UNITED STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


FORM
10-Q





(Mark One)




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




For
the quarterly period ended March 31, 2010





or





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




For
the transition period from _____________ to _____________





Commission
file number: 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    ̈    No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    ̈      Yes    ̈
       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 filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
      (Do not check if a smaller reporting company)
            Smaller
      reporting company x





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





On May
13, 2010, the registrant had 30,880,094 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 Months Ended March 31,
      2010 and 2009
              
              F-1Condensed
      Consolidated Balance Sheets as of March 31, 2010 and December 31,
      2009
              
              F-3Condensed
      Consolidated Statements of Cash Flows for the Three Months Ended March 31,
      2010 and 2009
              
              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
              
              17Item
      4.
              
              Controls
      and Procedures.
              
              17Part
      II:
              
              Other
      Information
              
              17Item
      1.
              
              Legal
      Proceedings
              
              17Item
      1A.
              
              Risk
      Factors
              
              17Item
      6.
              
              Exhibits
              
              17Signatures
              
              
              
              18




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, 2009. 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


Part
I: Financial Information





Item
1. Financial Statements




WLG
Inc.
 Consolidated
Statements of Operations and other comprehensive income
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)


Three
      months endedMarch
      31,2010
                  
                  
                  2009US$
                  
                  
                  US$Note
                  
                  (unaudited)
                  
                  
                  (unaudited)Revenues:Freight
                  
                  
                  
                  23,695
                  
                  
                  
                  14,947Other
      services
                  
                  
                  
                  15,089
                  
                  
                  
                  16,116Total
      revenues
                  
                  
                  
                  38,784
                  
                  
                  
                  31,063Operating
      expensesCost
      of forwarding/customs
                  
                  
                  
                  (32,601
                  )
                  
                  
                  (26,559
                  )Selling
      and administrative expenses
                  
                  
                  
                  (6,385
                  )
                  
                  
                  (5,352
                  )Depreciation
      and amortization
                  
                  
                  
                  (217
                  )
                  
                  
                  (243
                  )Total
      operating expenses
                  
                  
                  
                  (39,203
                  )
                  
                  
                  (32,154
                  )Loss
      from operations
                  
                  
                  
                  (419
                  )
                  
                  
                  (1,091
                  )Other
      income (expense)Interest
      income
                  
                  
                  
                  1
                  
                  
                  
                  1Interest
      expense
                  
                  
                  
                  (180
                  )
                  
                  
                  (160
                  )Other
      income, net
                  
                  
                  
                  17
                  
                  
                  
                  71Loss
      before income taxes
                  
                  
                  
                  (581
                  )
                  
                  
                  (1,179
                  )Income
      tax (provision) benefit
                  
                  
                  
                  (38
                  )
                  
                  
                  136Net
      loss
                  
                  
                  
                  (619
                  )
                  
                  
                  (1,043
                  )Dividends
      on preferred stock
                  
                  
                  
                  (23
                  )
                  
                  
                  (23
                  )Loss
      applicable to common stock
                  
                  
                  
                  (642
                  )
                  
                  
                  (1,066
                  )Other
      comprehensive income (loss), net of taxes:Foreign
      currency translation adjustment
                  
                  
                  
                  59
                  
                  
                  
                  (56
                  )Total
      comprehensive loss
                  
                  
                  
                  (583
                  )
                  
                  
                  (1,122
                  )Net
      loss per share:Basic
      loss per share
                  2
                  
                  
                  (0.02
                  )
                  
                  
                  (0.03
                  )Diluted
      loss per share
                  2
                  
                  
                  (0.02
                  )
                  
                  
                  (0.03
                  )Weighted
      average number of shares of common shares outstandingBasic
                  
                  
                  
                  31,168,983
                  
                  
                  
                  31,400,094Diluted
                  
                  
                  
                  31,168,983
                  
                  
                  
                  31,400,094
  The
financial statements should be read in conjunction with the accompanying
notes.
  F-1
 WLG
Inc.
 Consolidated
Balance Sheets
 At March
31, 2010 and December 31, 2009
 
 (Dollars
in thousands except share data and per share
amounts)
  At
                      March
      31,
                      2010
                    
                    
                    At
                      December
      31,
                      2009Note
                    
                    
                    US$
                    
                    
                    US$(unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                    
                    
                    
                    
                    
                    1,669
                    
                    
                    
                    1,899Restricted
      cash
                    
                    
                    
                    
                    
                    601
                    
                    
                    
                    601Trade
      receivables, net of allowance (2010-$604; 2009-$570)
                    
                    
                    
                    
                    
                    16,867
                    
                    
                    
                    16,906Deposits,
      prepayments and other current assets
                    
                    
                    
                    
                    
                    1,381
                    
                    
                    
                    1,254Tax
      prepaid
                    
                    
                    
                    
                    
                    171
                    
                    
                    
                    149Total
      current assets
                    
                    
                    
                    
                    
                    20,689
                    
                    
                    
                    20,809Property,
      plant and equipment, net
                    
                    
                    
                    
                    
                    1,521
                    
                    
                    
                    1,427Deposits
      and other non-current assets
                    
                    
                    
                    
                    
                    107
                    
                    
                    
                    107Deferred
      tax assets
                    
                    
                    
                    
                    
                    267
                    
                    
                    
                    288Intangible
      assets, net
                    
                    
                    
                    
                    
                    2,074
                    
                    
                    
                    2,183Goodwill
                    
                    
                    
                    
                    
                    6,878
                    
                    
                    
                    6,878Total
      assets
                    
                    
                    
                    
                    
                    31,536
                    
                    
                    
                    31,692LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesBank
      overdrafts
                    
                    
                    3
                    
                    
                    
                    620
                    
                    
                    
                    603Trade
      payables
                    
                    
                    
                    
                    
                    
                    10,478
                    
                    
                    
                    10,447Other
      accrued liabilities
                    
                    
                    
                    
                    
                    
                    2,697
                    
                    
                    
                    2,897Bank
      loans - maturing within one year
                    
                    
                    3
                    
                    
                    
                    5,174
                    
                    
                    
                    4,725Current
      portion of capital lease obligations
                    
                    
                    
                    
                    
                    
                    86
                    
                    
                    
                    90Due
      to directors
                    
                    
                    5
                    
                    
                    
                    644
                    
                    
                    
                    670Income
      tax payable
                    
                    
                    
                    
                    
                    
                    93
                    
                    
                    
                    117Total
      current liabilities
                    
                    
                    
                    
                    
                    
                    19,792
                    
                    
                    
                    19,549Non-current
      liabilitiesNon-current
      portion of capital lease obligations
                    
                    
                    
                    
                    
                    
                    96
                    
                    
                    
                    35Other
      non-current liabilities
                    
                    
                    
                    
                    
                    
                    191
                    
                    
                    
                    187Bank
      loans – maturing after one year
                    
                    
                    3
                    
                    
                    
                    455
                    
                    
                    
                    206742
                    
                    
                    
                    428Commitments
      and contingencies
                    
                    
                    4Series
      B convertible redeemable preferred stock, $0.001 par value, 1.7 million
      shares authorized and issued (Redemption and liquidation value
      $1,700)
                    
                    
                    6
                    
                    
                    
                    1,700
                    
                    
                    
