freight forwarding company and
        provides freight forwarding and logistics services to its
        customers.
  F-6
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
  **1.**
                **ORGANIZATION
                    AND BASIS OF PRESENTATION
                    (CONTINUED)**
 Effective
        October 1, 2005, WLG acquired all of the issued and outstanding shares of
        common
        stock of Asean Logistics, Inc. (“ALI”), a California corporation, in exchange
        for 250,000 restricted shares of WLG’s common stock. Concurrent with the
        acquisition, WLG, by way of a contribution to capital, transferred all of
        the
        ALI shares to WLG (USA).
 
 ALI
        was a
        non-asset based freight forwarding company and provided freight forwarding
        services to its customers, which shipped products primarily between Asia
        and the
        United States. As of December 31, 2007, all of ALI’s administrative and
        accounting functions had been assumed by WLG (USA), and by June 30, 2008,
        all of
        the remaining operations of ALI had been combined with those of WLG
        (USA).
 
 On
        November 9, 2005, WLG (Australia) Pty Ltd. (“WLG (Aust)”), a wholly owned
        Australian subsidiary of WLG, completed the acquisition of all of the issued
        and
        outstanding common stock of Asean Cargo Services Pty Limited (“Asean”) in
        exchange for 3.5 million restricted shares of WLG’s common stock. An additional
        1.3 million shares of WLG’s restricted common stock was issued to the sellers of
        Asean in 2007 in recognition of Asean achieving certain financial goals during
        the fifteen-month period ended December 31, 2006.
 
 Founded
        in 1984 and based in Sydney, Australia, Asean also has offices in Melbourne
        and
        Brisbane and maintains relationships with cargo agents in all of Australia’s
        mainland states. Asean provides freight forwarding and logistics services,
        as
        well as customs brokerage services, to its customers, most of which that
        ship
        products primarily between Asia and Australia.
 
 In
        February 2006, WLG formed two United Kingdom (“UK”) subsidiaries, WLG (UK)
        Holdings Limited (“WLG (UK) Holdings”) as a first tier subsidiary and WLG (UK)
        Limited (“WLG (UK)”) as a subsidiary of WLG (UK) Holdings. Effective September
        15, 2006, WLG (UK) acquired for cash the operating assets and assumed limited
        liabilities of a division (“UK Division”) of a UK freight forwarding and
        logistics company (“UK Co.”). This UK Division, which operated in Manchester,
        UK, provided sea and air freight forwarding, customs clearance and warehouse
        logistics services, mostly to UK based customers. These activities are now
        carried on by WLG (UK).
 
 On
        December 1, 2006, WLG (USA) acquired for cash all of the voting shares of
        Mares-Shreve & Associates, Inc. (“MSA”) and its wholly owned subsidiary, Sea
        Systems Ocean Line, Inc., (“Sea Systems”) (collectively, the “MSA Group”). MSA,
        which was incorporated on May 15, 1979, in Washington state, provides freight
        forwarding and customs brokerage services to its customers. Sea Systems,
        incorporated on February 26, 1991, in Washington state, is a non-asset based
        freight forwarder and provided air and sea freight forwarding and related
        logistics services to its customers. As of June 30, 2008, all of Sea
        Systems’
        operations had been combined with those of MSA. MSA mainly serves customers
        that
        ship products from Asia to the US.
 
 On
        July
        31, 2007, the Group acquired all of the membership interests in World Commerce
        Services LLC. WCS is based in Schaumburg, Illinois, and also has offices
        in New
        York, Atlanta, Los Angeles and San Francisco. It is a non-asset based freight
        forwarding company and provides a full range of logistics and customs brokerage
        services to its customers, specializing in freight imports from Asia, mostly
        by
        sea, and with an emphasis on imports from China.
  F-7
  **WLG
          Inc.**
 
 **Notes
          to the Consolidated Financial Statements**
 3
          and 9
          months ended September 30, 2007 and 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
  **1.**
                **ORGANIZATION
                    AND BASIS OF PRESENTATION
                    (CONTINUED)**
 
 On
        December 7, 2007, the Company filed an amendment to the Company’s Restated
        Certificate of Incorporation to change the Company’s name from Wako Logistics
        Group, Inc. to WLG Inc., which became effective December 21, 2007.
 
 As
        of
        September 30, 2008, all subsidiaries are wholly-owned and all material
        intercompany balances and transactions have been eliminated in
        consolidation.
  The
        accompanying financial data as of September 30, 2008, and for the three and
        nine
        months ended September 30, 2007 and 2008, have been prepared by the Company
        without audit.
  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 financial
        statements should be read in conjunction with the Company’s audited consolidated
        financial statements and notes thereto for the year ended December 31,
        2007.
  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.
  The
        unaudited, interim consolidated financial statements of the Company have
        been
        prepared in accordance with accounting principles generally accepted in the
        United States for interim financial information. In the opinion of management,
        all adjustments (which include only normal recurring adjustments) necessary
        to
        present fairly the financial position as of September 30, 2008, and results
        of
        operations for the three and nine months ended September 30, 2007 and 2008,
        and
        cash flows for the nine months ended September 30, 2007 and 2008, have been
        made. The results of operations for the three and nine months ended September
        30, 2007 and 2008, are not necessarily indicative of the operating results
        for
        the full year.
  F-8
  **WLG
          Inc.**
 
 **Notes
          to the Consolidated Financial Statements**
 3
          and 9
          months ended September 30, 2007 and 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
 
 **2.**
              **EARNINGS
                  PER SHARE**
 
 Earnings
        per share were computed as follows:
  **3
                  months ended September 30, 2007****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share**
                **amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              201Dividends
                  on Series A convertible redeemable preferred stock
              
              
              (23
              )
              
              2,000,000
              
              
              0.01Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              178
              
              
              29,813,024
              
              
              0.01Effect
                  of dilutive securitiesEmployee
                  stock options
              
              
              -
              
              
              54,065Warrants*(Note
                  #)*
              
              
              -
              
              
              -Series
                  A convertible redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              178
              
              
              29,867,089
              
              
              0.01
  F-9
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **2.**
                **EARNINGS
                    PER SHARE
                    (CONTINUED)**
 
 **9
                  months ended September 30, 2007****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share**
                **amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              561Dividends
                  on Series A convertible redeemable preferred stock
              
              
              (68
              )
              
              2,000,000
              
              
              0.03Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              493
              
              
              27,742,500
              
              
              0.02Effect
                  of dilutive securitiesEmployee
                  stock options
              
              
              -
              
              
              87,853Warrants*(Note
                  #)*
              
              
              -
              
              
              -Series
                  A convertible redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              493
              
              
              27,830,353
              
              
              0.02
  F-10
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **2.**
                **EARNINGS
                    PER SHARE (CONTINUED)**
 **3
                  months ended September 30, 2008****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share**
                **amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              450Dividends
                  on Series A convertible redeemable preferred stock
              
              
              (23
              )
              
              2,000,000
              
              
              0.01Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              427
              
              
              31,400,094
              
              
              0.01Effect
                  of dilutive securitiesEmployee
                  stock options*(Notes
                  #)*
              
              
              -
              
              
              -Warrants*(Note
                  #)*
              
              
              -
              
              
              -Series
                  A convertible redeemable preferred stock*(Note
                  #)*
              
              
              23
              
              
              2,000,000Series
                  B convertible redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              450
              
              
              33,400,094
              
              
              0.01
  F-11
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **2.**
                **EARNINGS
                    PER SHARE (CONTINUED)**
 **9
                  months ended September 30, 2008****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              712Dividends
                  on Series A convertible redeemable preferredstock
              
              
              (68
              )
              
              2,000,000
              
              
              0.03Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              644
              
              
              31,400,094
              
              
              0.02Effect
                  of dilutive securitiesEmployee
                  stock options*(Notes#)*
              
              
              -
              
              
              -Warrants*(Note
                  #)*
              
              
              -
              
              
              -Series
                  A convertible redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Series
                  B convertible redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              644
              
              
              31,400,094
              
              
              0.02
 
 *#
                :*
              For
                  the three and nine months ended September 30, 2007, common stock
                  was not
                  increased by the 2,000,000 shares related to the Series A convertible
                  redeemable preferred stock and the conversion of the 100,000 outstanding
                  warrants granted to a consultant in exchange for services rendered.
                  For
                  the three months ended September 30, 2008, common stock is not
                  increased
                  by the conversion of the 100,000 outstanding warrants granted to
                  a
                  consultant in exchange for services rendered, the exercise of 245,000
                  outstanding options or the 2,428,571 shares related to Series B
                  convertible redeemable preferred stock. For the nine months ended
                  September 30, 2008, common stock is not increased by the 2,000,000
                  shares
                  of Series A convertible redeemable preferred stock, the 500,000
                  shares of
                  common stock issuable to the sellers of WCS upon conversion of
                  the Series
                  A convertible redeemable preferred stock, the conversion of the
                  100,000
                  outstanding warrants granted to a consultant in exchange for services
                  rendered, the exercise of 245,000 outstanding options, or the 2,428,571
                  shares of Series B convertible redeemable preferred stock. Under
                  an agreement with the sellers’ of WCS, the Company is potentially
                  obligated to issue up to 1,962,506 shares of its common stock to
                  them if
                  certain financing targets are achieved. None of the financial targets
                  were
                  achieved as of the three and nine months ended September 30, 2007
                  and
                  2008.The effect of these conversions would be anti-dilutive.
  F-12
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **3.**
              **BANKING
                  FACILITIES**
 
 The
                  Group has obtained bank facilities from creditworthy, commercial
                  banks as
                  follows:
 
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **September
                  30,**
                **2008***US$*
              
              *US$**(Unaudited)***Facilities
                  granted**-
                  bank guarantees
              
              
              1,148
              
              
              1,203-
                  overdraft facilities
              
              
              591
              
              
              554-
                  bank loans and revolving credit lines
              
              
              12,778
              
              
              9,057-
                  foreign exchange facilities
              
              
              219
              
              
              205-
                  lease facilities
              
              
              235
              
              
              205Total
                  bank facilities
              
              
              14,971
              
              
              11,224
 
 The
        terms
        of the loan facilities, including the amounts and maturity dates, are agreed
        between the banks and the Group from time to time.
 
 Bank
        guarantees of $544 will expire within one year from September 30, 2008, but
        may
        be renewed, provided the Group makes available the cash required by the banks
        to
        collateralize each guarantee. A bank guarantee of $113 and the overdraft
        facilities have no expiry dates, but the bank or WLG may terminate either
        facility by giving 30 days notice to the other party. The remaining bank
        guarantee of $546 has no fixed expiration date and is cancelable and/or
        renewable at the option of the bank.
 
 The
        bank
        loan facilities mature on various dates as follows: (i) $276 on October 17,
        2008, and (ii) $5,500 revolving credit facility in November 2008. The remaining
        loan facility of $3,281 is an on-going facility that is subject to review
        in
        2008, and, by its terms, may be terminated by either the bank or WLG giving
        30
        days notice to the other party.
 
 The
        bank
        loans and revolving credit facilities of $9,057 are secured as follows: (i)
        term
        loan of
        $276
        is unsecured and repayable within one year by monthly installments, (ii)
        $5,500
        is secured by all of WCS’s assets, including its accounts receivables as well as
        the accounts receivable of WLG (USA) and MSA and a guarantee provided by
        the
        Group’s parent company, and (iii) $3,281 is secured by Asean’s accounts
        receivable and a registered mortgage charge over the assets of
        Asean.
 
 WCS’s
        revolving credit facility in the face amount of $5,500 requires that WCS
        comply
        with certain covenants, one of which is that WCS must at all times have excess
        availability of at least $1,000. As of September 30, 2008, the excess
        availability under WCS’s revolving credit facility was $720, or about $280 less
        that what the covenant requires. By October 6, 2008, the excess availability
        under this revolving credit facility exceeded $1,000, and WCS was in compliance
        with this covenant.
  F-13
 **WLG
              Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 3
              and 9
              months ended September 30, 2007 and 2008
 
 *(Dollars
              in thousands except share data and per share
              amounts)*
 
 **3.**
                **BANKING
                    FACILITIES (CONTINUED)**
 Certain
        of the bank guarantees, totaling $544, are collateralized by cash of $544.
        In
        addition, a bank guarantee of $113 is secured by (i) a letter of support
        from
        the Group’s parent company, and (ii) a registered mortgage debenture over all of
        Asean’s assets. The remaining bank guarantee of $546 is secured by a fixed and
        floating charge on all of the assets of WLG (UK) and by a guarantee of the
        Group’s parent company.
 
 Asean’s
        overdraft facility of $554 is secured by (i) a comfort letter from the Group’s
        parent company and (ii) a registered mortgage debenture over all of Asean’s
        assets.
 
 Asean
        has
        a foreign exchange facility of $205, which at September 30, 2008, had not
        been
        utilized. Asean has a leasing facility of $205, and $3 was outstanding as
        of
        September 30, 2008, and this facility is secured by the assets under lease.
        In
        addition, both the foreign exchange and leasing facility are secured by a
        comfort letter from the Group’s parent company. As of September 30, 2007 and
        2008, the weighted average interest rates of the Group’s short-term bank
        borrowings were 8.94% and 8.10% per annum, respectively.
 