                    1,700
 The
financial statements should be read in conjunction with the accompanying
notes.
  F-2
 WLG
Inc.
 Consolidated
Balance Sheets
 At March
31, 2010 and December 31, 2009
 
 (Dollars
in thousands except share data and per share
amounts)
 At
                    March
      31,
                    2010
                  
                  
                  At
                    December
      31
                    2009Note
                  
                  
                  US$
                  
                  
                  US$(unaudited)Stockholders’
      equityPreferred
      stock, $0.001 par value, 5 million shares authorized 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, $0.001 par value, 55 million shares authorized, 31,400,094 (2009: 31,400,094)shares issued, 30,880,094 (2009: 31,400,094)
      shares outstanding
                  
                  
                  
                  
                  
                  31
                  
                  
                  
                  31Additional
      paid-in capital
                  
                  
                  
                  
                  
                  12,784
                  
                  
                  
                  12,784Statutory
      reserve
                  
                  
                  7
                  
                  
                  
                  167
                  
                  
                  
                  167Treasury
      stock, at cost, 520,000 (2009:
      Nil) shares
                  
                  
                  
                  
                  
                  
                  (130
                  )
                  
                  
                  -Accumulated
      other comprehensive income (losses)
                    -
      Foreign currency translation adjustments
                  
                  
                  
                  
                  
                  
                  298
                  
                  
                  
                  239Accumulated
      losses
                  
                  
                  
                  
                  
                  
                  (3,850
                  )
                  
                  
                  (3,208
                  )Total
      stockholders’ equity
                  
                  
                  
                  
                  
                  
                  9,302
                  
                  
                  
                  10,015Total
      liabilities and stockholders’ equity
                  
                  
                  
                  
                  
                  
                  31,536
                  
                  
                  
                  31,692
 The
financial statements should be read in conjunction with the accompanying
notes.
  F-3
 WLG
Inc.
 Consolidated
Statements of Cash Flows
 Three
months ended March 31, 2010 and 2009
 
 (Dollars
in thousands except share data and per share
amounts)
 Three
      months ended
                    March
      31,2010
                  
                  
                  2009US$
                  
                  
                  US$(unaudited)
                  
                  
                  (unaudited)Cash
      flows from operating activities:Net
      loss
                  
                  
                  (619
                  )
                  
                  
                  (1,043
                  )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activitiesDepreciation
                  
                  
                  109
                  
                  
                  
                  83Amortization
                  
                  
                  108
                  
                  
                  
                  160Allowance
      for bad debts
                  
                  
                  63
                  
                  
                  
                  174Share-based
      amortization
                  
                  
                  -
                  
                  
                  
                  3Changes
      in working capital:Trade
      receivables
                  
                  
                  14
                  
                  
                  
                  3,866Deposits,
      prepayments and other current assets
                  
                  
                  (257
                  )
                  
                  
                  4Trade
      payables
                  
                  
                  31
                  
                  
                  
                  (1,720
                  )Other
      accrued liabilities
                  
                  
                  (179
                  )
                  
                  
                  49Due
      to directors
                  
                  
                  (26
                  )
                  
                  
                  (210
                  )Income
      tax payable
                  
                  
                  (24
                  )
                  
                  
                  (258
                  )Net
      cash (used in) provided by operating activities
                  
                  
                  (780
                  )
                  
                  
                  1,108Cash
      flows from investing activities:Acquisitions
      of property, plant and equipment (Note 1)
                  
                  
                  (103
                  )
                  
                  
                  (100
                  )Net
      cash used in investing activities
                  
                  
                  (103
                  )
                  
                  
                  (100
                  )Cash
      flows from financing activities:Restricted
      cash
                  
                  
                  -
                  
                  
                  
                  112Bank
      overdrafts
                  
                  
                  17
                  
                  
                  
                  (5
                  )Net
      increase (decrease) in bank loans
                  
                  
                  698
                  
                  
                  
                  (1,184
                  )Capital
      lease obligations paid
                  
                  
                  (21
                  )
                  
                  
                  (18
                  )Dividends
      paid on preferred stock
                  
                  
                  (23
                  )
                  
                  
                  (23
                  )Repayment
      to director
                  
                  
                  (18
                  )
                  
                  
                  -Net
      cash provided by (used in) financing activities
                  
                  
                  653
                  
                  
                  
                  (1,118
                  )Net
      decrease in cash and cash equivalents
                  
                  
                  (230
                  )
                  
                  
                  (110
                  )Cash
      and cash equivalents at beginning of period
                  
                  
                  1,899
                  
                  
                  
                  2,402Cash
      and cash equivalents at end of period
                  
                  
                  1,669
                  
                  
                  
                  2,292
 
 Major
Non-cash Transactions
  1:  During
      the three months ended March 31, 2010, the Group entered into a capital
      lease arrangement in respect of assets with a total capital value at the
      inception of the lease of $78 (2009:
      Nil).
 
 2.
      During the three months ended March 31, 2010, a former shareholder of WCS
      reimbursed the Company for legal fees and settlement costs in connection
      with a settlement of certain litigation by transferring to the Company WLG
      shares valued at $130.  (See note
4)
 The
financial statements should be read in conjunction with the accompanying
notes.
  F-4
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (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.
 
 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 March 31,
2010.
 
 On April
1, 2005, WLG acquired 100% of the voting interests in Kay O’Neill (USA) LLC
(“KON”), an Illinois limited liability company based in Chicago,
Illinois.  KON also had an office in Detroit, Michigan. 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 $1,000 cash payment 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-5
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (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 ALI’s remaining operations  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 whom
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,
provides freight forwarding and customs brokerage services to its
customers.  Sea Systems, incorporated on February 26, 1991, in
Washington, was 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. Effective December 31, 2009, MSA merged with and into World Commerce
Services LLC (“WCS”).
 
 On July
31, 2007, the Group acquired all of the membership interests in
WCS.  WCS is based in Schaumburg, Illinois, and also has offices in
New York, Atlanta and Los Angeles.  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-6
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (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
March 31, 2010, all subsidiaries are wholly-owned and all material intercompany
balances and transactions have been eliminated in consolidation.
 
 The
accompanying financial data as of March 31, 2010, and for the three months ended
March 31, 2010 and 2009, 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, 2009.
 
 The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles 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 U.S. generally accepted accounting
principles 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 March 31, 2010, and results of
operations for the three months ended March 31, 2010 and 2009, and cash flows
for the three months ended March 31, 2010 and 2009, have been
made.  The results of operations for the three months ended March 31,
2010 and 2009, are not necessarily indicative of the operating results for the
full year.
 F-7
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 2.           LOSS
PER SHARE
 
 Loss per share was computed as
follows:
 
 Three
      months ended March 31, 2010Loss
                    
                    
                    Weighted
      average number of shares outstanding
                    
                    
                    Per
      share amountUS$
                    
                    
                    
                    
                    
                    US$(unaudited)
                    
                    
                    
                    
                    
                    (unaudited)Net
      loss
                    
                    
                    (619
                    )Dividends
      on Series A convertible redeemable preferred stock
                    
                    
                    (23
                    )
                    
                    
                    2,000,000
                    
                    
                    
                    0.01Basic
      loss per shareNet loss available to common
      stockholders
                    
                    
                    (642
                    )
                    
                    
                    31,168,983
                    
                    
                    
                    (0.02
                    )Effect
      of dilutive securitiesEmployee stock options (Note
      #)
                    
                    
                    -
                    
                    
                    
                    -Warrants (Note
    #)
                    
                    
                    -
                    
                    
                    
                    -Series A convertible
      redeemable preferredstock  (Note #)
                    
                    
                    -
                    
                    
                    
                    -Series B convertible
      redeemable preferred stock
      (Note #)
                    
                    
                    -
                    
                    
                    
                    -Diluted
      loss per shareNet loss available
      to  common stockholders
                    
                    
                    (642
                    )
                    
                    
                    31,168,983
                    
                    
                    
                    (0.02
                    )
 F-8
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 2.
              LOSS
      PER SHARE (CONTINUED)
 
 
 Three
      months ended March 31, 2009Loss
                      
                      
                      Weighted
      average number of shares outstanding
                      
                      
                      Per
      share amountUS$
                      
                      
                      
                      
                      
                      US$(unaudited)
                      
                      
                      
                      
                      
                      (unaudited)Net
      loss
                      
                      
                      (1,043
                      )Dividends
      on Series A convertible redeemable preferred stock
                      
                      
                      (23
                      )
                      
                      
                      2,000,000
                      
                      
                      
                      0.01Basic
      loss per shareNet loss available to common
      stockholders
                      
                      
                      (1,066
                      )
                      
                      
                      31,400,094
                      
                      
                      
                      (0.03
                      )Effect
      of dilutive securitiesEmployee stock options (Note
      #)
                      
                      
                      -
                      
                      
                      
                      -Warrants (Note
    #)
                      
                      
                      -
                      
                      
                      
                      -Series A convertible
      redeemable preferredstock  (Note
      #)
                      
                      
                      -
                      
                      
                      
                      -Series B convertible
      redeemable preferredstock
      (Note #)
                      
                      
                      -
                      
                      
                      
                      -Diluted
      loss per shareNet loss available to common
      stockholders
                      
                      
                      (1,066
                      )
                      
                      
                      31,400,094
                      
                      
                      
                      (0.03
                      )
 
 
 #:
              For
      the three months ended March 31, 2010 and 2009, weighted average
      number of shares outstanding was not increased by the exercise
      of the 100,000 outstanding warrants granted to a consultant in exchange
      for services rendered, the exercise of 245,000 outstanding options, the
      2,000,000 shares related to the 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,
      and the 2,428,571 shares related to the Series B convertible redeemable
      preferred stock, because the effect of conversion would be anti-dilutive.
      The Company’s potential obligation to issue 500,000 shares of common stock
      to the sellers of WCS terminated as of February 19,
  2010.
 
 Under an
agreement with the sellers of WCS, the Company was potentially obligated to
issue up to 1,962,506 shares of its common stock to them if certain earnings
targets were achieved. None of the earnings targets were achieved as of March
31, 2009. The obligation to issue these shares terminated as of July 31, 2009.
 F-9
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 3.           BANKING
FACILITIES
 
 The
      Group has bank facilities from creditworthy commercial banks as
      follows:
 
 At
                      March
      31,
                      2010
                    
                    
                    At
                      December
      31,
                      2009US$
                    
                    
                    US$(Unaudited)Facilities
      granted-
      bank guarantees
                    
                    
                    1,123
                    
                    
                    
                    1,145-
      overdraft facilities
                    
                    
                    621
                    
                    
                    
                    603-
      bank loans and revolving credit lines
                    
                    
                    7,257
                    
                    
                    
                    5,909-
      foreign exchange facilities
                    
                    
                    230
                    
                    
                    
                    223-
      lease facilities
                    
                    
                    230
                    
                    
                    
                    223Total
      bank facilities
                    
                    
                    9,461
                    
                    
                    
                    8,103
 
 The terms
of the revolving loan facilities, including the amounts and maturity dates, are
set forth in agreements between the banks and the Group.
 
 Bank
guarantees of $545 will expire within one year from March 31, 2010, but may be
renewed, provided the Group makes available the cash required by the banks to
collateralize each guarantee. A bank guarantee of $126 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 $452 has no fixed expiration date and is cancelable and/or
renewable at the option of the bank.
 
 The bank
loans and revolving loan facilities mature on various dates as follows: (i)
$3,000 revolving credit facility on February 24, 2011, (ii) loan facility of
$3,676 is an on-going loan facility that is subject to review in 2010, and, by
its terms, may be terminated by either the bank or WLG giving 30 days notice to
the other party and (iii) two loan facilities of $258 and $323, which are
repayable in 60 monthly installments ending in December 2014 and January 2015,
respectively.
 
 The bank
loans and revolving credit facilities of $7,257 are secured as follows: (i)
$3,000 is secured by all assets of WCS and WLG (USA), including their accounts
receivables as well as a guarantee provided by the Group’s parent company, (ii)
$3,676 is secured by Asean’s accounts receivable and a registered mortgage
charge over the assets of Asean and (iii) $581 is secured by a guarantee
provided by the Group’s parent company and a guarantee given by the Hong Kong
Special Administrative Region Government.
 F-10
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 3. BANKING
FACILITIES (CONTINUED)
 
 The total
bank guarantees of $1,123 contain guarantees collateralized by cash of
$545.  Another bank guarantee of $126 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
$452 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 $620 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 $230 and a leasing facility of $230, both of
which as of March 31, 2010, had not been utilized.  In addition, both
the foreign exchange and leasing facility are secured by a comfort letter from
the Group’s parent company.  As of March 31, 2010, and December 31,
2009, the weighted average interest rates of the Group’s bank borrowings were
9.26% and 7.27% per annum, respectively.
 
 
 At
                        March
      31,
                        2010
                      
                      
                      At
                        December
      31,
                        2009US$
                      
                      
                      US$(Unaudited)UtilizedCommitted
      lines-
      bank guarantees
                      
                      
                      1,123
                      
                      
                      
                      1,145-
      overdraft facilities
                      
                      
                      620
                      
                      
                      
                      603-
      bank loan and revolving credit lines
                      
                      
                      5,629
                      
                      
                      
                      4,931Total
      bank facilities utilized
                      
                      
                      7,372
                      
                      
                      
                      6,679
  F-11
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 4.           COMMITMENTS
AND CONTINGENCIES
 
 Commitments under operating
leases
 The
      Group rents office and warehouse space, staff quarters and certain office
      equipment under non-cancellable operating leases. The following table
      summarizes the approximate future minimum lease payments for operating
      leases in effect as of March 31, 2010 and December 31,
    2009:
 
 
 
 At
                        March
      31,
                        2010
                      
                      
                      At
                        December
      31,
                        2009US$
                      
                      
                      US$(unaudited)Within
      one year
                      
                      
                      1,893
                      
                      
                      
                      1,539Over
      one year but not exceeding two years
                      
                      
                      1,577
                      
                      
                      
                      1,038Over
      two years but not exceeding three years
                      
                      
                      1,152
                      
                      
                      
                      731Over
      three years but not exceeding four years
                      
                      
                      1,019
                      
                      
                      
                      472Over
      four years but not exceeding five years
                      
                      
                      871
                      
                      
                      
                      404Over
      five years
                      
                      
                      864
                      
                      
                      
                      984Total
      operating lease commitments
                      
                      
                      7,376
                      
                      
                      
                      5,168
 
 
 The
      Group has obligations under various operating lease agreements ranging
      from 3 months to 8 years.  Rent expense under these operating
      leases for the three months ended March 31, 2010 and 2009, was $451 and
      $402, 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 commits to
      utilize a minimum amount of cargo space each year.  As of March
      31, 2010 and December 31, 2009, the obligations for the minimum amount of
      such cargo space to be utilized in the coming 12 months was $3,977 and
      2,249 respectively.
 