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **September
                  30,**
                **2008***US$*
              
              *US$**(Unaudited)***Utilized**Committed
                  lines-
                  bank guarantees
              
              
              1,148
              
              
              1,203-
                  overdraft facilities
              
              
              471
              
              
              554-
                  bank loans and revolving credit lines
              
              
              7,854
              
              
              6,390-
                  lease facilities
              
              
              36
              
              
              3Total
                  bank facilities utilized
              
              
              9,509
              
              
              8,150
  F-14
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 **4.**
              **COMMITMENTS
                  AND CONTINGENCIES**
 
 ***Commitments
        under operating leases***
 The
                  Group rents office space, staff quarters and certain office equipment
                  under non-cancelable operating leases. The following table summarizes
                  the
                  approximate future minimum lease payments for operating leases
                  in effect
                  as of December 31, 2007 and September 30,
                  2008:
 
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **September
                  30,**
                **2008***(unaudited)**US$*
              
              *US$*Within
                  one year
              
              
              1,358
              
              
              1,374Over
                  one year but not exceeding two years
              
              
              968
              
              
              965Over
                  two years but not exceeding three years
              
              
              466
              
              
              719Over
                  three years but not exceeding four years
              
              
              250
              
              
              522Over
                  four years but not exceeding five years
              
              
              60
              
              
              401Over
                  five years
              
              
              -
              
              
              1,736Total
                  operating lease commitments
              
              
              3,102
              
              
              5,717
 
 Rent
                  expense under operating leases for the 9 months ended September
                  30, 2007
                  and 2008, was $786 and $1,486,
                  respectively.
 ***Cargo
                  space commitments***
 The
                  Group in the course of its business enters into agreements with
                  various
                  air and ocean freight carriers pursuant to which the Group is committed
                  to
                  utilize a minimum amount of cargo space each year. As of September
                  30,
                  2008, the obligation for the minimum amount of cargo space to be
                  used for
                  the following twelve months was $2,487.
  F-15
  **WLG
              Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 3
              and 9
              months ended September 30, 2007 and 2008
 
 *(Dollars
              in thousands except share data and per share amounts)*
 **4.**
                **COMMITMENTS
                    AND CONTINGENCIES
                    (CONTINUED)**
 ***Contingencies
        - outstanding claims***
 The
                  Group 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, 2008, and subject to the legal proceedings as described below,
        the
        aggregate, outstanding amount of claims was approximately $20.
 
 Three
        parties have filed legal actions against the Group totaling about $150. These
        claims are covered by insurance, except for amounts equal to or less than
        the
        deductible payment required under these policies, which total about $35,
        and for
        which a provision in such amount was recorded as of June 30, 2008, and no
        further adjustment has been made to this amount. The Group has
        identified potential claims of approximately $48 that might be asserted by
        various parties. The Group believes that the ultimate liability, if any,
        for all
        of these claims, both filed and potential, will not have a material adverse
        effect on its financial position.
 
 WCS
                  has been named as a third-party defendant in pending proceedings
                  filed in
                  the United States District Court for the Southern District of New
                  York and
                  the United States District Court, Central District of California
                  relating
                  to claims arising out of the derailment of a Union Pacific train
                  at
                  Tyrone, Oklahoma on April 21, 2005. The total amount of damages
                  sought
                  equals approximately $6,800, including an unspecified amount for
                  costs of
                  delay, lost profit and lost revenue. The Group intends to vigorously
                  defend each of the foregoing actions. WCS has been advised by its
                  legal
                  counsel that it has been named as a third-party defendant for technical
                  reasons and that the likelihood of any liability being assigned
                  to WCS is
                  minimal, but subject to the normal risks of litigation. Management
                  believes that the disposition or ultimate resolution of this pending
                  litigation will not have a material adverse effect on the financial
                  position of the Group.
 
 
 **5.**
              **RELATED
                  PARTY TRANSACTIONS**
 
 **Name
                  and relationship of related parties**Name
              
              Relationship
                  with the GroupChristopher
                  Wood (“CW”)
              
              Shareholder,
                  director and officer of WLGDavid
                  Koontz (“DK”)
              
              Director
                  and officer of WLG and a director of Asean and WLG
                  (Aust)Join
                  Wing Properties Limited (“JWP”)
              
              CW
                  is a shareholder and director of
                  JWP
 
 
 **Details
                  of related parties**Name
              
              Principal
                  activities
              
              Ownership*Name
                  of owner*
              
              *%
                  held*JWP
              
              Leases
                  property to CW
              
              CW
              
              100%
  F-16
  **WLG
          Inc.**
 
 **Notes
          to the Consolidated Financial Statements**
 3
          and 9
          months ended September 30, 2007 and 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
 **5.**
              **RELATED
                  PARTY TRANSACTIONS
                  (CONTINUED)**
 
 The
        following is a summary of the amounts included in the accompanying balance
        sheets:
  **At**
                **December
                  31,**
                **2007**
              
              **At**
                **September
                  30,**
                **2008***US$*
              
              *US$**(unaudited)***Due
                  to directors (Notes)**CW
              
              
              960
              
              
              652DK
              
              
              750
              
              
              5631,710
              
              
              1,215
 
 Notes :
 (i)
              Amounts
                  due to directors are unsecured and interest-free except for the
                  director
                  loans of $600 and $563 due to CW and DK, respectively, which were
                  used as
                  part of the consideration to acquire the membership interests of
                  WCS,
                  repayment of bank loans and working capital. The loans carry an
                  interest
                  rate of 12% per annum. As of September 30, 2008, the director loan
                  of $563
                  is to be repaid by 9 equal installments, and the director loan
                  of $600 is
                  to be repaid by 12 equal installments beginning on January 31,
                  2009, and
                  the remaining balance of $52 has no fixed repayment
                  terms.
 
 (ii)
                  On
                      July 1, 2008, the Group issued a $600 promissory note to CW,
                      dated July 1,
                      2008, (the “Note”) to set forth, among other things, the interest rate and
                      repayment terms for $600 in loans that CW previously made to
                      it. The Note
                      bears interest at the rate of 12% per annum and is repayable in
                      twelve monthly installments of $50 each, with the first installment
                      due on
                      January 31, 2009. The Note is secured by the Group’s assets and will
                      become immediately due and payable upon the earlier to occur
                      of (i) an
                      event of default as defined in the Note, (ii) a change in control
                      as
                      defined in the Note, (iii) raising not less than $3,000 in
                      new capital,
                      and/ or (iv) the termination of CW’s
                      employment.
 
 
 **Additional
        details of transactions**
 **3
                  months ended**
                **September
                  30,**
              
              **9
                  months ended**
                **September
                  30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)**US$*
              
              *US$*
              
              *US$*
              
              *US$***Rental
                  paid/payable**JWP
              
              
              27
              
              
              27
              
              
              81
              
              
              81
  F-17
  **WLG
          Inc.**
 
 **Notes
          to the Consolidated Financial Statements**
 3
          and 9
          months ended September 30, 2007 and 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
 **5.**
              **RELATED
                  PARTY TRANSACTIONS
                  (CONTINUED)**
 
 Summary
        of transactions for the nine months ended September 30, 2007 and 2008, with
        directors/ stockholders (unaudited):
 
 **CW**
              
              **DK**
              
              **Total***US$*
              
              *US$*
              
              *US$*January
                  1, 2007
              
              
              439
              
              
              -
              
              
              439Loans
                  from directors
              
              
              750
              
              
              750
              
              
              1,500Interest
                  accrued
              
              
              15
              
              
              15
              
              
              30Interest
                  paid
              
              
              (15
              )
              
              (15
              )
              
              (30
              )Expenses/draws*(Note)*
              
              
              (111
              )
              
              -
              
              
              (111
              )September
                  30, 2007
              
              
              1,078
              
              
              750
              
              
              1,828January
                  1, 2008
              
              
              960
              
              
              750
              
              
              1,710Loans
                  from directors
              
              
              1,637
              
              
              -
              
              
              1,637Repayment
                  of loan
              
              
              -
              
              
              (187
              )
              
              (187
              )Interest
                  accrued
              
              
              100
              
              
              66
              
              
              166Interest
                  paid
              
              
              (40
              )
              
              (66
              )
              
              (106
              )Expenses/draws*(Note)*
              
              
              (305
              )
              
              -
              
              
              (305
              )Converted
                  to Series B convertible redeemable preferred stock
              
              
              (1,700
              )
              
              -
              
              
              (1,700
              )September
                  30, 2008
              
              
              **652**
              
              
              **563**
              
              
              **1,215**
 
 Note :
  ·
            Expenses
                include amounts that were either paid directly to or for the benefit
                of
                CW. 
 
 **6.**
              **SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW
                  INFORMATION**
 
 **9
                  months ended**
                **September
                  30,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**US$*
              
              *US$***Cash
                  paid for:**Interest
                  expense
              
              
              404
              
              
              621Income
                  taxes
              
              
              315
              
              
              339
  F-18
  **WLG
          Inc.**
 
 **Notes
          to the Consolidated Financial Statements**
 3
          and 9
          months ended September 30, 2007 and 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
 **7.**
              **SHARE-BASED
                  PAYMENT**
 
 In
        April
        2005, the board and stockholders of the Company approved the Wako Logistics
        Group, Inc. 2005 Stock Incentive Plan (the “Plan”). The Plan, which is effective
        until April 19, 2015, provides for awarding stock options, stock appreciation
        rights and restricted stock to its officers, employees, directors and
        consultants, as well as to officers, employees, directors and consultants
        who
        provide services to any of the Group’s subsidiaries or affiliates. The Plan is
        administered by our board, provided, that the board in the future may appoint
        a
        committee to administer the Plan. At the inception of the Plan, 4,000,000
        shares
        of common stock were approved for the issuance of awards under the Plan,
        which
        amount shall be automatically increased (but not decreased) to 20% of the
        total
        number of the Company’s shares of common stock issued and outstanding on January
        1st of each year beginning on January 1, 2006. Based on shares outstanding
        as of
        January 1, 2008, the number of shares reserved under the Plan was increased
        to
        6,280,019.
 
 In
        general, stock options awarded under the Plan vest over three years and expire
        in a maximum of ten years from their effective dates. However, the Plan permits
        significant latitude to allow the board to grant options with varying terms,
        such as changing the vesting period, the term and/or exercise price. Once
        the
        board, under provisions of the Plan, grants an option, the Company will estimate
        the fair value of the option, and compensation expense will be recognized
        over
        the vesting period of the option.
 
 As
        of
        August 2005, the Company had committed to award 200,000 options to purchase
        common stock to one of its officers, and, as of that date, all substantial
        terms
        and conditions for the option were communicated to, and agreed with, the
        officer. As such, the Company established August 2005 as the grant date for
        this
        option. The board has formally approved the award and this option is fully
        vested.
 
 Effective
        January 15, 2007, the board approved and awarded stock options to three
        employees permitting them to purchase an aggregate of 20,000 shares of the
        Company’s common stock. The vesting period for the January 2007 options is 3
        years.
 
 Effective
        January 8, 2008, the board approved and awarded stock options to an employee
        for
        the purchase of 25,000 shares of the Company’s common stock. The vesting period
        for the January 2008 options is 3 years.
 
 The
        Company accounts for stock-based compensation in accordance with SFAS No.
        123(R), Share-Based Payment (revised 2004). Under this method, the compensation
        expense related to the fair value of stock options charged to the unaudited,
        consolidated statement of operations for the nine months ended September
        30,
        2007 and 2008, was $40 and $7, respectively. As of September 30, 2008, the
        compensation expense related to non-vested options totaled $15 and is expected
        to be recognized over 24 months. The total intrinsic value of the options
        outstanding and options exercisable as of September 30, 2008, was $1 and
        Nil,
        respectively. No tax benefit was recognized for the stock option expense
        recorded for the nine months ended September 30, 2007 and 2008.
 F-19
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
 **7.**
                **SHARE-BASED
                    PAYMENT (CONTINUED)**
 
 The
        Company estimates the fair value of stock options using the Black-Scholes
        option
        pricing model, with the following assumptions:
 
 **Options
                  granted on****August
                  1,**
                **2005**
              
              **January
                  15,**
                **2007**
              
              **January
                  8,**
                **2008**Risk-free
                  interest rate per annum
              
              
              4.60
              %
              
              4.60
              %
              
              3.59
              %Expected
                  life
              
              
              2
                  years
              
              
              3
                  years
              
              
              3
                  yearsExpected
                  volatility(Note #)
              
              
              45.00
              %
              
              57.79
              %
              
              46.00
              %Expected
                  dividend yield
              
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %Post
                  vesting terminations
              
              
              No
              
              
              No
              
              
              NoWeighted
                  average grant-date fairvalue(per
                  share)
              
              $
              0.28
              
              $
              1.22
              
              $
              0.23
 
 #:
              The
                  expected volatility is based on the underlying share price of WLG’s shares
                  and a comparison to the volatility of the share price of peer
                  companies.
 