 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
March 31, 2010 and December 31, 2009, and subject to the legal proceeding as
described below, the aggregate, outstanding amount of all claims was
approximately $123 and $40, respectively.  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.
 F-12
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 4.
              COMMITMENTS
      AND CONTINGENCIES (CONTINUED)
 
 Contingencies
– outstanding claims (Continued)
 
 WCS
      was 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 equaled
      approximately $6,800, including an unspecified amount for costs of delay,
      lost profit and lost revenue. In December 2009, WCS settled the case for
      $100, with an initial payment of $50 at the time of settlement and is
      obliged thereafter to make ten monthly payments of $5 each. During the
      first quarter of 2010, the cost of this settlement, as well as certain
      legal fees, has been reimbursed to the Group by the return of 520,000
      shares of WLG’s common stock by a former shareholder of WCS. The
      520,000 shares of WLG's common stock was recorded as treasury stock as at
      March 31, 2010.
 
 
 5.           RELATED
PARTY TRANSACTIONS
 
 Name
      and relationship of related partiesName
                
                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 partiesName
                
                Principal
      activities
                
                OwnershipName
      of owner
                
                %
      heldJWP
                
                Leases
      property to CW
                CW
                100%
 F-13
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (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
                                          
                                          AtMarch
      31,
                                          
                                          December
      31,2010
                                          
                                          2009US$
                                          
                                          US$(unaudited)Due
      to director (Notes)CW
                                          644
                                          
                                          670
 
 Notes:
 
 (i)
              Amounts
      due to director are unsecured and interest-free, except for the director
      loan, which amounted to $582 and $600 as of March 31, 2010 and December
      31, 2009, respectively, (see note (ii) below), which was used as part of
      the consideration to acquire the membership interests of WCS, repayment of
      bank loans and working capital. The director loan carries an interest rate
      of 12% per annum and was scheduled to be repaid in 12 equal installments
      beginning on January 31, 2009.
 (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 that CW had previously loaned to the Group. The
      Note bears interest at the rate of 12% per annum and was to be repaid in
      twelve monthly installments of $50, with the first installment due on
      January 31, 2009. CW has agreed that payments due under the Note may be
      deferred on a month-to-month basis. Principal repayments of $18 had been
      made to CW as of March 31, 2010. 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 related party transactions
 Three
      months ended
                        March
      31,2010
                      
                      2009US$
                      
                      US$(unaudited)
                      
                      (unaudited)Rental
      paid/payableJWP
                      
                      27
                      
                      27
 F-14
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 5.          RELATED
PARTY TRANSACTIONS (CONTINUED)
 
 Summary
of transactions for the three months ended March 31, 2010 and 2009, with
directors / stockholders (unaudited):
 
 CW
                    
                    
                    DK
                    
                    
                    TotalUS$
                    
                    
                    US$
                    
                    
                    US$At
      January 1, 2010
                    
                    
                    670
                    
                    
                    
                    -
                    
                    
                    
                    670Interest
      accrued
                    
                    
                    69
                    
                    
                    
                    -
                    
                    
                    
                    69Interest
      paid
                    
                    
                    (51
                    )
                    
                    
                    -
                    
                    
                    
                    (51
                    )Repayment
      of loan
                    
                    
                    (18
                    )
                    
                    
                    -
                    
                    
                    
                    (18
                    )Repayment
      of advances
                    
                    
                    (26
                    )
                    
                    
                    -
                    
                    
                    
                    (26
                    )At
      March 31, 2010
                    
                    
                    644
                    
                    
                    
                    -
                    
                    
                    
                    644
 
 
 CW
                    
                    
                    DK
                    
                    
                    TotalUS$
                    
                    
                    US$
                    
                    
                    US$At
      January 1, 2009
                    
                    
                    615
                    
                    
                    
                    375
                    
                    
                    
                    990Reclassified
      from accrued liabilities
                    
                    
                    60
                    
                    
                    
                    -
                    
                    
                    
                    60Interest
      accrued
                    
                    
                    69
                    
                    
                    
                    9
                    
                    
                    
                    78Interest
      paid
                    
                    
                    (69
                    )
                    
                    
                    (9
                    )
                    
                    
                    (78
                    )Repayment
      of loan
                    
                    
                    -
                    
                    
                    
                    (188
                    )
                    
                    
                    (188
                    )Repayment
      of advances
                    
                    
                    (22
                    )
                    
                    
                    -
                    
                    
                    
                    (22
                    )At
      March 31, 2009
                    
                    
                    653
                    
                    
                    
                    187
                    
                    
                    
                    840
 
  
 6.
              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, and shall pay an annual
cumulative dividend equal to 12% of the stated value per share.
 F-15
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 6.
              SERIES
      B CONVERTIBLE REDEEMABLE PREFERRED STOCK
  (CONTINUED)
 
 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.
 
 For the
three months ended March 31, 2010 and 2009, the dividends on the Series B
Preferred Stock were included in interest expense in the amounts of $51 and $51,
respectively.
  
 7.           STATUTORY
RESERVE
 
 WE China
(“the PRC Subsidiary”) is a wholly-owned foreign investment enterprise (“WOFIE”)
registered in the PRC.  Under the laws and regulations applicable to a
WOFIE, such enterprises are required to maintain certain statutory reserves for
specific purposes, which include a general reserve, an enterprise development
fund and a staff welfare and bonus fund.  The board of directors of
the PRC Subsidiary shall determine on an annual basis based on its PRC statutory
financial statements the amount to be transferred to statutory
reserves.
 
 Minimum
annual transfers to statutory reserves must be at least 10% of a WOFIE’s after
tax profit which shall be determined in accordance with the PRC accounting rules
and regulations.  Annual transfers to the general reserve shall
continue until such reserve balance reaches 50% of a WOFIE’s registered
capital.  The general reserve can only be utilized to offset prior
years' losses or as additional paid-in capital.  No distribution of
the remaining general reserve shall be made other than upon liquidation of the
PRC Subsidiary.
 
 No after
tax profit has been appropriated to the general reserve in respect of the three
months ended March 31, 2010 and 2009, as the transfers are to be
made based on the PRC Subsidiary’s statutory financial statements at the
completion of its fiscal year.
 
 8.           SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
 
 Three
      months ended
                      March
      31,2010
                    
                    
                    2009US$
                    
                    
                    US$(unaudited)
                    
                    
                    (unaudited)Cash
      paid for:Interest
      expense
                    
                    
                    162
                    
                    
                    
                    160Income
      taxes
                    
                    
                    63
                    
                    
                    
                    122
 F-16
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 9.           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 the board, provided, that the
board 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, 2010, the number
of shares reserved under the Plan is 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 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.
 
 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, and these options are now fully vested.
 
 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.
 