 The
        following table sets forth the outstanding options granted under the
        Plan:
 **Shares**
              
              **Weighted
                  ave. exercise price**
              
              **Weighted
                  ave. remaining contractual term (years)**Outstanding
                  at April 30, 2005 (inception of Plan)
              
              
              -
              
              
              -Granted
                  in 2005
              
              
              200,000
              
              
              1.00Outstanding
                  at December 31, 2005
              
              
              200,000
              
              
              1.00
              
              
              9.58Granted
                  in 2006
              
              
              -
              
              
              -Outstanding
                  at December 31, 2006
              
              
              200,000
              
              
              1.00
              
              
              8.58Granted
                  in 2007
              
              
              20,000
              
              
              2.85Outstanding
                  at December 31, 2007
              
              
              220,000
              
              
              1.17
              
              
              7.71Granted
                  in 2008
              
              
              25,000Outstanding
                  at September 30, 2008
              
              
              245,000
              
              
              1.12
              
              
              7.20Exercisable
                  at September 30, 2008
              
              
              215,827
              
              
              1.09
              
              
              6.96
  F-20
  **WLG
          Inc.**
 
 **Notes
          to the Consolidated Financial Statements**
 3
          and 9
          months ended September 30, 2007 and 2008
 
 *(Dollars
          in thousands except share data and per share amounts)*
  **8.**
              **SEGMENTS
                  OF THE BUSINESS**
 
 **(a)**
              **Business
                  segments**
 
 The
        Group
        operates mainly in three business segments, being the provision of (i) air
        forwarding; (ii) sea forwarding; and (iii) customs brokerage services. The Group ’s
        operations by air, sea and customs brokerage services are summarized in the
        following table:
 
 **(i)**
              **For
                  the 3 months ended September 30, 2007 and 2008
                  (unaudited)**
 
 **Air
                  forwarding**
              
              **Sea
                  forwarding**
              
              **Customs
                  brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Revenue
              
              
              9,460
              
              
              8,506
              
              
              31,902
              
              
              29,426
              
              
              13,551
              
              
              18,647
              
              
              54,913
              
              
              56,579Costs
                  of forwarding/customs
              
              
              (8,047
              )
              
              (7,082
              )
              
              (28,042
              )
              
              (24,786
              )
              
              (12,111
              )
              
              (17,451
              )
              
              (48,200
              )
              
              (49,319
              )Depreciation
              
              
              (21
              )
              
              (13
              )
              
              (63
              )
              
              (69
              )
              
              (25
              )
              
              (20
              )
              
              (109
              )
              
              (102
              )Interest
                  income
              
              
              5
              
              
              2
              
              
              5
              
              
              2
              
              
              1
              
              
              2
              
              
              11
              
              
              6Interest
                  expense
              
              
              (26
              )
              
              (23
              )
              
              (98
              )
              
              (78
              )
              
              (45
              )
              
              (50
              )
              
              (169
              )
              
              (151
              )Other
                  segment income
              
              
              5
              
              
              33
              
              
              12
              
              
              72
              
              
              5
              
              
              22
              
              
              22
              
              
              127Other
                  segment expenses
              
              
              (1,231
              )
              
              (991
              )
              
              (3,178
              )
              
              (3,911
              )
              
              (1,211
              )
              
              (1,075
              )
              
              (5,620
              )
              
              (5,977
              )Taxation
              
              
              (39
              )
              
              (74
              )
              
              (147
              )
              
              (124
              )
              
              (30
              )
              
              (34
              )
              
              (216
              )
              
              (232
              )Segment
                  income
              
              
              106
              
              
              358
              
              
              391
              
              
              532
              
              
              135
              
              
              41
              
              
              632
              
              
              931Unallocated
                  parent company expenses
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (431
              )
              
              (481
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              201
              
              
              450Property,
                  plant and equipment - additions
              
              
              23
              
              
              12
              
              
              52
              
              
              29
              
              
              31
              
              
              16
              
              
              106
              
              
              57
  F-21
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share amounts)*
  **8.**
                **SEGMENTS
                    OF THE BUSINESS
                    (CONTINUED)**
 **(ii)**
              **For
                  the 9 months ended September 30, 2007 and 2008
                  (unaudited)**
 
 **Air
                  forwarding**
              
              **Sea
                  forwarding**
              
              **Customs
                  brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Revenue
              
              
              24,214
              
              
              29,509
              
              
              62,094
              
              
              86,166
              
              
              29,796
              
              
              52,606
              
              
              116,104
              
              
              168,281Costs
                  of forwarding/customs
              
              
              (20,134
              )
              
              (24,807
              )
              
              (52,427
              )
              
              (73,500
              )
              
              (27,058
              )
              
              (49,004
              )
              
              (99,619
              )
              
              (147,311
              )Depreciation
              
              
              (58
              )
              
              (47
              )
              
              (169
              )
              
              (196
              )
              
              (43
              )
              
              (64
              )
              
              (270
              )
              
              (307
              )Interest
                  income
              
              
              22
              
              
              9
              
              
              19
              
              
              13
              
              
              4
              
              
              6
              
              
              45
              
              
              28Interest
                  expense
              
              
              (70
              )
              
              (72
              )
              
              (215
              )
              
              (249
              )
              
              (89
              )
              
              (142
              )
              
              (374
              )
              
              (463
              )Other
                  segment income
              
              
              23
              
              
              9
              
              
              44
              
              
              23
              
              
              18
              
              
              16
              
              
              85
              
              
              48Other
                  segment expenses
              
              
              (3,433
              )
              
              (3,497
              )
              
              (8,002
              )
              
              (10,817
              )
              
              (2,412
              )
              
              (3,438
              )
              
              (13,847
              )
              
              (17,752
              )Taxation
              
              
              (81
              )
              
              (149
              )
              
              (300
              )
              
              (301
              )
              
              (46
              )
              
              (44
              )
              
              (427
              )
              
              (494
              )Segment
                  income (loss)
              
              
              483
              
              
              955
              
              
              1,044
              
              
              1,139
              
              
              170
              
              
              (64
              )
              
              1,697
              
              
              2,030Unallocated
                  parent company expenses
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,136
              )
              
              (1,318
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              561
              
              
              712Property,
                  plant and equipment - additions
              
              
              74
              
              
              45
              
              
              202
              
              
              112
              
              
              101
              
              
              64
              
              
              377
              
              
              221
 
 **(iii)**
              **As
                  of December 31, 2007 and September 30, 2008
                  (unaudited)**
 
 **Air
                  forwarding**
              
              **Sea
                  forwarding**
              
              **Customs
                  brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Segment
                  assets
              
              
              6,765
              
              
              6,134
              
              
              15,472
              
              
              13,551
              
              
              4,997
              
              
              6,829
              
              
              27,234
              
              
              26,514Unallocated
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14,839
              
              
              13,827Total
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              42,073
              
              
              40,341
  F-22
 **WLG
              Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 3
              and 9
              months ended September 30, 2007 and 2008
 
 *(Dollars
              in thousands except share data and per share amounts)*
  **8.**
                  **SEGMENTS
                      OF THE BUSINESS
                      (CONTINUED)**
 (b)
              The
                  table below summarizes the percentage of the Group’s revenues during the
                  three months and nine months ended September 30, 2007, and 2008,
                  analyzed
                  by geographical locations:
  **3
                  months ended**
                **September
                  30,**
              
              **9
                  months ended**
                **September
                  30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)**%*
              
              *%*
              
              *%*
              
              *%***Revenues**Americas
              
              
              9
              
              
              45
              
              
              12
              
              
              46Asia
                  and others
              
              
              63
              
              
              20
              
              
              57
              
              
              22Australia
              
              
              16
              
              
              26
              
              
              18
              
              
              24Europe
              
              
              12
              
              
              9
              
              
              13
              
              
              8100
              
              
              100
              
              
              100
              
              
              100
 
 
 (c)
              The
                  Group made no sales during the three months and nine months ended
                  September 30, 2008, which qualified as sales to a major customer
                  (a major
                  customer is defined as a customer for which sales to it represent
                  10% or
                  more of total revenues).
 
 
 **9.**
              **SERIES
                  B CONVERTIBLE REDEEMABLE PREFERRED
                  STOCK**
 
 On
        June
        30, 2008, the Company entered into a conversion agreement with Christopher
        Wood,
        the Company’s Chief Executive Officer, director and controlling shareholder,
        pursuant to which Mr. Wood and the Company agreed to convert $1,700 of
        outstanding loans that Mr. Wood had made to the Company into 1.7 million
        shares
        of the Company’s Series B Convertible Redeemable Preferred Stock (“Series B Preferred Stock”). In connection
        therewith, in June 2008, the Company’s Board of Directors approved the
        designation of a new series of preferred stock consisting of 1.7
        million shares of authorized, but unissued, shares of preferred stock designated
        as Series B Preferred Stock, par value $0.001. The Series B Preferred Stock
        was
        issued on June 30, 2008. The Series B Preferred Stock may be converted by
        the
        holder at any time into shares of the Company’s common stock at a conversion
        price of $0.70 per share. The Series B Preferred Stock has a stated, redemption
        and liquidation value of $1.00 per share. The Series B Preferred Stock shall
        pay
        an annual cumulative dividend equal to 12% of the stated value per share.
        The
        Company may require a conversion in the event of a change in control of the
        Company. Commencing 24 months after the date of issuance of the Series B
        Preferred Stock, the Company has the right to redeem all or a portion of
        the
        then outstanding shares of Series B Preferred Stock at a price of $1.00 per
        share, subject to adjustment. In addition, commencing on the earlier to occur
        of
        24 months after the issuance date, Mr. Wood’s retirement or his holding less
        than 50.1% of the outstanding common stock of the Company, Mr. Wood may cause
        the Company to redeem any or all of his outstanding shares of Series B Preferred
        Stock, at a price of $1.00 per share, subject to adjustment.
  F-23
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 9
            months ended September 30, 2007 and 2008
 
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **10.**
              **RECENT
                  ACCOUNTING PRONOUNCEMENTS**
 
 In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
        No.
        157 establishes a framework for measuring fair value within generally accepted
        accounting principles that clarifies the definition of fair value within
        that
        framework and expands disclosures about the use of fair value
        measurements.  SFAS No. 157 does not require any new fair value
        measurements in generally accepted accounting principles.  However,
        the definition of fair value in SFAS No. 157 may affect assumptions used
        by
        companies in determining fair value. On January 1, 2008, the Company
        adopted SFAS 157 with respect to its financial assets and liabilities that
        are
        measured at fair value; the adoption of these provisions did not have a material
        impact on the consolidated financial statements.
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
        for Financial Assets and Financial Liabilities—Including an amendment of FASB
        Statement No. 115,” or SFAS 159. SFAS 159 permits entities to
        choose to measure many financial instruments and certain other items at fair
        value. Entities that elect the fair value option will report unrealized gains
        and losses in earnings at each subsequent reporting date. The fair value
        option
        may be elected on an instrument-by-instrument basis, with few exceptions.
        SFAS 159 also establishes presentation and disclosure requirements to
        facilitate comparisons between companies that choose different measurement
        attributes for similar assets and liabilities. Companies may elect the fair
        value option under SFAS 159 for fiscal years beginning after
        November 15, 2007. We elected not to adopt the fair value option of
        SFAS 159 at this time.
 
 In
        December 2007, the FASB issued SFAS No. 141 (Revised), Business
        Combinations.  SFAS No. 141(R) improves the relevance,
        representational faithfulness, and comparability of the information that
        a
        reporting entity provides in its financial reports about a business combination
        and requires an acquirer to recognize the assets acquired, the liabilities
        assumed, and any noncontrolling interest in the acquiree at the acquisition
        date, measured at their fair values as of that date.  This Statement
        applies prospectively to business combinations for which the acquisition
        date is
        on or after the beginning of the first annual reporting period beginning
        on or
        after December 15, 2008.  The adoption of this Statement is not
        expected to have a material impact on the Company’s financial position or
        results of operations. The Company will be required to expense costs related
        to
        any acquisitions after December 31, 2008, if any.
 
 In
        December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
        Consolidated Financial Statements.  SFAS No. 160 amends ARB 51 to
        establish accounting and reporting standards for the noncontrolling interest
        in
        a subsidiary and for the deconsolidation of a subsidiary and clarifies that
        a
        noncontrolling interest in a subsidiary is an ownership interest in the
        consolidated entity that should be reported as equity in the consolidated
        financial statements.  This Statement is effective for fiscal years
        beginning on or after December 15, 2008.  The adoption of this
        Statement is not expected to have a material impact on the Company’s financial
        position or results of operations.
 
 In
        March
        2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
        and
        Hedging Activities, an Amendment of FASB Statement No. 133.  SFAS
        No. 161 amends SFAS No. 133 and requires entities to enhance their disclosures
        about (a) how and why an entity uses derivative instruments, (b) how derivative
        instruments and related hedged items are accounted for under SFAS No. 133
        and
        its related interpretations, and (c) how derivative instruments and related
        hedged items affect an entity’s financial position, financial performance, and
        cash flows.  SFAS No. 161 is effective for fiscal years beginning on
        or after November 15, 2008.  The adoption of SFAS No. 161 is not
        expected to have a material impact on the Company’s financial position or
        results of operations.
  F-24
  **WLG
              Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 3
              and 9
              months ended September 30, 2007 and 2008
 
 *(Dollars
              in thousands except share data and per share
              amounts)*
 
 **10.**
                **RECENT
                    ACCOUNTING PRONOUNCEMENTS
                    (CONTINUED)**
 On
        May 9,
        2008, the FASB issued SFAS 162, The Hierarchy of GAAP. Per the FASB, the
        GAAP
        hierarchy should be directed to entities because it is the entity (not its
        auditor) that is responsible for selecting accounting principles for financial
        statements that are presented in conformity with GAAP. Accordingly, the GAAP
        hierarchy should reside in the accounting literature established by the FASB.
        SFAS 162 will be effective 60 days after the SEC’s approval of the PCAOB’s
        amendments to AU Section 411. The adoption of this Statement is not expected
        to
        have a material impact on the Company’s financial position or results of
        operations.
 
 In
        May
        2008, the FASB issued SFAS 163, Accounting for Financial Guarantee Insurance
        Contracts, an interpretation of FASB Statement No. 60 to require that an
        insurance enterprise recognize a claim liability prior to an event of default
        (insured event) when there is evidence that credit deterioration has occurred
        in
        an insured financial obligation and clarifies how Statement 60 applies to
        financial guarantee insurance contracts. The adoption of this Statement is
        not
        expected to have a material impact on the Company’s financial position or
        results of operations.
  In
          June
          2008, the Financial Accounting Standards Board issued EITF Issue No. 08-4,
          "Transition Guidance for Conforming Changes to Issue No. 98-5" ("EITF No.
          08-4"). The objective of EITF No. 08-4 is to provide transition guidance
          for
          conforming changes made to EITF No. 98-5, "Accounting for Convertible Securities
          with Beneficial Conversion Features or Contingently Adjustable Conversion
          Ratios", that result from EITF No. 00-27 "Application of Issue No. 98-5
          to
          Certain Convertible Instruments", and SFAS No. 150, "Accounting for Certain
          Financial Instruments with Characteristics of both Liabilities and Equity".
          This
          Issue is effective for financial statements issued for fiscal years ending
          after
          December 15, 2008, with early application permitted. The adoption of EITF
          No.
          08-4 is not expected to have a material impact on the Company’s financial
          position or results of operations.