 Effective
December 1, 2008, the board approved and awarded stock options to an employee
for the purchase of 150,000 shares of Company’s common stock. The vesting period
for December 2008 options is 2 years. The options lapsed upon the
termination of employment of this employee during 2009.
 
 The
Company accounts for stock-based compensation in accordance with FASB ASC 718,
Compensation – Stock Compensation. Under ASC 718, the compensation expense
related to the fair value of stock options charged to the consolidated statement
of operations for the three months ended March 31, 2010 and 2009, was $1 and $3,
respectively. As of March 31, 2010 and December 31, 2009, the future
compensation expense related to non-vested options totaled $1 and $2 and was
expected to be recognized over 9 and 12 months, respectively. The total
intrinsic values of the options outstanding and options exercisable as of March
31, 2010 and December 31, 2009, were zero. No tax benefit was recognized for the
stock option expense recorded for the three months ended March 31, 2010 and
2009.
 F-17
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 9.           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
      onAugust
      1,
                        2005
                      
                      
                      January
      15,
                        2007
                      
                      
                      January
      8,
                        2008
                      
                      
                      December
      1,
                        2008Risk-free
      interest rate per annum
                      
                      
                      4.60
                      %
                      
                      
                      4.60
                      %
                      
                      
                      3.59
                      %
                      
                      
                      0.63
                      %Expected
      life
                      
                      2
      years
                      
                      
                      3
      years
                      
                      
                      3
      years
                      
                      
                      2
      yearsExpected
      volatility(Note #)
                      
                      
                      45.00
                      %
                      
                      
                      57.79
                      %
                      
                      
                      46.00
                      %
                      
                      
                      5.03
                      %Expected
      dividend yield
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %Post
      vesting terminations
                      
                      No
                      
                      
                      No
                      
                      
                      No
                      
                      
                      NoWeighted
      average grant-date fair
                        value(per
      option share)
                      
                      $
                      0.28
                      
                      
                      $
                      1.22
                      
                      
                      $
                      0.23
                      
                      
                      $
                      0.06
 
 #:
              The
      expected volatility is based on the underlying share price of WLG’s shares
      and to a comparison of the volatility of the share prices 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 2007
                      20,000
                      
                      2.85Outstanding
      at December 31, 2007
                      220,000
                      
                      1.17
                      
                      7.71Granted
      in 2008
                      175,000
                      
                      0.61Outstanding
      at December 31, 2008
                      395,000
                      
                      0.92
                      
                      8.07Forfeited
      in 2009
                      (150,000)
                      
                      0.60Outstanding
      at December 31, 2009
                      245,000
                      
                      1.12
                      
                      5.95Outstanding
      at March 31, 2010
                      245,000
                      
                      1.12
                      
                      5.70Exercisable
      at March 31, 2010
                      236,167
                      
                      1.13
                      
                      5.62
 F-18
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 
 10.           FAIR
VALUE DISCLOSURES
 
 Effective
January 1, 2008, the Company adopted FASB ASC 820, Fair Value Measurements
and Disclosures, which requires disclosures about assets and liabilities that
are measured at fair value. The Company began to apply the provisions of ASC 820
to non-financial assets and liabilities beginning January 1, 2009.
 
 The
Company’s assets and liabilities recorded at fair value have been categorized
based upon a fair value hierarchy in accordance with ASC 820. Level 1 inputs
utilize quoted prices in active markets for identical assets or liabilities.
Level 2 inputs are based on other observable market data, such as quoted prices
for similar assets and liabilities, and inputs other than quoted prices that are
observable, such as interest rates and yield curves. Level 3 inputs are
developed from unobservable data reflecting the Company’s assumptions, and
include situations where there is little or no market activity for the asset or
liability.
 
 The
carrying value of cash and cash equivalents, restricted cash, trade receivables,
deposits, prepayments and other current assets, prepaid tax, trade payables,
other accrued liabilities, amounts due to directors, bank overdraft and bank
loans contained in the consolidated balance sheet approximates fair
value.
 F-19
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 11.
              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)
              During
      the three months ended March 31, 2010 and 2009
  (unaudited)
 
 Air
      forwarding
                  
                  
                  Sea
      forwarding
                  
                  
                  Customs
      brokerage
                  
                  
                  TotalThree
      months endedMarch 31
                  
                  
                  Three
      months endedMarch 31
                  
                  
                  Three
      months endedMarch 31
                  
                  
                  Three
      months endedMarch 312010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009US$
                  
                  
                  US$
                  
                  
                  US$
                  
                  
                  US$
                  
                  
                  US$
                  
                  
                  US$
                  
                  
                  $US
                  
                  
                  US$Revenue
                  
                  
                  8,157
                  
                  
                  
                  4,532
                  
                  
                  
                  17,494
                  
                  
                  
                  14,476
                  
                  
                  
                  13,133
                  
                  
                  
                  12,055
                  
                  
                  
                  38,784
                  
                  
                  
                  31,063Cost
      of forwarding/customs
                  
                  
                  (6,593
                  )
                  
                  
                  (3,559
                  )
                  
                  
                  (14,031
                  )
                  
                  
                  (11,633
                  )
                  
                  
                  (11,977
                  )
                  
                  
                  (11,367
                  )
                  
                  
                  (32,601
                  )
                  
                  
                  (26,559
                  )Depreciation
                  
                  
                  (22
                  )
                  
                  
                  (12
                  )
                  
                  
                  (62
                  )
                  
                  
                  (52
                  )
                  
                  
                  (25
                  )
                  
                  
                  (19
                  )
                  
                  
                  (109
                  )
                  
                  
                  (83
                  )Interest
      income
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  1
                  
                  
                  
                  -Interest
      expense
                  
                  
                  (24
                  )
                  
                  
                  (14
                  )
                  
                  
                  (59
                  )
                  
                  
                  (42
                  )
                  
                  
                  (28
                  )
                  
                  
                  (26
                  )
                  
                  
                  (111
                  )
                  
                  
                  (82
                  )Other
      segment income
                  
                  
                  10
                  
                  
                  
                  13
                  
                  
                  
                  7
                  
                  
                  
                  60
                  
                  
                  
                  -
                  
                  
                  
                  (2
                  )
                  
                  
                  17
                  
                  
                  
                  71Other
      segment expenses
                  
                  
                  (1,551
                  )
                  
                  
                  (919
                  )
                  
                  
                  (3,233
                  )
                  
                  
                  (3,113
                  )
                  
                  
                  (1,138
                  )
                  
                  
                  (962
                  )
                  
                  
                  (5,922
                  )
                  
                  
                  (4,994
                  )Income
      tax benefit (provision)
                  
                  
                  11
                  
                  
                  
                  36
                  
                  
                  
                  (42
                  )
                  
                  
                  51
                  
                  
                  
                  (7
                  )
                  
                  
                  49
                  
                  
                  
                  (38
                  )
                  
                  
                  136Segment
      (loss) income
                  
                  
                  (12
                  )
                  
                  
                  77
                  
                  
                  
                  75
                  
                  
                  
                  (253
                  )
                  
                  
                  (42
                  )
                  
                  
                  (272
                  )
                  
                  
                  21
                  
                  
                  
                  (448
                  )Unallocated
      parent company expenses
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (640
                  )
                  
                  
                  (595
                  )Net
      loss
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (619
                  )
                  
                  
                  (1,043
                  )Property,
      plant and equipment – additions
                  
                  
                  43
                  
                  
                  
                  29
                  
                  
                  
                  102
                  
                  
                  
                  60
                  
                  
                  
                  36
                  
                  
                  
                  11
                  
                  
                  
                  181
                  
                  
                  
                  100
 F-20
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 11
              SEGMENTS
      OF THE BUSINESS (CONTINUED)
 
 (a)         Business
segments (continued)
 
 (ii)
              As
      of March 31, 2010 and December 31,
2009
 
 Air
      forwarding
                
                
                Sea
      forwarding
                
                
                Customs
      brokerage
                
                
                TotalAt
      March 31,
                  2010
                
                
                At
      December 31, 2009
                
                
                At
      March 31,
                  2010
                
                
                At
      December 31,
                  2009
                
                
                At
      March 31,
                  2010
                
                
                At
      December 31,
                  2009
                
                
                At
      March 31,
                  2010
                
                
                At
      December 31,
                  2009US$
                
                
                US$
                
                
                US$
                
                
                US$
                
                
                US$
                
                
                US$
                
                
                US$
                
                
                US$(unaudited)
                
                
                
                
                
                (unaudited)
                
                
                
                
                
                (unaudited)
                
                
                
                
                
                (unaudited)Segment
      assets
                
                
                5,694
                
                
                
                5,150
                
                
                
                10,393
                
                
                
                10,122
                
                
                
                6,475
                
                
                
                7,340
                
                
                
                22,562
                
                
                
                22,612Unallocated
      assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                8,974
                
                
                
                9,080Total
      assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                31,536
                
                
                
                31,692
 
 F-21
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 (Dollars
in thousands except share data and per share amounts)
 11.
              SEGMENTS
      OF THE BUSINESS (CONTINUED)
 
 (b)
              The
      table below summarizes the percentage of the Group’s revenues during the
      three months ended March 31, 2010 and 2009, analyzed by geographical
      locations:
 
 Three
      months ended
                      March
      31,2010
                    
                    
                    2009%
                    
                    
                    %(unaudited)
                    
                    
                    (unaudited)RevenuesAmerica
                    
                    
                    31
                    
                    
                    
                    38Asia
      and others
                    
                    
                    24
                    
                    
                    
                    21Australia
                    
                    
                    37
                    
                    
                    
                    31Europe
                    
                    
                    8
                    
                    
                    
                    10100
                    
                    
                    
                    100
 
 (c)
              The
      Group made no sales during the three months ended March 31, 2010 and 2009,
      which qualified as sales to a major customer (defined as a customer where
      sales to it represent 10% or more of total
  revenues).
 
 
 
 12.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
 
 In May
2009, the FASB issued FASB ASC 855, Subsequent Events, which
provides guidance on events that occur after the balance sheet date but prior to
the issuance of the financial statements. The provisions distinguish events
requiring recognition in the financial statements and those that may require
disclosure in the financial statements and requires disclosure of the date
through which subsequent events were evaluated. The Company adopted ASC 855
since the second quarter of 2009. In February 2010, the FASB issued ASU 2010-9,
Subsequent Events, Amendments
to Certain Recognition and Disclosure Requirements, which amends FASB ASC
855, to require SEC filers to evaluate subsequent events through the date that
the financial statements are issued. However, non–SEC filers are required to
evaluate subsequent events through the date that the financial statements are
available to be issued. In addition, ASU 2010-9 exempts SEC filers from
disclosing the date through which subsequent events were evaluated. ASU 2010-9
is effective upon issuance. The adoption of the provisions did not have a
material impact on the Company’s consolidated financial statements.
 
 In
February 2010, the FASB issued ASU 2010-09, Subsequent event. This ASC
amends certain recognition and disclosure requirements to FASB ASC 855. ASU
2010-09 requires an entity that is an SEC filter or is a conduit bond obligor
for conduit debt securities that are traded in a public market to evaluate
subsequent events through the date that the financial statements are issued but
remove the requirement for an SEC filer to disclose a date in both issued and
revised financial statements. These amendments are effective upon issuance of
the final Update, except of the use of the issued date for conduit debt
obligors. That amendment is effective for interim or annual periods ending after
June 15, 2010. The adoption of this ASU is not expected to have a material
impact on the Group’s financial statements.
 F-22
 WLG
Inc.
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2010 and 2009
 
 12.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
(CONTINUED)
 
 In March
2010, the FASB issued ASU No. 2010-11, Derivatives and Hedging. This
ASU amends Subtopic 815-15, scope exception related to embedded credit
derivatives. The adoption of ASU 2010-11 did not have a material impact on the
Group’s results of operations or financial position.
 
 In April
2010, the FASB issued ASU 2010-13, Compensation – Stock
Compensation. This ASC provides amendments to FASB ASC 718 to clarify
that an employee share-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the entity’s equity
securities trade should not be considered to contain a condition that is not a
market, performance, or service condition. As a result, an entity would not
classify such an award as a liability if it otherwise qualifies as equity. The
amendments are effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2010. The adoption of this ASU
is not expected to have a material impact on the Group’s financial
statements.
 
 In April 2010, the FASB issued ASU
2010-18,Receivables.
The ASC provides amendments to FASB ASC 310 As a result, modification of loans
under within a pool under do under ASC do not result in the removal of those
loans from the pool even it the modification of those loans would otherwise be
considered a troubled debt restructuring. Effective for modifications of loans
accounted for within pools under Subtopic 310-30 occurring in the first interim
or annual period ending on or after July 15, 2010. The amendments are to be
applied prospectively. Early application is permitted. The adoption of this ASU
is not expected to have a material impact on the Group’s financial
statements.
 
 In
January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements. This ASU amends FASB ASC 820 to require a number of
additional disclosures regarding fair value measurements. Specifically, this ASU
requires entities to disclose: (1) the amount of significant transfers between
Level 1 and Level 2 of the fair value hierarchy and the reasons for these
transfers; (2) the reasons for any transfers in or out of Level 3; and (3)
information in the reconciliation of recurring Level 3 measurements about
purchases, sales, issuances and settlements on a gross basis. Except for the
requirement to disclose information about purchases, sales, issuances, and
settlements in the reconciliation of recurring Level 3 measurements on a gross
basis, which is effective for fiscal years beginning after December 15, 2010,
all the amendments to FASB ASC 820 made by this ASU are effective for interim
and annual reporting periods beginning after December 15, 2009. The adoption of
this ASU is not expected to have a material impact on the Group’s financial
statements.
 
 
 13 SUBSEQUENT
EVENTS
 
 On May
11, 2010, Mr. Christopher Wood, the former Chief Executive Officer, controlling
shareholder and a director of WLG, sold 7,748,848 shares of WLG’s common stock
owned by him to Jumbo Glory Limited (“Jumbo Glory”) at a price of $0.129 per
shares in a private transaction.  The sale was pursuant to an
Amendment to a Stock Purchase Agreement dated February 8, 2010.  With
the completion of the transaction, Jumbo Glory has acquired 51% of WLG’s common
stock and now holds a controlling interest in the Company.
 
 F-23


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 People's Republic of China (“PRC”
or “China”), Australia, the United States (“US”), the United Kingdom (“UK”) and
through a worldwide network of independent cargo agents.