F-25




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





**General**





WLG
      Inc. (“WLG,” the “Company,” or the “Group”) is an international, non-asset based
      logistics company that provides air and ocean freight forwarding, contract
      logistics, customs brokerage and other supply chain management services to
      its
      customers from its offices in Hong Kong, the Peoples Republic of China (“PRC” or
“China”), Australia, United States (“US”), United Kingdom (“UK”) and through a
      worldwide network of independent cargo agents.





WLG's
      business is conducted by its operating subsidiaries, which, as of September
      30,
      2008, included the following entities: Wako Express (HK) Co. Ltd. (“WEHK”), Wako
      Air Express (HK) Co. Ltd. (“WAE”), Wako Express (China) Co. Ltd. (“WE China”),
      WLG (USA) LLC (“WLG (USA)”) (formerly dba “Kay O'Neill”), Mares-Shreve &
Associates, Inc. (“MSA”), Asean Cargo Services Pty Limited (“Asean”), WLG (UK)
      Limited (“WLG (UK)”) and World Commerce Services, LLC (“WCS”).





WLG
      was incorporated in Delaware on December 2, 2003, under the name Wako Logistics,
      Inc. In January 2004, we changed our name to Wako Logistics Group, Inc. and
      in
      December 2007, our name was changed to WLG Inc. Under our certificate
      of incorporation, we were initially authorized to issue 100 million shares
      of
      common stock, par value $0.001 per share. On the date of our first name change,
      we reduced the number of authorized shares to 60 million shares, of which 55
      million shares were designated as common stock, and 5 million shares were
      designated as blank check preferred stock. Immediately following the formation
      of WLG, Mr. Christopher Wood (“Mr. Wood”) became our sole
      shareholder.





Pursuant
      to certain Share Exchange Agreements entered into on January 18, 2004, between
      us and Mr. Wood (and his nominee), we consummated a combination with WEHK
      and WAE by issuing 20,000,900 shares of our common stock in exchange for 100%
      of
      the outstanding shares of common stock of WEHK and WAE. After these share
      exchanges, WEHK and WAE became wholly-owned subsidiaries of WLG. Following
      this
      transaction, Mr. Wood owned all 20,001,000 shares of our common stock then
      issued and outstanding.





WEHK
      was incorporated in Hong Kong on September 4, 1982, and carries on the business
      of arranging sea freight shipments, both export and import, for its customers
      between Hong Kong and the rest of the world, with a particular concentration,
      historically, on the Asian-Australian trade lanes, and, more recently, on the
      trade lanes running from Asia to the US and Europe.




WAE
      was incorporated in Hong Kong on February 24, 1989. Its business is dedicated
      to
      handling air freight shipments, both export and import, between Hong Kong and
      the rest of the world, particularly to Australia, but also to the US and
      Europe.





All
      of our Asian operations have been conducted through our two Hong Kong based
      subsidiaries since January 18, 2004, (the date we acquired WEHK and WAE) and
      through WE China, following commencement of business by it in February
      2005.




On
      April 1, 2005, we completed the acquisition of all of the voting interests
      in
      Kay O'Neill (USA) LLC (“Kay O'Neill”), an Illinois limited liability company.
      Kay O'Neill was a US based logistics business, which primarily served
      US customers by providing services similar to those offered by the Group in
      Asia
      and elsewhere. At the acquisition date, Kay O'Neill had only one office in
      the
      US, which was in Des Plaines, Illinois. As part of the process of creating
      brand
      identity for the Group in the United States, Kay O'Neill, on June 29, 2005,
      changed its name to WLG (USA) LLC and began immediately to operate as WLG (USA).
      In June of 2005, WLG (USA) opened an office in Taylor, Michigan, and, at the
      beginning of 2006, it registered to do business in Texas to provide services
      for
      contract logistics projects.





Pursuant
      to the Closer Economic Partnership Agreement (“CEPA”) signed in September 2003
      between Hong Kong and the PRC, companies incorporated in Hong Kong were granted
      the right to establish wholly-owned enterprises in China to provide a full-range
      of logistics services. In July 2004, our Hong Kong subsidiary, WEHK, which
      qualified under the provisions of the CEPA, formed WE China, as a wholly-owned
      subsidiary in the PRC. WE China began operations in February 2005, and now
      provides freight forwarding and other logistics services for exports and imports
      between China and the rest of the world. WE China has eight offices in China,
      including offices in what we believe are four of China's most important
      commercial centers: Beijing; Shanghai; Shenzhen and Guangzhou.




3




Effective
      October 1, 2005, WLG (USA) acquired all of the voting stock of Asean Logistics,
      Inc. (“ALI”), a company incorporated in September 1999 in Torrance, California.
      ALI was a non-asset based, freight forwarding company and provided traditional
      freight-forwarding services to its customers, who shipped products primarily
      between Asia and the United States. As of December 31, 2007, all of ALI’s
      operations and administrative functions had been assumed by WLG (USA), and
      by
      June 30, 2008, all of ALI’s remaining operations had been combined with those of
      WLG (USA). Prior to the acquisition, WLG and ALI worked closely together
      pursuant to the terms of an agency agreement.





On
      November 9, 2005, WLG, through a newly formed and wholly-owned Australian
      subsidiary, WLG (Australia) Pty Ltd, acquired all of the issued and outstanding
      common stock of Asean, a non-asset based freight forwarding, logistics and
      customs brokerage company. Incorporated in March 1984 and based in Sydney,
      Australia, Asean also has offices in Melbourne and Brisbane and maintains agency
      relationships with other freight and logistics companies in all of Australia's
      mainland states. Asean provides a full range of transportation, logistics and
      customs brokerage services to its customers, with an emphasis on shipments
      in
      the Asian-Australian trade lanes. Prior to WLG's acquisition of Asean, both
      companies had worked closely with each other for over 20 years, providing
      transportation and logistics services to the customers of the other through
      an
      agency agreement.





In
      February 2006, WLG formed two United Kingdom (“UK”) subsidiaries, WLG (UK)
      Holdings as a first tier subsidiary and WLG (UK) as a second tier subsidiary,
      to
      make acquisitions and conduct business in the UK. Effective September 15, 2006,
      WLG (UK) acquired the operating assets and assumed limited liabilities of a
      division (“UK Division”) of a UK freight forwarding and logistics company (“UK
      Co.”). As part of this transaction, WLG (UK) purchased for cash the operating
      assets of UK Division on an “as is” and “where is” basis. This UK Division,
      which operated in Manchester, UK, provided sea and air freight forwarding,
      customs brokerage and warehouse logistics services, mostly to UK based
      customers. These activities are now carried on by WLG (UK). Prior to this
      acquisition, the Group and UK Co. had worked together in a limited capacity
      on
      several mutual customers.





On
      December 1, 2006, we acquired all of the voting shares of MSA and its
      wholly-owned subsidiary, Sea Systems, (collectively, “MSA Group”). MSA,
      incorporated on May 15, 1979, in Washington state, provides customs brokerage
      and freight forwarding services to its customers. Sea Systems, incorporated
      on
      February 26, 1991, in Washington state, is a non-asset based freight forwarder
      and provides air and sea freight forwarding and related logistics services
      to
      its customers. The MSA Group mainly serves customers that ship products from
      Asia to the West Coast of the United States for onward shipment to locations
      throughout the US. Traditionally, the business of the MSA Group has been more
      focused on its customs brokerage practice than its freight forwarding
      operations. Prior to its acquisition by WLG, the MSA Group and WLG had not
      worked together. As of June 30, 2008, all of the operations of Sea Systems
      had
      been integrated with those of MSA.





Effective
      July 31, 2007, WLG acquired all of the membership interests of WCS in exchange
      for WLG common stock and cash. WCS, incorporated in Illinois in January 2004,
      is
      the successor to a company of the same name, which began business in 1976.
      Like
      its predecessor, WCS is a non-asset based freight forwarding company and
      provides a full range of sea and air freight forwarding, logistics and customs
      brokerage services. It serves a wide range of customers that primarily import
      products by sea and air from Asia, with a heavy emphasis on shipments from
      China. In addition to its head office in Schaumburg, Illinois, WCS has offices
      in Long Island, New York, Atlanta, Georgia and two offices in California located
      in Los Angeles and San Francisco. Prior to the acquisition, the Group and WCS
      had not worked together. The personnel and operations of WLG (USA)’s office in
      Des Plaines, Illinois, have been relocated to WCS’office in
      Schaumburg.




With
      the exception of performing administrative, oversight and regulatory tasks,
      no
      other business activities are carried on by the Group's parent company, WLG
      Inc.





**Overview**





We
      are a global, non-asset based logistics and freight forwarding company that
      provides supply chain logistics services, including warehousing, freight
      forwarding, customs brokerage and value added services (“VAS”). We do not own or
      operate any transportation assets such as aircraft, ships, trucks, river barges
      or railroads. Instead, we contract with companies that own and operate
      commercial transportation assets of all types as a means of providing both
      regional and international freight forwarding services to our customers. More
      specifically, we coordinate the storage of raw materials, supplies, components
      and finished goods and arrange their shipment by air, sea, river, rail and
      road
      from and to most major manufacturing and trading locations throughout the world.
      In order to provide VAS to our customer, we lease warehouse space in
      several of the countries in which we have offices.





Our
      revenues are generated from the air, sea and local freight transportation
      services that we arrange, customs brokerage services we perform and the VAS
      we
      provide such as scanning, pick and pack, price ticketing and warehousing of
      goods. We believe that our customers benefit from the extensive experience
      we
      have in arranging the transportation of freight, performing customs clearance
      services and providing VAS in the countries in which we operate and in which
      we
      maintain agency relationships. For our freight forwarding business, our
      experience allows us to focus on large cargo shipments, because these types
      of
      shipments normally require access to sophisticated logistical networks in many
      countries, which we have built over the last 25 years.





4




**Freight
      Forwarding and Value Added Services**





Due
      to the volume of shipments we arrange, we are generally able to negotiate
      buy rates for transportation services that are lower than the rates our
      customers could negotiate directly with transportation providers. Often, the
      shipping rates we negotiate may be reduced due to the amount of freight
      volumes that we arrange to have shipped. As a result, our customers, by having
      us arrange their freight shipments, may benefit from lower rates, and we, in
      turn, benefit by increasing our revenues and operating profits.





A
      significant portion of the expenses for our freight forwarding business is
      variable and relates directly to the amounts and volumes of shipments we book.
      Direct transportation costs are our largest variable expense. Personnel costs
      represent the second largest expense for our freight operations. Over time,
      we
      have gained the experience necessary to estimate our staffing needs based
      on the number of customer orders we fulfill. Nonetheless, staff costs are less
      flexible than other variable costs so that, in the short term, we may not be
      able to alter our staff levels to adjust for unexpected peaks and downturns
      in
      our business.





We
      derive a significant portion of our air freight revenues from the consolidation
      of cargo from a number of customers. In this segment of our business, we always
      seek to combine a mix of light and heavy cargo in order to optimize the ratio
      of
      weight and cubic capacity for all of our air freight shipments. In general,
      this
      improves our profitability on these shipments.





In
      order to maintain an adequate “inventory” of space on air carriers, we
      frequently commit to use a minimum amount of space with the airlines prior
      to
      receiving orders from our customers. To the extent we do not use such space,
      we
      incur a liability to the airlines. In the normal course of our business, we
      seek
      to minimize the risk of loss from these minimum volume contracts by carefully
      gauging customer demand, and by entering into arrangements with other freight
      forwarders whereby they take and pay for the excess cargo space that we are
      unable to fill. However, we do not have the ability to require our customers
      to
      ship minimum amounts, and, as such, we are not able to pass this risk on to
      our
      customers.




We
      also have contracts with ocean shipping lines pursuant to which the shipping
      lines undertake to provide us a certain amount of container space at agreed
      rates. Under the normal operating practices of this industry, ocean lines often
      do not charge freight forwarders for space they are unable to utilize. However,
      if an ocean shipping line did choose to enforce the stated terms of these
      contracts, we would incur a liability to the extent we did not use the
      guaranteed space under a particular contract.




As
      part of our freight forwarding business, we often provide related logistics
      services to our customers. Within our industry, such services are known as
      Value
      Added Services. The provision of VAS is a necessary and important part of our
      business and may cover a wide range of supply chain services. As an example,
      we
      may provide some or all of the following VAS to our customers: pick and scan;
      pick and pack; co-packing; bar code printing; labeling and price tagging at
      both
      the carton and item levels. At the carton level, each carton remains unopened,
      which makes this a simpler service. At the item level, each individual item
      may,
      as in the case of apparel, be identified by size and color, which requires
      advanced information technology capabilities.





The
      VAS that we provide may also involve receiving goods from one or multiple
      factories on behalf of a customer - often an overseas retail buyer - and
      warehousing such goods prior to packing the goods in individual containers
      for
      shipment to the customer's distribution centers or retail outlets. Goods are
      often shipped “store ready”, meaning they are sorted and price-tagged, ready for
      sale in each retail location. We see the demand for VAS increasing because
      a
      large portion of a retailer's higher labor and storage costs may be “exported”
to lower-cost locations, such as China, thus bypassing costly de-consolidation
      and distribution centers in the customer's home country. In addition, performing
      these services at the point of shipment in the country of manufacture may
      provide our customers with a more efficient and less costly means to store
      and
      distribute their products. Performance of VAS relies on the application of
      a
      wide range of information technologies, and requires an ability to receive,
      process and provide shipping and inventory information from and to our customers
      on a time-sensitive basis. Our billings for VAS vary with the type of services
      performed, but they are often based on a per-piece count measured by the actual
      number of units we store, process and/or prepare for shipment.





**Customs
      Brokerage Operations**





We
      have customs brokerage practices in our offices in Sydney and Melbourne,
      Australia, Manchester, England, Seattle, Washington, Long Beach and San
      Francisco, California and in Schaumburg, Illinois. In each location, we acquired
      an existing business. The revenue and expense streams for this segment of our
      business tend to be more predictable than those of our freight forwarding
      operations. However, customs brokerage in most locations is a commodity type
      business and pricing is very competitive. Consequently, operating margins in
      this business are often small, and are generally less than those in our freight
      forwarding operations. In some cases, we accept low margin brokerage business
      as
      a strategic decision to obtain freight forwarding customers or to retain the
      ones we have. Also, due to competitive factors, we often advance funds on behalf
      of our customs brokerage customers to pay the customs duty on their freight
      imports, and, as a result, we do incur credit risk, which may be substantial,
      particularly as measured against the profit from a specific customs brokerage
      job or customer. Because the return on an individual account may be small and
      the credit risk large, we exercise a heightened degree of oversight in accepting
      and retaining customs brokerage clients. In addition, we work with and advise
      our clients to take advantage of government programs that grant credit terms
      for
      the payment of customs duties that are remitted by the customers directly to
      the
      government.





5




Generally,
      billings for customs brokerage services are based on the number of freight
      clearances for a particular customer and may often include the costs and mark-up
      for ancillary services such as arranging for the local delivery of
      goods and the preparation, pick-up and delivery of documentation for such
      shipments. The amounts we bill are normally similar to what other brokerage
      companies charge in a specific geographical area. Personnel costs are the
      largest expense for this segment of our business, and, because this part of
      our
      business tends to be stable and recurring, we are able to estimate with
      a fair degree of certainty what the personnel needs are for our
      various customs practices.





**Global
      Agency Network**





We
      work with over 400 overseas cargo agents, many of whom have offices in strategic
      cities in Europe, North and South America, Africa and the Middle East. As a
      result, we may be represented by more than one agent in many cities, and we
      do
      not generally need to rely on a single agent in any one city.





All
      of our arrangements with these independent cargo agents are on a non-exclusive
      basis. Under these arrangements, the agents are not authorized to make any
      commitments or to execute contracts on our behalf. With some exceptions, the
      fees paid to and received from these agents are usually shared 50:50 and may
      include additional charges for specific services.





By
      working with independent cargo agents, we have been able to expand our
      business without the costs typically associated with the ownership and
      maintenance of company-owned offices. Given the importance of overseas cargo
      agents to our business, our senior management is involved with them on a
      regular basis to maintain and strengthen these working relationships. Our mutual
      goal is to provide and receive increased business through our network of cargo
      agents. However, because we normally have to split the revenue with these cargo
      agents, the profit we earn per job is less than what we may earn if our own
      offices handled both sides, import and export, of a shipping transaction. In
      addition, it is more difficult to ensure the same level of service to a customer
      when part of a shipment is handled by an independent agent.





**Results
      of Operations**








THREE
      MONTHS ENDED SEPTEMBER 30, 2008 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
      30,
      2007.







Total
      revenues for the three months ended September 30, 2008, increased by about
      $1.67
      million, or 3%, compared with total revenues for the three months ended
      September 30, 2007, growing from approximately $54.91 million to $56.58 million.
      Revenues from our existing business, on a like-to-like basis, decreased by
      $5.22
      million, or 10%. WCS, the US company we acquired at the end of July in 2007,
      added revenues of $20.32 million to the third quarter of 2008, compared to
      revenues of $13.43 million for the two months of August and September
      2007.





For
      the decrease in like-to-like revenues of $5.22 million, our Hong Kong and China
      revenues declined by $2.07 million in the third quarter of
      2008, compared to the same period in 2007. In addition, our existing US
      operations reported a decrease of $5.82 million in revenues, of which $3.57
      million and $2.25 million are attributable to WLG (USA) and MSA, respectively.
      Most of the decline in revenues for MSA is attributable to charges for sea
      freight that MSA’s customers paid direct in 2008, compared to last year when MSA
      paid these amounts on behalf of its customers. The decline in revenues for
      WLG (USA) is mainly attributable to the reduction in business from an
      independent, overseas agent that established its own office in the US and to
      the
      contraction of WLG (USA)’s customer base in connection with the integration
      of its operations with those of WCS. Revenues in the UK grew by about $0.68
      million, and Asean reported a growth in revenues of approximately $1.99 million,
      over this same period in 2007.




Gross
      profit rose from $6.71 million in the three months ended September 30,
      2007, to $7.26 million for the same period in 2008, for an increase of $0.55
      million, or 8%. Of this increase, Asean added $0.50 million and our China
      operation accounted for $0.26 million of the growth. WLG (UK) reported an
      increase in gross profit of $6,000 during the three months ended September
      30,
      2008. Our Hong Kong operations reported a decrease in gross profit of $0.26
      million, as a result of a decrease in revenue during the third quarter. The
      remaining increase in gross profit of $0.33 million is attributable to WCS,
      which was only included in the Group for August and September of 2007. Lastly,
      WLG (USA) reported a decrease in gross profit of $0.29 million, and the decline
      in its gross profit tracks with the decrease of its revenues.





The
      Group's overall gross margin improved from 12.2% for the three months ended
      September 30, 2007, to 12.8% for the same period in 2008.





During
      the three months ended September 30, 2008, total operating expenses increased
      to
      about $6.43 million, as compared to approximately $6.13 million for the same
      period in 2007, for an increase of $0.30 million, or 5%. All of the increase
      in
      operating costs in the third quarter of 2008 is attributable to $0.60
      million of operating expenses of WCS, which was not part of the group until
      July
      31, 2007. There was an overall decrease of $0.30 million in operating expenses
      attributable to our existing operations, representing a 5% reduction in
      operating expenses over the same period in 2007. For the three months ended
      September 30, 2008, salaries and related personnel costs increased by about
      $0.42 million, or 11%, from $3.93 million to $4.35 million. Of this increase,
      $0.49 million is attributable to WCS, leaving an overall decrease of $75,000
      in
      all other subsidiaries. Other selling and administrative costs decreased by
      approximately 6% from $1.88 million to $1.77 million, which, when combined
      with
      the increase in personnel costs, results in a total increase of $0.31 million
      for operating costs, not including amortization and depreciation. Of the $0.31
      million increase, approximately $0.59 million relates to WCS, which was acquired
      on July 31, 2007, but this increase was offset by a reduction of $0.28 million
      in the operating expenses in our existing subsidiaries. Amortization and
      depreciation expense decreased from $324,000 to $319,000, mainly as a result
      of
      certain fixed assets being fully depreciated. See *discussion of Other Operating Expenses* below.




6




After
      the provision for income taxes, the Group recorded net income of $450,000 for
      the three months ended September 30, 2008, compared to net income of $201,000
      for the same period in 2007, for an increase of $249,000. Hong Kong and China’s
      operations reported a combined net income of $740,000 for the three months
      ended
      September 30, 2008, compared with net income of $517,000 for the same period
      in
      2007, representing an increase of approximately $223,000. The improvement in
      their net incomes is mainly due to an increase in gross profit in China’s
      operations together with a decrease in administrative expenses for our Hong
      Kong office. In addition, MSA reported net income of $41,000 for the three
      months ended September 30, 2008, compared to a loss of $28,000 for the same
      period in 2007. WCS, which we acquired in the third quarter of 2007, reported
      a
      net loss of $89,000 for the three months ended September 30, 2008, compared
      with
      a net income of $184,000 for the same period in 2007. Asean’s net income for the
      third quarter of 2008 is $294,000, compared to $190,000 for the same period
      in
      2007, for an increase of $104,000, mainly as a result of a growth in
      business for some of its major customers and a decrease in the net loss
      from its warehouse in Melbourne. WLG (UK) posted a net income of $33,000 for
      the
      three months ended September 30, 2008, compared to a net income of $73,000
      for
      the same period in 2007, for a decrease of $40,000, mainly as result of an
      increase in its bad debt provision and overhead expenses related to the
      operation of a new warehouse facility. WLG (USA) reported a net loss of $89,000,
      compared to a net loss of $304,000 for the same period in 2008, for an
      improvement of $215,000. The improvement is mainly attributable to reductions
      in
      its general and administrative expenses. In addition, the parent company
      reported additional expenses of about $49,000 for the three months ended
      September 30, 2008, compared to the same period in 2007, as a result of an
      increase in interest expense of about $59,000.





**Segment
      Information**





***Air
      freight operations*** :
      Revenues from our air freight operations for the three months ended September
      30, 2008, decreased from approximately $9.46 million to about $8.51 million,
      or
      about 10%, when compared to the same period in 2007. Our Hong Kong and China
      air
      freight operations reported decreases in their revenues of $0.44 million and
      $0.20 million, respectively, mainly as a result of a slow down in the general
      air freight market during the third quarter of 2008, especially for air freight
      business from Hong Kong to Australia. In addition, Asean, MSA, WLG (USA) and
      WLG
      (UK) reported decreases in revenue by $0.02 million, $0.02 million, $0.41
      million and $0.03 million, respectively. WCS, which was not part of the Group
      until July 31, 2007, reported an increase in air freight revenues of $0.17
      million.





Cost
      of sales for our air freight operations decreased by approximately 12%, from
      $8.05 million for the three months ended September 30, 2007, to $7.08 million
      for the same period in 2008. This decrease is due to a reduction in the volume
      of air freight shipments arranged by us.





The
      gross profit margin for our air freight business increased to 16.7% for the
      three months ended September 30, 2008, from 14.9% for the same period in
      2007, mainly as a result of an improvement in the gross profit margins of our
      operations in China and Hong Kong.





Segment
      overhead for our air freight operations decreased by approximately $0.24
      million, or 18%, from $1.31 million for the three months ended September 30,
      2007, to $1.07 million for the same period in 2008. The decrease in mainly
      attributable to a decline in the general and administrative expense of
      approximately $0.12 million in our Hong Kong and China operations, and a
      decrease of about $0.20 million in the air freight overhead of WLG (USA) as
      a
      result of a decrease in its air freight business.




Net
      segment income for our air freight operations is approximately $0.36
      million for the three months ended September 30, 2008, compared to net
      income of $0.11 million for the same period in 2007, for an increase of
      $0.25 million. This growth is attributable to our Hong Kong and China air
      freight operations, which reported net incomes of approximately $0.21
      million and $0.10 million for the three months ended September 30,
      2008, respectively, compared with net incomes of approximately $87,000 and
      $31,000, respectively, for the same period in 2007, for a combined improvement
      of $0.19 million. The increases in net income are attributable to an improvement
      in gross profit together with a decrease in administrative expenses. WLG (USA)
      reported a net loss of about $17,000 in the third quarter of 2008, compared
      to a
      net loss of $65,000 for the same period in 2007, resulting in an improvement
      of
      $48,000. Most of this improvement is attributable to a reduction in WLG (USA)'s
      general overhead expenses for this segment. In addition, Asean’s net income for
      this segment improved by $21,000, while WCS reported a decrease in net income
      of
      $11,000.




***Sea
      freight operations:*** Revenues from our sea freight operations decreased by about 8% for the three
      months ended September 30, 2008, when compared to the same period in 2007,
      from
      approximately $31.90 million to $29.43 million, for a decrease of $2.47 million.
      Our operations in Hong Kong reported a decrease in revenue of $1.40 million,
      mainly due to a decline in the volume of business. In addition, WE China
      recorded a decrease in revenues of about $0.03 million. Revenues of WLG (USA)
      and MSA decreased by $3.16 million and $1.44 million, respectively. Most of
      the
      reduction in MSA’s revenues is a result of some of MSA’s customers making
      payment directly to the shipping lines for the cost of their freight shipments.
      WCS's revenues increased by $1.68 million in this quarter over the same period
      in 2007 due, in part, to the fact that WCS was only included in the
      group's results last year from August 1, 2007, onwards. In addition, Asean
      and
      WLG (UK) recorded increases in revenues of $1.39 million and $0.49 million,
      respectively.





7




Cost
      of sales for our sea freight operations decreased by 12% from $28.04 million
      for
      the three months ended September 30, 2007, to $24.79 million for the same period
      in 2008, for a decrease of $3.25 million. The acquisition of WCS increased
      the
      Group’s cost of sales by about $1.39 million for the three months ended
      September 30, 2008. As a result of the decline in revenues from our other
      companies, there was a drop in cost of sales for these entities.





The
      Group’s gross profit margin improved to approximately 15.8% for the three
      months ended September 30, 2008, from 12.1% for the same period in 2007.
      Most of this improvement is due to higher margins earned by WE China and
      Asean.





Total
      segment overhead attributable to our sea freight business increased by $0.64
      million, or 18%, from approximately $3.47 million for the three months ended
      September 30, 2007, to $4.11 million for the same period in 2008. In large
      part, this increase is attributable to the acquisition of WCS, which was not
      part of the group until July 31, 2007, but which added overhead expense of
      $0.46
      million to the Group when compared to the third quarter of 2007. Overhead
      expenses of Asean grew by about $0.40 million and relate to the growth in its
      revenues for this segment, which grew by just over 30% when compared to the
      same
      period in 2007. The remaining companies in the Group experienced an overall
      reduction of $0.22 million in overhead expense for the three months ended
      September 30, 2008, compared to the same period in 2007.