WLG's
business is conducted by its operating subsidiaries, which, as of March 31,
2010, 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”), 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., and, in January 2004, changed its name to Wako Logistics Group, Inc. In
December 2007, we changed our name 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, 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 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, an Illinois limited liability company.  Kay O'Neill
operated 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 time of the acquisition, 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.




3





Pursuant
to the Closer Economic Partnership Agreement (“CEPA”) concluded in September
2003, between Hong Kong and the PRC, Hong Kong incorporated companies 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, a wholly-owned subsidiary in the PRC.  WE China began
operations in February 2005, and now provides logistics support and freight
forwarding services for air and sea exports and imports between China and the
rest of the world.  WE China has nine offices in China, including
offices in what we believe are four of China’s most important commercial
centers: Beijing; Shanghai; Shenzhen and Guangzhou.




Effective
October 1, 2005, WLG acquired all of the voting stock of ALI, a company
incorporated in September 1999 in California and based in Torrance,
California  ALI was a non-asset based freight forwarding company and
provided traditional freight-forwarding services to its customers for shipments
between Asia and the United States.  As of June 30, 2008, all of ALI’s
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. (“WLG Aust”), completed the acquisition of
all of the issued and outstanding common stock of Asean, a non-asset based
freight forwarding and logistics 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.”).  At the date of this acquisition, UK Co. was in bankruptcy
proceedings in the United Kingdom.  As such, 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 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 with several mutual
customers.





On
December 1, 2006, we acquired all of the voting shares of MSA and its
wholly-owned subsidiary, Sea Systems, (“MSA Group”). MSA, which was incorporated
on May 15, 1979, in Washington, provides customs brokerage and freight
forwarding services to its customers.  Sea Systems, incorporated on
February 26, 1991, in Washington, is a non-asset based freight forwarder and
provided 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 U.S. for onward shipment to locations
throughout the country.   Historically, the business of the MSA
Group had been more focused on its customs brokerage practice rather than on its
freight forwarding operations.  Prior to its acquisition by WLG, the
MSA Group and WLG had not worked together.  As of the end of 2008, all
of the activities of Sea Systems had been assumed by MSA, and, as of December
31, 2009, MSA was merged into and with WCS..





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 air and sea freight
forwarding, logistics and customs brokerage services.  It serves a
wide range of customers that primarily import products by sea 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, and
Los Angeles, California.  Prior to the acquisition, the Group and WCS
had not worked together.




4




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





Overview





We are a
global, non-asset based freight forwarder providing supply chain logistics
services, including freight forwarding, customs brokerage and Value Added
Services (“VAS”) to our customers.  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.





As part
of the services we perform, we coordinate the storage of raw materials,
supplies, components and finished goods and arrange their shipment by air, sea,
river, rail and road to and from most major production, trading and consumer
locations throughout the world.  Historically, the Group has
concentrated on freight shipments originating in Asia, and mostly in Hong Kong
and China for shipment to Australia and, to a lesser extent, to
Europe.  However, with the acquisitions in the US, the Group is now
focusing more of its attention on the US market.





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 the 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 many countries in which we
operate and/or 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 the use of advanced
tracking systems and access to sophisticated logistical networks in many
countries, which we have established over the past 27 years.





Freight
Forwarding and Value Added Services (VAS)





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 reflect the volumes of freight 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 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 that allow us to project 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 adjust our staff levels 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
ratios of weight and cubic capacity for all air freight
shipments.   In general, this improves our profitability on
shipments where we are able to achieve this mix.





In order
to ensure that we are able to maintain an “inventory” of cargo space on air
carriers, we frequently commit to use a minimum amount of space with certain
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 utilization contracts with the airlines 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.




5





We also
have contracts with ocean shipping lines pursuant to which the shipping lines
provide us a certain amount of container space at agreed rates over a period of
time.  Under the normal operating practices of this industry, shipping
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 allocated space or was unable to sell it to other freight
forwarders.





As part
of our freight forwarding business, we often provide Value
Added  Services to our customers.  The provision of VAS
continues to be 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 processed 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.  With the
continuing economic downturn, we are seeing an increasd interest on the part of
our customers to seek low-cost logistics and distributions
services.  Thus, performing these services at the point of shipment in
the country of manufacture may provide a more efficient and less costly means
for a customer to store and distribute its 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 and prepare for
shipment.




Customs
Brokerage Operations





We have
customs brokerage practices in our offices in Sydney, Australia, Manchester,
England, Seattle, Washington, Los Angeles, California and Schaumburg,
Illinois.  In each location, we acquired an existing
business.  Customs brokerage services are performed both for freight
and brokerage customers as well as for brokerage only
customers.  While the complexity of customs services may vary from one
jurisdiction to another based on the specific governmental regulations of each
country, the nature of the services are similar worldwide.  In
general, customs brokerage services include preparing all documentation required
for the clearance of goods through customs and, for some customers, the
collection of funds for the payment of import duties to the appropriate
governmental agencies.  In addition, as part of our customs work, we
often provide ancillary services which may include assistance with customs
examinations, advice on duty rates and regulations and the local delivery of
goods.





As part
of our customs practice, we may be required, because of competitive pressures,
to advance funds on behalf of our clients to pay the duty on their import
shipments.  These advances represent a considerable use of cash and do
carry a credit risk for us.  For this reason, we maintain stringent
checks on the creditworthiness of all brokerage customers.  Normally,
countries have electronic payment procedures which allow importers to make
payments directly to the government customs agency, and we have implemented
programs to encourage and assist our customers to use these payment
facilities.  If our customers do remit customs duties directly to
their respective governmental agencies, we benefit by not outlaying
our cash, as well as avoiding the credit risk on the cash advances we might
otherwise provide.





Brokerage
margins are generally less than the margins we earn from our freight-forwarding
and VAS operations.  However, operating a brokerage practice gives us
a competitive advantage in some locations and a level playing field in others,
which helps us to attract and retain more profitable freight forwarding and VAS
customers.




6




Generally,
billings for customs brokerage services are based on the number of freight
clearances we perform 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. Lastly, because
this part of our business tends to be stable and recurring, we are able to
estimate with a fair degree of certainty what our personnel needs are for each
of our customs practices.





Global
Agency Network





WLG
maintains a wide network of independent cargo agents in many cities around the
world.  All of our arrangements with these agents are on a
non-exclusive basis.  And, under these arrangements, none of the
agents is authorized to make commitments or to execute any contracts on our
behalf.  In most cases, the fees earned for transporting a shipment
from the point of origin to the point of destination are shared 50:50 with our
overseas agents.  In some cases, billings to and from out agents may
include additional charges for other transportation and logistics
services.





At the
latest count, we work with over 600 overseas agents worldwide with offices
in strategic cities around the world.  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.




In
addition to performing freight forwarding support services for us, these agents
are an important sales and marketing resource.  By relying on these
agents to help us obtain new business and market our services, we may be able to
expand our global activities without the costs typically associated with the
ownership and maintenance of company-owned offices.  Given the
importance of overseas cargo agents to our business, we think it is critical
that senior management be involved 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.  Lastly, our costs to retain these agency relationships are
nominal, and mostly include only management time and travel
costs.  However, because we normally have to split our fees with these
cargo agents, the profit we earn per job is less than what we may earn if our
own offices handled both the import and export sides 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 MARCH 31, 2010 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2009.