Net
      segment income for our sea freight operations is approximately $0.53
      million for the three months ended September 30, 2008, compared to net
      income of $0.39 million for the same period in 2007. MSA, Asean and WE
      China’s net incomes increased by $65,000, $57,000, and $125,000, respectively.
      WLG (USA)’s net loss was reduced from $239,000 to $73,000, for an improvement of
      $166,000, mainly attributable to a decrease in its administrative overhead.
      Hong
      Kong’s sea freight operations reported a decrease in net income of $95,000,
      mainly as a result of a decrease in revenues for this segment during the period.
      In addition, WCS reported a loss of $56,000, compared to net income of
      $118,000 for the two months ended September 30, 2007. WLG (UK)’s net income for
      the third quarter of 2008 decreased by about $3,000, when compared to the same
      period in 2007.





***Customs
      brokerage services:*** Asean, MSA, WLG (UK) and WCS each have a division that provides customs
      brokerage services. For the three months ended September 30, 2008, revenues
      from
      customs brokerage services totaled approximately $18.65 million, compared to
      $13.55 million for the same period in 2007, for an increase of about $5.10
      million. This increase is mostly attributable to additional revenues of $5.04
      million from WCS’s customs practice, which was not part of the group until July
      31, 2007. Combined revenues of Asean, WLG (UK) and MSA increased by about $0.06
      million for the three months ended September 30, 2008, when compared to the
      same
      period in 2007. Direct and administrative costs for this segment totaled about
      $18.61 million, producing a net income of $41,000 for the three months ended
      September 30, 2008, compared to a net income of $135,000 for the same period
      in
      2007. The decrease in net income is attributable to WLG (UK) and WCS, which
      reported net losses of $17,000 and $29,000, respectively, compared to net
      incomes of $20,000 and $58,000, respectively, for the same period in 2007.
      Asean
      and MSA’s combined net income in this segment totaled $87,000, for
      increases of about $26,000 and $4,000, respectively, for the three months ended
      September 30, 2008, when compared to the same period last year.




**Other
      Operating Expenses**





*Salaries
      and allowances*




Salaries
      and related expenses increased by $0.41 million, or 10%, from $3.93 million
      for
      the three months ended September 30, 2007, to $4.34 million for the same period
      in 2008. The increase is attributable to WCS, which was not part of the group
      until July 31, 2007. For the two months of August and September 2007, WCS’s
      payroll costs were about $0.60 million, and are $1.09 million for the three
      months ending September 30, 2008, for an increase of $0.49 million over the
      same
      period last year. There is an overall decrease of employee payroll of about
      $80,000 in our remaining subsidiaries. As of September 30, 2008, the Group's
      employee headcount was 337, compared to 322 at September 30, 2007.




*Rent*




Rent
      expense for our facilities increased by 21% from $0.42 million for the three
      months ended September 30 2007, to $0.51 million for the same period in 2008,
      for an increase of $0.09 million. The acquired operations of WCS added $23,000
      of rent expense to the Group. WLG (UK) moved to a larger warehouse facility
      in
      the first quarter of 2008, which increased its rental expense by $38,000, when
      compared to the three months ended September 30, 2007. In addition, Asean added
      rent expense of $24,000, mainly attributable to an increase in its office
      rent.





*Other
      selling and administrative expenses*





Other
      SG&A expense for the three months ended September 30, 2008, totaled about
      $1.26 million, compared to $1.46 million for the same period in 2007, for a
      decrease of $0.20 million. The acquisition of WCS increased Other SG&A
      expenses by approximately $75,000. Asean’s Other SG&A expenses increased by
      $97,000 for the three months ended September 30, 2008, when compared to the
      same
      period in 2007, mainly as a result of an increase in operating costs for a
      new
      warehouse. Other SG&A expenses in our remaining operating subsidiaries
      declined by about $0.37 million in the third quarter of 2008, compared to the
      third quarter of 2007. Much of the decline in the Other SG&A is due to a
      reduction in bad debt expense and exchange losses.





8




*Depreciation
      and Amortization*




Depreciation
      expense for property, plant and equipment decreased to $102,000 for the three
      months ended September 30, 2008, compared to $109,000 for the same period in
      2007. WCS, which was not part of the group until July 31, 2007, recorded an
      increase in depreciation of $9,000. WLG (UK) and Asean
      each reported an increase in depreciation of $4,000, due to the
      addition of fixed assets. Depreciation expense for the remaining subsidiaries
      decreased by about $24,000.





Amortization
      expense is attributable to the customer lists acquired in the acquisitions
      of
      WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with
      the
      acquisition of WLG (USA), we recorded a customer list asset of $0.51 million,
      which is being amortized on a straight-line basis over 5 years. Asean's customer
      list was valued at $1.56 million and is being amortized on a straight-line
      basis
      over 8 years. A value of $0.16 million was assigned to ALI's customer list,
      which, due to impairment write-downs and normal amortization in 2006 and 2007,
      was fully amortized by the end of 2007. WLG (UK)'s customer list was valued
      at
      $0.83 million and is being amortized over 5 years. A cost of $1.55 million
      was
      assigned to the customer list of the MSA Group, which is being amortized over
      a
      10-year life. However, in 2007, MSA’s customer list was reduced by $0.60 million
      due to MSA not achieving certain earnings targets. During the third quarter
      of
      2008, MSA’s customer list was further reduced by $400,000 because one of its
      former owners left the company and forfeited any right to an earn-out
      payment that could have been as much as $400,000. WCS’s customer list was valued
      at $2.84 million and is being amortized over 9 years. For the three months
      ended
      September 30, 2008, amortization expense totaled $0.22 million, and is
      attributable to WLG (USA), Asean, WLG (UK), the MSA Group and WCS in the
      approximate amounts of $26,000, $49,000, $42,000, $22,000 and $79,000,
      respectively. Amortization expense for the three months ended September 30,
      2007, was $0.22 million and related to WLG (USA), Asean, ALI, WLG (UK), the
      MSA
      Group and WCS in the approximate amounts of $26,000, $49,000, $8,000, $42,000,
      $39,000 and $53,000 respectively. WCS was not part of the Group until July
      31,
      2007, and, as such, only two months’ amortization expense was recorded for
      WCS’s customer list during the third quarter of 2007.




*Interest
      Expense*




Interest
      expense increased from $199,000 for the three months ended September 30, 2007,
      to $241,000 for the same period in 2008, for an increase of $42,000. Asean
      reported an increase in interest expense of $25,000, mainly as a result of
      an
      increase in interest rates and higher bank debt. WLG (USA)’s term loan and
      credit line were fully repaid in the first half of 2008, and, as such, its
      interest expense declined by $36,000. WCS reported a decrease of $7,000 in
      its interest expense, when compared to this period last year. The Group incurred
      interest expense of about $69,000 for a loan of $0.60 million and $1.7 million
      Series B convertible redeemable preferred stock held by a director, and interest
      expense of about $21,000 for a loan of $0.56 million as of September 30, 2008,
      from another director. All director loans and the Series B convertible
      redeemable preferred stock carry an interest rate of 12% per annum.




*Other
      income/ expense*





Other income
      for the three months ended September 30, 2008, totaled $126,000, and consisted
      mainly of $94,000 in exchange gains attributable to our operations in Australia
      and Hong Kong, and to miscellaneous income items totaling $32,000. Other income
      of $23,000 reported for the same period in 2007 was composed of exchange gains
      recorded by Asean and WLG (USA).




*Provision
      for Income Taxes*





The
      provision for income taxes increased from $0.22 million for the three months
      ended September 30, 2007, to $0.27 million for the same period in 2008. Income
      tax of $0.26 million was provided on the combined net income of $1.23 million
      attributable to our Hong Kong, China and Australian operations, for an effective
      tax rate of 21.1%. The US operations of WLG (USA), MSA and WCS are included
      in a
      US consolidated federal income tax return with the Group's parent company,
      and,
      together, these companies reported a consolidated pre-tax loss of approximately
      $0.52 million, which includes about $0.21 million of expenses which are not
      deductible for income tax purposes, the largest being amortization of $0.20
      million. No tax benefit has been provided on the US losses. After giving effect
      to all losses and amortization expense, for which no income tax benefit was
      provided, the effective tax rate on the Group's income of $0.72 million is
      approximately 37.5% for the three months ended September 30, 2008.





NINE
      MONTHS ENDED SEPTEMBER 30, 2008 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30,
      2007.




**Results
      of Operations**





Total
      revenues for the nine months ended September 30, 2008, increased by about $52.18
      million, or 45%, compared with total revenues for the nine months ended
      September 30, 2007, growing from approximately $116.10 million to $168.28
      million. Of this increase, revenues from our existing operations on a
      like-to-like basis grew by $3.03 million, for an increase of 3%. WCS, the US
      company acquired on July 31, 2007, reported revenues of $62.58 million compared
      to revenues of $13.43 million reported for the months of August and September
      2007, adding $49.15 million in revenues to the Group.





9




Like-to-like
      revenues increased by about $3.03 million for the nine months ended September
      30, 2008, compared to the same period last year. Asean contributed
      additional revenues of approximately $7.58 million, and our Hong Kong and
      China operations added about $2.02 million in revenues. Revenues in our UK
      operations grew by about $3.02 million over the same period last year. Our
      existing US operations reported a decrease of $9.59 million in revenues, of
      which $2.36 million is from MSA and $7.23 million is from WLG (USA). The decline
      in revenues of WLG (USA) is due to a contraction of its customer base caused
      by
      an independent agent in the U.K. that established its own office in the
      U.S., and to the integration of WLG (USA)’s operations with those of WCS. Much
      of the reduction in MSA’s revenues is due to some of its larger customers paying
      the shipping lines direct for their cargo shipments, rather than having MSA
      continue to pay such amounts.




Gross
      profit rose from $16.49 million in the nine months ended September 30,
      2007, to $20.97 million for the same period in 2008, for an increase of $4.48
      million, or 27%. Of this increase, our Hong Kong and China operations
      contributed $0.39 million and Asean added $1.56 million. In addition, MSA and
      WLG (UK) reported an increase in gross profit of $0.14 million and $0.05
      million, respectively. WLG (USA) reported a decrease of $0.98 million in its
      gross profit. This decline in WLG (USA)’s gross profit is mainly due to the
      reduction in business from a former UK agent of WLG (USA) that established
      its
      own office in the US, and to a contraction in WLG (USA)’s customer base in
      connection with the integration of its business with that of WCS. The remaining
      increase in gross profit of $3.32 million is attributable to WCS, which was
      not
      part of the Group until July 31, 2007.





The
      Group's overall gross margin decreased from 14.2% for the nine months ended
      September 30, 2007, to 12.5% for the same period in 2008. A part of the
      reduction in gross margin is due to fuel surcharges levied by the various
      airlines and shipping lines. In almost all cases, we were able to bill the
      fuel
      surcharges to our customers, but at no mark up, with the effect that this
      reduced our gross profit margin, but not our gross profit. Much of the decline
      in gross margin is attributable to WCS, which we acquired during the third
      quarter of 2007. WCS recorded a gross margin of 7.0% covering both its freight
      forwarding and customs brokerage operations for the nine months ended September
      30, 2008. The lower gross margin of WCS is due, in part, to low margins for
      its freight forwarding business and the duty paid on behalf of its
      customers.




During
      the nine months ended September 30, 2008, total operating expenses increased
      to
      about $19.16 million, as compared to approximately $15.22 million for the same
      period in 2007, for an increase of $3.94 million, or 26%. Most of the increase
      in operating costs for the first three quarters of 2008 is attributable
      to $3.44 million of operating expenses of WCS, which was acquired in the
      third quarter of 2007. The remaining increase of $0.50 million is attributable
      to our existing operations, and represents a 3% increase in operating expenses
      over the same period in 2007. For the nine months ended September 30, 2008,
      salaries and related personnel costs increased by about $2.70 million, or 27%,
      from $9.91 million to $12.61 million. Of this increase, $2.55 million is
      attributable to WCS. Other selling and administrative costs grew by
      approximately 24% from $4.51 million to $5.59 million, which, when combined
      with
      the increase in personnel costs, results in a total increase of almost $3.78
      million for operating costs, not including amortization and depreciation. Of
      the
      $3.78 million increase, approximately $3.38 million relates to WCS, which was
      not part of the Group until July 31, 2007. In part, our operating expenses
      are
      higher in 2008, when compared to 2007, because we opened two new warehouse
      facilities since the first quarter of 2007. Asean added a new warehouse in
      Melbourne, Australia, near the end of the second quarter in 2007, and WLG
      (UK) moved to a larger warehouse in Manchester, England, in the first
      quarter of 2008. Amortization and depreciation expenses increased from $0.81
      million to $0.96 million, or about 19%. Most of this increase is for
      amortization expense, which increased as a result of recording certain
      intangible assets in connection with the acquisition of WCS in 2007.
      See *discussion of Other Operating Expenses* below.




After
      the provision for income taxes, the Group recorded a net income of $0.71 million
      for the nine months ended September 30, 2008, compared to net income of $0.56
      million for the same period in 2007. Hong Kong and China’s operations reported a
      combined net income of $1.74 million in the first three quarters of 2008,
      compared with net income of $1.28 million for the same period in 2007,
      representing an increase of approximately $0.46 million. The improvement in
      their net incomes is mainly due to an increase in the volume of business done,
      resulting in higher revenues matched by a slower growth in their overhead
      expenses. In addition, MSA’s net income improved to $180,000 for the nine months
      ended September 30, 2008, compared to a loss of $24,000 for the same period
      in
      2007, mainly as a result of an increase in its gross profit. Asean’s net income
      for the nine months ended September 30, 2008, is $400,000, compared to $294,000
      for the same period in 2007. This increase of $106,000 is due to increases
      in
      both Asean’s freight forwarding and customs brokerage business, but was
      negatively affected by operating costs of its new warehouse facility. WLG (USA)
      and WLG (UK) incurred losses of $109,000 and $141,000, respectively, for the
      nine months ended September 30, 2008, compared to a net loss of $148,000 and
      net
      income of $106,000, respectively, for the same period in 2007. The 2008 losses
      for these two companies are a result of a bankruptcy of a UK customer, expenses
      required to move to a new warehouse in the UK and to the loss of business in
      connection with the integration of WLG (USA)’s operations with those of WCS, but
      which was offset by a reduction in WLG (USA)’s operating expenses. The parent
      company’s loss increased by about $179,000 for the nine months ended September
      30, 2008, mainly due to additional amortization of about $110,000 from the
      intangible assets of WCS, interest expense of $187,000 incurred for the WCS
      acquisition and the repayment of certain bank debt of WLG (USA) and a reduction
      in compensation expense of about $160,000. WCS, which we acquired in the third
      quarter of 2007, reported a net loss of $52,000 for the nine months ended
      September 30, 2008, compared to net income of $182,000 for August and September
      in 2007.





10




**Segment
      Information**





***Air
      freight operations*** :
      Revenues from our air freight operations for the nine months ended September
      30,
      2008, increased by nearly $5.30 million to about $29.51 million from
      approximately $24.21 million, or about 22%, when compared to the same period
      in
      2007. Asean, WLG (UK), WE China, WEHK and WAE all reported increases in their
      air freight revenues, contributing $0.67 million, $0.10 million, $1.53 million,
      $0.40 million and $1.81 million, respectively, to the overall growth in
      revenues. WLG (USA) and MSA reported a decrease in their air freight revenues
      of
      $0.74 million and $36,000, respectively. WCS, which was not part of the Group
      until July 31, 2007, contributed total air freight revenues of $2.11 million
      for
      the nine months ended September 30, 2008, compared to revenues of $0.54 million
      for August and September 2007.




Cost
      of sales for our air freight operations increased by approximately 23%, from
      $20.13 million for the nine months ended September 30, 2007, to $24.81 million
      for the same period in 2008. This increase is due to higher volumes of air
      freight shipments arranged by us, and is attributable to a growth in the
      business of our Australian, Hong Kong and China operations and new air freight
      revenues from WCS. Of the total increase of $4.68 million in cost of sales
      for
      our air freight operations, approximately $1.41 million is attributable to
      WCS.





The
      Group’s gross profit margin for its air freight business decreased from 16.9%
      for the nine months ended September 30, 2007, to 15.9% for the same period
      in
      2008, and is mainly the result of airlines charging higher fuel surcharges
      for
      the first nine months of 2008, compared to the same period last year. Although
      we have been able to bill our customers for the fuel surcharges, these
      additional charges had the effect of reducing our gross margin, but not our
      gross profit, because the surcharges were passed on to our customers
      without a mark-up.





Segment
      overhead for our air freight operations increased by approximately $0.15
      million, or 4%, from $3.60 million for the nine months ended September 30,
      2007,
      to $3.75 million for the same period in 2008. Of this increase, approximately
      $0.16 million is attributable to the overhead expenses of WCS. There is an
      overall decrease of $13,000 in overhead expenses incurred by our other
      subsidiaries.




Net
      segment income for our air freight operations is approximately $0.96 million
      for
      the nine months ended September 30, 2008, compared to net income of $0.48
      million for the same period in 2007, for an increase of $0.48 million. Our
      Hong
      Kong and China air freight operations reported net incomes of approximately
      $0.69 million and $0.20 million for the nine months ended September 30, 2008,
      respectively, compared with net incomes of approximately $0.40 million and
      $36,000, respectively, for the same period in 2007, for a combined improvement
      of $0.45 million. The increase in net income results from a growth in the volume
      of shipments by our Hong Kong and China operations, especially to
      Australia. In addition, Asean reported an increase of approximately $21,000
      in
      its air freight net income for the nine months ended September 30, 2008. WLG
      (USA) reduced the loss in its air freight business by $11,000 for the nine
      months ended September 30, 2008, when compared to the same period last year.
      WCS
      reported a net loss of $2,000, compared to a net income of $7,000 for this
      segment in 2007.




***Sea
      freight operations:*** Revenues from our sea freight operations rose by about 39% for the nine months
      ended September 30, 2008, when compared to the same period in 2007, growing
      from
      approximately $62.09 million to $86.17 million, for an increase of $24.08
      million. Much of this increase is attributable to WCS, which was acquired during
      the third quarter of 2007, and which reported revenues of $36.41 million for
      the
      nine months ended September 30, 2008, compared to $9.52 million in revenues
      for
      the months of August and September 2007 . There was an overall decrease in
      revenue from our existing operations of about $2.81 million for the nine months
      ended September 30, 2008, or about 5%, when compared to the same period in
      2007.
      Asean, WE China and WLG (UK) reported increases in their revenues of $4.78
      million, $1.01 million and $1.49 million, respectively, compared to the same
      period in 2007. WLG (USA) experienced a decrease in revenues of $6.49 million
      as
      a result of a reduction in its customer base, due, in part, to the integration
      of its operations with those of WCS. In addition, MSA recorded a decrease
      in revenues of about $0.87 million, much of which is due to some of MSA’s
      customers paying the shipping lines direct for the cost of shipping their
      cargoes, rather than MSA paying these charges on behalf of its customers. Our
      Hong Kong sea freight operations reported a decrease in revenue of $2.73
      million, mainly due to a decrease in business to the UK and
      Australia.





Cost
      of sales for our sea freight operations increased by almost 40% from $52.43
      million for the nine months ended September 30, 2007, to $73.50 million for
      the
      same period in 2008, for an increase of $21.07 million. This increase is
      attributable to the acquisition of WCS, which increased the Group’s cost of
      sales by about $24.76 million for the nine months ended September 30, 2008.
      As a
      result of a decline in the sea freight revenues of our other subsidiaries,
      there
      is a corresponding decrease of $3.69 million in their cost of
      sales.




The
      Group’s gross profit margin decreased from approximately 15.6% for the nine
      months ended September 30, 2007, to 14.7% for the same period in 2008. The
      decrease is mainly attributable to WCS, which has a lower gross profit margin
      for its sea freight business than the gross margin reported by the other Group
      subsidiaries. For the nine months ended September 30, 2008, WCS reported a
      gross
      profit margin of 7.8% for its sea freight operations, compared to a gross profit
      margin of 19.8% for the sea freight operations of all other members of the
      Group.





11




Total
      segment overhead attributable to our sea freight business increased by $2.91
      million, or 34%, from approximately $8.62 million for the nine months ended
      September 30, 2007, to $11.53 million for the same period in 2008. In part,
      this
      increase is attributable to the acquisition of WCS, which was not part of the
      group until July 31, 2007. WCS added overhead expense of $2.28 million to the
      Group for the nine months ended September 30, 2008. There is an increase in
      segment overhead of $0.63 million in the remaining subsidiaries. Most of this
      increase is attributable to increased costs incurred by Asean to cope with
      its
      higher sea freight revenues and to expenses for its new warehouse facility
      in
      Melbourne.




Net
      segment income for our sea freight operations is approximately $1.14 million
      for
      the nine months ended September 30, 2008, compared to net income of $1.04
      million for the same period in 2007. WE China, MSA and Asean’s net incomes for
      the nine months ended September 30, 2008, increased by $255,000, $182,000,
      and
      $61,000, respectively, over the amounts they reported for the same period in
      2007. Hong Kong’s sea freight operations reported a decrease of $240,000
      in net income for this period, compared to the first three quarters of
      2007. WLG (USA) reported a net loss of $88,000, which represents a decline
      of
      $28,000 in the net loss of $116,000 for the first nine months of 2007. WLG
      (UK)
      reported a net income of $20,000 for the first three quarters of 2008, which
      compares to a net income of $60,000 for the same period in 2007, for a decrease
      of $40,000. In addition, WCS reported a net loss of $33,000 for the nine
      months ended September 30, 2008, compared to net income of $118,000 for
      the months of August and September 2007.





***Customs
      brokerage services:*** Asean, MSA, WLG (UK) and WCS each have a division that provides customs
      brokerage services. For the nine months ended September 30, 2008, revenues
      from
      customs brokerage services totaled approximately $52.61 million, compared to
      $29.80 million for the same period in 2007, for an increase of about $22.81
      million. This growth is mostly attributable to revenues of $20.70 million from
      WCS’s customs practice. Combined revenues for Asean, MSA and WLG (UK) increased
      by about $2.11 million for the nine months ended September 30, 2008, compared
      to
      the same period in 2007. Direct and administrative costs for this segment
      totaled about $52.67 million, producing a net loss of $64,000 for the nine
      months ended September 30, 2008, compared to net income of $170,000 for the
      same
      period in 2007. The loss is mainly attributable to WLG (UK), which reported
      a
      net loss of $176,000 in this segment, compared to a net income of $30,000 for
      the same period in 2007. WCS recorded a net loss of $16,000 for the nine months
      ended September 30, 2008, compared to net income of $58,000 for the months
      of
      August and September 2007. MSA’s net income in this segment for the nine months
      ended September 30, 2008, is approximately $10,000, which compares to a net
      loss
      of about $11,000 in the same period for 2007, for an improvement of $21,000.
      Asean’s net income from its customs practice for this period in 2008 is about
      $118,000, which compares to $93,000 for the same period in 2007, resulting
      in an
      improvement of $25,000.




**Other
      Operating Expenses**





*Salaries
      and allowances*




Salaries
      and related expenses increased by $2.70 million, or 27%, from $9.91 million
      for
      the nine months ended September 30, 2007, to $12.61 million for the same period
      in 2008. This increase is attributable to several factors, including normal
      increments in employee salaries given at the beginning of 2008, personnel hired
      during the period, particularly for Asean’s new warehouse facility, and to WCS,
      which was acquired on July 31, 2007, of last year. WCS increased our employee
      count by 58 and added personnel costs of $2.55 million for the nine months
      ended
      September 30, 2008. The remaining increase of $0.15 million is attributable
      to
      salary increases in our existing operations, compensation expense for stock
      options and to new employees added by Asean. As of September 30, 2008, the
      Group's employee headcount was 337, compared to 322 at September 30,
      2007.




*Rent*




Rent
      expense for our facilities increased by 39% from $1.04 million for the nine
      months ended September 30 2007, to $1.45 million for the same period in 2008,
      for an overall increase of $0.41 million. The acquired operations of WCS added
      $158,000 of rent expense to the Group. WLG (UK) moved to a larger warehouse
      facility in the first quarter of 2008, which increased its rental expense by
      $98,000, when compared to the nine months ended September 30, 2007. In addition,
      Asean’s rental expenses grew by about $129,000, mainly attributable to an
      increase in its office rent and to the rent for a new warehouse facility, which
      opened in May 2007 in Melbourne, Australia.





*Other
      selling and administrative expenses*





Other
      SG&A expense for the nine months ended September 30, 2008, totaled about
      $4.13 million, compared to $3.47 million for the same period in 2007, for an
      increase of $0.66 million. The increase is attributable to the acquisition
      of
      WCS, which increased Other SG&A expenses by $0.67 million. There is an
      overall decrease in Other SG&A expenses of $8,000 for the remaining
      companies in the Group.





*Depreciation
      and Amortization*




Depreciation
      expense for property, plant and equipment increased to $307,000 for the nine
      months ended September 30, 2008, compared to $270,000 for the same period in
      2007, for an increase of $37,000. All of this increase is attributable to WCS,
      which recorded depreciation expense of $84,000 for the first three quarters
      of
      2008, compared to depreciation expense of $19,000 for the months of August
      and
      September 2007. Depreciation expense of our existing subsidiaries declined
      by about $28,000.




12




Amortization
      expense is attributable to the customer lists acquired in the acquisitions
      of
      WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with
      the
      acquisition of WLG (USA), we recorded a customer list asset of $0.51 million,
      which is being amortized on a straight-line basis over 5 years. Asean's customer
      list was valued at $1.56 million and is being amortized on a straight-line
      basis
      over 8 years. A value of $0.16 million was assigned to ALI's customer list,
      which, due to impairment write-downs and normal amortization in 2006 and 2007,
      was fully amortized by the end of 2007. WLG (UK)'s customer list was valued
      at
      $0.83 million and is being amortized over 5 years. A cost of $1.55 million
      was
      assigned to the customer list of the MSA Group, which is being amortized over
      a
      10-year life. In 2007, MSA’s customer list was reduced by $0.60 million due to
      MSA not achieving certain earnings targets. During the third quarter of 2008,
      MSA’s customer list was further reduced by $400,000, as one of its former
      shareholders left the company and forfeited any right to an earn-out
      payment which could have been as much as $400,000. WCS’s customer list was
      valued at $2.84 million and is being amortized over 9 years. For the nine months
      ended September 30, 2008, amortization expense totaled $0.65 million, and is
      attributable to WLG (USA), Asean, WLG (UK), the MSA Group and WCS in the
      approximate amounts of $77,000, $146,000, $125,000, $66,000 and $236,000,
      respectively. Amortization expense for the nine months ended September 30,
      2007,
      was $0.54 million and related to WLG (USA), Asean, ALI, WLG (UK), the MSA Group
      and WCS in the approximate amounts of $77,000, $146,000, $23,000, $125,000,
      $116,000 and $53,000, respectively. WCS was not part of the Group until July
      31,
      2007 and, as such, only two months’ amortization expense of WCS’s customer list
      was reported for the nine months ended September 30, 2007.




*Interest
      Expense*




Interest
      expense increased from $0.40 million for the nine months ended September 30,
      2007, to $0.68 million for the same period in 2008, for an increase of $0.28
      million. This increase is partly attributable to WCS, which added interest
      expense of approximately $0.10 million for the first three quarters of 2008,
      compared to the months of August and September in 2007, during which WCS was
      part of the Group. Asean reported an increase in interest expense of $75,000,
      mainly as a result of higher interest rates and additional bank borrowings.
      WLG
      (USA)’s interest expense declined by about $91,000 due to the repayment in full
      of a term loan and its line of credit, in March and April 2008, respectively.
      In
      addition, the Group incurred interest expense of about $0.15 million for a
      director’s loan of $0.60 million and $1.7 million Series B convertible
      redeemable preferred stock, and interest expense of about $66,000 for a loan
      of
      $0.56 million as of September 30, 2008, from another director. All director
      loans and the Series B convertible redeemable preferred stock carry an interest
      rate of 12% per annum.




*Other
      income/ expense*





Other
      income for the nine months ended September 30, 2008, totaled $48,000, and
      consisted of exchange gains of about $43,000, mainly attributable to our
      operations in Australia and Hong Kong and to miscellaneous income items totaling
      $5,000. Other income of $85,000 for the same period in 2007 was mainly composed
      of exchange gains recorded by Asean and WLG (UK).




*Provision
      for Income Taxes*





The
      provision for income taxes increased from $0.43 million for the nine months
      ended September 30, 2007, to $0.49 million for the same period in 2008. Income
      tax of $0.48 million was provided on the combined net income of $2.42 million
      attributable to our Hong Kong, China and Australian operations, for an effective
      tax rate of 19.8%. The US operations of WLG (USA), MSA and WCS are included
      in a
      US consolidated federal income tax return with the Group's parent company,
      and,
      together, these companies reported a consolidated pre-tax loss of approximately
      $0.99 million, which includes about $0.63 million of expenses which are not
      deductible for income tax purposes, the largest being amortization expense
      of
      $0.62 million. Except for state income taxes of about $10,000, no tax benefit
      has been provided on the US losses. Also no tax benefit was provided on the
      $0.23 million net loss of WLG (UK). After giving effect to all losses and
      amortization expense, for which no income tax benefit was provided, the
      effective tax rate on the Group's income of $1.21 million is approximately
      40.5%
      for the nine months ended September 30, 2008.




13




**LIQUIDITY
      AND CAPITAL RESOURCES**




For
      the nine months ended September 30, 2008, our operations provided cash of
      approximately $1.04 million, compared with cash of $1.69 million provided by
      our
      operations for the same period in 2007. In 2008, cash was provided by the
      following sources: net income of $0.71 million; amortization and depreciation
      expense of $0.96 million; provision for bad debts of $0.19 million; other
      non-cash items of $7,000; decrease in trade receivables of $1.26 million and
      an
      increase in income tax payable of $0.16 million. Major components that used
      cash
      for operations in 2008 include: an increase in deposits and prepayments of
      $0.04
      million; a decrease in trade payables of $1.64 million; a decrease
      in other accrued liabilities of $0.14 million and repayment of $0.43
      million to directors for loans and advances.




Net
      cash provided by financing activities totaled about $39,000 for the nine months
      ended September 30, 2008, compared to net cash of about $1.62
      million provided by financing activities in 2007. Cash provided by
      financing activities in 2007 included loans from directors of $1.5 million,
      an
      increase in bank overdrafts of $0.31 million and a decrease in restricted cash
      of $0.01 million, while cash used by financing activities in 2007 included
      repayment of bank loans of $0.03 million, repayment of capital lease obligations
      of $0.10 million and cash dividends of $0.07 million. Cash provided by financing
      activities in 2008 included an increase of $83,000 in bank overdraft facilities
      and loans from a director totaling $1.64 million. Cash used by financing
      activities in 2008 included an increase in restricted cash of $64,000, repayment
      of bank loans and capital lease obligations of $1.46 million and $85,000,
      respectively, and cash dividends of $68,000 paid on our preferred stock.




As
      of September 30, 2008, certain banks in Hong Kong and China had issued bank
      guarantees of $0.54 million to several airlines on behalf of WAE and WE China.
      With these guarantees, the airlines, in turn, grant credit terms to WAE and
      WE
      China. In general, payments for air freight shipments must be made to the
      airlines prior to the time we receive payments from our customers. These
      guarantees are secured by cash of approximately $0.54 million in restricted
      bank
      accounts. A bank has provided a guarantee on behalf of Asean of about $0.11
      million in favor of the owner of the office premises occupied by Asean. In
      addition, a UK bank has provided a guarantee of $0.55 million to the UK Customs
      and Excise Department for the benefit of WLG (UK). In return for this guarantee,
      the UK Customs and Excise Department has granted credit terms to WLG
      (UK). In addition to giving a parent company guarantee to WLG
      (UK)’s bank, a parent company guarantee has been given in support of
      the new office and warehouse facilities of WLG (UK). This latter guarantee
      is
      limited to an amount equal to three years rent at the date the guarantee is
      enforced. As of September 30, 2008, our obligation under this guarantee is
      about $0.93 million.




During
      2006, WEHK borrowed approximately $0.11 million to pay income taxes and for
      use
      as working capital. This loan was fully repaid by November 2007. In October
      2007, WEHK borrowed $0.28 million to pay income taxes, and this loan is
      repayable in equal installments over twelve months. As of September 30, 2008,
      the outstanding balance of this loan was approximately $24,000.





In
      November 2006, WLG (USA) obtained a $1.0 million revolving line of credit and
      a
      five year, $1.0 million term loan from its bank. The term loan was to be repaid
      ratably over 60 months. Both loans were secured by all of the assets of WLG
      (USA) and MSA and by a guarantee given by the Group’s parent company. Under
      these two loan facilities, WLG (USA) had to maintain certain financial covenant
      ratios, including minimum cash flow coverage and maximum funded debt to earnings
      before taxes, interest and non-cash items, each of which was to be measured
      on a rolling basis at the end of each calendar quarter. As of December 31,
      2007,
      WLG (USA) was in violation of these covenants; however, the bank waived the
      violations. Subsequent to December 31, 2007, the bank required that the term
      loan be repaid in March 2008 and set April 15, 2008, for termination of the
      revolving line of credit. The term loan of approximately $0.75 million was
      fully
      repaid prior to March 31, 2008, and the line of credit, which had a balance
      of
      $0.13 million, was repaid on April 15, 2008. These loans were repaid from the
      Group’s working capital and from a loan provided to the Group by a
      director.





Asean
      has a receivables loan facility in the face amount of approximately $3.28
      million, which is secured by, and based on, 100% and 80% of its accounts
      receivable, respectively. It also has an overdraft facility with a limit of
      about $0.55 million. At September 30, 2008, Asean's bank debt under its
      receivables and overdraft facilities was $2.77 million and $0.55 million,
      respectively, with interest rates of approximately 11.63% for the receivables
      line and 10.73% for the overdraft facility. Asean's bank, in addition to having
      a charge over all of its accounts receivable, holds a first registered mortgage
      over all of Asean's assets. Asean’s overdraft facilities are guaranteed by the
      Group’s parent company.




WCS
      has a revolving loan facility from a bank in the face amount of $5.50 million.
      This facility, which is secured in part by all of the trade receivables of
      WCS,
      MSA and WLG (USA), allows borrowings equal to 80% of eligible receivables of
      the
      three companies. As of September 30, 2008, WCS owed approximately $3.59 million
      under this facility, which carried an interest rate of 5.0% per annum. This
      loan
      facility is also secured by all of the assets of WCS and by a guarantee from
      the
      Group’s parent company. These facilities expire on November 28,
      2008.




We
      continue to execute our business plan which calls for us to make strategic
      acquisitions to supplement our internal growth. In 2005, we completed the
      acquisitions of three freight forwarding and logistics companies, one of which
      had a customs brokerage business. We followed this in 2006 by acquiring two
      freight forwarding and customs brokerage companies. In July of 2007, we acquired
      WCS, which operates both a freight forwarding business and customs brokerage
      practice. We expect to make additional strategic acquisitions to expand our
      ability to provide a full range of logistics services on a global scale, as
      well
      as to increase our capabilities in certain key markets that we currently serve.
      To the extent that we are unable to use our common stock to acquire other
      companies, we will need to raise additional capital, if we are to be successful
      in executing our business plan. At this point, we are not certain of the amount
      of capital we may need because the amount will vary with the size, type and
      nature of the consideration required for the prospective
      acquisitions.




14




However,
      there can be no assurance that we will be successful in identifying suitable
      acquisition targets, and, if we are, there can be no certainty that we will
      be
      able to complete the acquisitions. Nor can there be any assurance that we would
      be successful in our efforts to raise additional capital, either in the form
      of
      long-tem debt and/or equity. We may also seek to raise additional capital to
      use
      as working capital to allow us to support and accelerate the growth of the
      Group, particularly in the US, Australia and Asia.




Our
      approximate contractual cash obligations as of September 30, 2008, are set
      forth
      in the table below and are expected to equal approximately $0.41 million per
      month over the following twelve months.




Payments Due by Period (in thousands)Contractual Obligations
            
            
            Total
            
            
            Less than
              1year
            
            
            1-3 years
            
            
            4-5 years
            
            
            After 5
                yearsLong-term
                debt obligations
            
            $
            1,163
            
            $
            1,013
            
            $
            150
            
            
            —
            
            
            —Facilities
                rental and equipment lease obligations
            
            $
            5,717
            
            $
            1,374
            
            $
            1,684
            
            $
            923
            
            $
            1,736Cargo
                space commitments
            
            $
            2,487
            
            $
            2,487
            
            
            —
            
            
            —
            
            
            —Redeemable
                preferred stock*
            
            $
            1,700
            
            
            —
            
            $
            1,700
            
            
            —
            
            
            —Total
                contractual cash obligations
            
            $
            11,067
            
            $
            4,874
            
            $
            3,534
            
            $
            923
            
            $
            1,736




*
      Either the Company or the Holder may require full or partial redemption of
      the preferred stock at any time after June 30, 2010.




During
      the nine months ended September 30, 2007 and 2008, we have not engaged in
      any:





·
            material
                off-balance sheet activities, including the use of structured finance
                or
                special purpose entities;




·
            trading
                activities in non-exchange traded
                contracts.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





This
      item is not applicable because the Company is a smaller reporting
      company.





**ITEM
      4.**  **CONTROLS
      AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





The
      Company's management, with the participation of the Company's Chief Executive
      Officer and Chief Financial Officer, has evaluated the effectiveness of the
      Company's disclosure controls and procedures (as such term is defined in Rules
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as Amended
      (the “Exchange Act”)) as of the end of the period covered by this Quarterly
      Report on Form 10-Q. Based on such evaluation, the Company's Chief Executive
      Officer and Chief Financial Officer have concluded that, as of the end of such
      period, the Company's disclosure controls and procedures are effective, as
      of
      the end of the period covered by this Report on Form 10-Q, in ensuring that
      material information relating to the Company required to be disclosed by the
      Company in reports that it files or submits under the Exchange Act is recorded,
      processed, summarized and reported on a timely basis.




**Changes
      in Internal Control Over Financial Reporting**





The
      Company reported in its annual report on Form 10-K for the fiscal year ended
      December 31, 2007, certain deficiencies in its internal control over financial
      reporting. The Company is continuing the process of remediating such
      deficiencies and reviewing and formalizing its internal control and procedures
      over financial reporting. The Company has not completed this process, and this
      process will require significant amounts of management time and resources.
      In
      the course of evaluation and testing, management may identify deficiencies,
      in
      addition to those previously identified, that will need to be addressed and
      remediated. The forgoing notwithstanding, there has been no change in the
      Company’s internal control over financial reporting during the quarter
      ended September 30, 2008, that has materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.





15




**Part
      II: Other Information**




**Item
      1: Legal Proceedings:**





During
      the three months ended September 30, 2008, there have been no material
      changes to legal proceedings from those discussed in our Annual Report on Form
      10-K for the year ended December 31, 2007 and in our Quarterly Report on
      Form 10-Q filed for the three months and six months ended June 30,
      2008.





**Item
      1A: Risk Factors:**




In
        addition to the other information set forth in this Quarterly Report on Form
        10-Q, you should carefully consider the Risk Factors included in Part I,
“Item
        1A. — “Risk Factors” of our Annual Report on Form 10-K for the year ended
        December 31, 2007, and the additional Risk Factors set forth below. These
        Risk
        Factors could materially impact our business, financial condition and/or
        operating results. Additional risks and uncertainties not currently known
        to us
        or that we currently deem to be immaterial also may materially adversely
        impact
        our business, financial condition and/or operating results.
  **Recent
        economic events and, in particular, the “credit crisis” may have an adverse
        effect in the markets in which we operate.**
  Much
        of
        our business is consumer driven, and to the extent there is a decline in
        consumer spending, we could experience a reduction in the demand for our
        services and a decrease in our revenues, net income and
        an
        increase in bad debts arising from non-payment of our trade receivables.
        While it is too early to predict what effect the current “credit crisis”
may have on the Group, we have seen a slow-down in our business and do see
        a
        need to carefully monitor our operating costs as the effects of the current
        economic issues become known.





**Item
      6. Exhibits.**





Exhibits





31.1
            
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 (Rule13a-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 and 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)).





16


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





WLG
                INC.Date:
                November 14, 2008
            By:
            /s/ Christopher
                WoodChristopher
                WoodChief
                Executive Officer,
              (Principal
                Executive Officer) and DirectorDate:
                November 14, 2008
            By:
            /s/ David
                L. KoontzDavid
                L. KoontzChief Financial Officer,
              (Principal Financial Officer and Accounting Officer)
              and Director




17




**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 (Rule13a-4(a)).32.1
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to 18
                U.S.C. Section1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Rule 13a-14(b)).




18