Results
of Operations





Total
revenues for the three months ended March 31, 2010, increased by about $7.72
million, or 25%, when compared with the same period in 2009, from approximately
$31.06 million to $38.78 million.   Our Hong Kong operations reported
increased revenues of $1.65 million.  Revenues from our China offices
increased by $1.44 million.  Our US operations reported a combined
increase in revenues of $0.16 million and Asean’s revenues grew by $4.64
million.  Lastly, revenues in our UK operations fell by $0.17
million.





Gross
profit increased from $4.50 million for the three months ended March 31, 2009,
to $6.18 million for the same period in 2010, for an increase of $1.68 million,
or about 37%. The increase was primarily due to an uptick in the volume of
freight shipped by our customers.  Of this increase in gross profit,
approximately 15% is attributable to our US operations and 85% relates to our
businesses outside the US.





The
Group's gross margin increased from 14.50% for the three months ended March 31,
2009, to 15.9% for the same period in 2010.  The increase in our gross
margin is  due to  improvements in the gross margin of Asean
in Australia and WCS in the US, The improvements in gross margin for these two
operations offset declines in the gross margins of our other
operations.




7




Total
operating expenses increased to about $6.60 million for the three months ended
March 31, 2010, as compared to approximately $5.60 million for the same period
in 2009, for an increase of $1.00 million.  The increase is partially
attributable to an increase in the operating expenses of Asean, and is due to
salaries for additional personnel for its warehouse operations, and a
strengthening of the Australian dollar against the US dollar. In addition, late
in 2009, we added new personnel to our  Hong Kong and China
operations, which increased our operating costs in the first quarter by about
$0.24 million.  For the first quarter of 2010, salaries and related
personnel costs increased by about $0.76 million, from $3.75 million to $4.51
million.  Other selling and administrative costs increased by
approximately 17% from $1.61 million to $1.88 million, which, when combined with
the increase in personnel costs, resulted in a total increase of approximately
$1.03 million in operating costs, not including amortization and
depreciation.  Amortization and depreciation expense decreased from
$0.24 million to $0.22 million, or about 11%.  Most of this reduction
relates to a decrease in the amortization for WCS’s customer list.  In
2009, we recorded a $0.72 million impairment charge to reflect a decline in the
value of WCS’s customer list, and this has resulted in less monthly amortization
expense for this asset.  SeeOther Operating Expenses
below.




After the
provision for income taxes, the Group recorded a net loss of $0.62 million for
the three months ended March 31, 2010, compared to a net loss of $1.04 million
for the same period in 2009.   Hong Kong and China’s operations
reported a combined net income of $0.13 million for the three months ended March
31, 2010, compared to net income of $0.34 million for the same period in 2009,
for a decrease of approximately $0.21 million.  Our US operations
recorded a combined net loss of $0.16 million for the three months ended March
31, 2010, compared to a net loss of $0.49 million for the same period in
2009.  For the three months ended March 31, 2010, WLG (USA) and WCS
reported net income of $55,000 and net loss of $0.21 million,
respectively, compared to a net income of $0.11 million and net loss of
$0.60 million, respectively, for the same period in 2009.  Asean
reported a net income of $0.15 million for the three months ended March 31,
2010, compared to net loss of $0.33 million for the same period in 2009, mainly
attributable to an increase in business from its major customers.  WLG
(UK) reported a net loss of $0.11 million for the three months ended March 31,
2010, compared to a net income of $42,000 for the same period in
2009.  The parent company’s loss was increased by about $43,000 when
compared to same period in 2009.  During the first quarter of 2010, we
added two officers in the parent company, one individual starting January and
the second person joining at the beginning of  March, which increased
salaries expense by about $93,000, but this increase was partially offset
by the decrease in amortization expense of about $52,000.




Segment
Information





Air freight
operations:  Revenues from our air freight operations increased
from $4.53 million for the three months ended March 31, 2009, to about $8.16
million for the same period in 2010, for an increase of $3.63
million.  Our Hong Kong and China operations reported increases in
revenues of $1.30 million and $0.97 million, respectively.  In
addition, WCS posted an increase in revenues of $1.00 million. Our remaining
subsidiaries reported a net increase in their air freight revenues of
approximately $0.36 million.




Cost of
sales for our air freight operations increased by $3.03 million from $3.56
million for the three months ended March 31, 2009, to $6.59 million for the same
period in 2010, mainly as a result of an increase in the volumes of cargo
shipped and an increase in shipping rates by the airlines.





The
Group’s gross profit margin for its air freight business decreased from 21.5%
for the three months ended March 31, 2009, to 19.2% for the same period in
2010.  The decrease in our gross profit margin is mainly attributable
to the increase in shipping rates in 2010.





Segment
overhead for our air freight operations was $0.90 million for the three months
ended March 31, 2009, which compares to $1.58 million for the same period in
2010.  This increase is attributable to an upturn in our air-freight
business, and to new personnel added to our offices in Hong Kong and
China.




8




Net
segment loss for our air freight operations is approximately $12,000 for the
three months ended March 31, 2010, compared to net income of $77,000 for the
same period in 2009.  For the three months ended March 31, 2010, our
Hong Kong and China air freight operations reported net incomes of approximately
$40,000 and $8,000, respectively, compared to net incomes of approximately $0.10
million and $26,000, respectively, for the same period in 2009, for a combined
decrease of $78,000.  In addition, Asean and WLG (USA) posted net
incomes of $31,000 and $15,000, respectively, for the first quarter of 2010,
compared to a net loss of $32,000 and a net income of $12,000 for the same
period in 2009.  WLG (UK) and WCS reported net losses of $65,000 and
$39,000, respectively, for the three months ended March 31, 2010, compared to
net losses of $4,000 and $27,000, respectively, for the same period in
2009.




Sea freight
operations:  Revenues from our sea freight operations increased
from approximately $14.48 million in the three months ended March 31, 2009, to
$17.49 million for the same period in 2010, for an increase of $3.01
million, or an increase of 21%.  Our China and Hong Kong
operations reported increases in revenues of $0.47 million and $0.35 million,
respectively.  In addition, Asean posted an increase in revenues of
$3.23 million. Our remaining subsidiaries reported a net decrease in their sea
freight revenues of approximately $1.04 million.





Cost of
sales for our sea freight operations increased from $11.63 million for the first
quarter of 2009 to $14.03 million for the same period in 2010, due to
an increase in the volume in cargo shipped and increasing shipping
rates.




The
Group’s gross profit margin increased slightly from 19.6% for the three months
ended March 31, 2009 to 19.8% in 2010.




Total
segment overhead attributable to our sea freight business increased by $0.30
million, or about 10%, from approximately $3.09 million for the three months
ended March 31, 2009, to $3.39 million for the same period in 2010.





Net
segment income for our sea freight operations is approximately $75,000 for the
three months ended March 31, 2010, compared to a net loss of $0.25 million for
the same period in 2009.  In the first quarter of 2010, WEHK and WE
China reported net incomes of $68,000 and $14,000, respectively, which compares
to $0.15 million and $57,000, respectively, for the same period in
2009.  In addition, Asean and WLG (USA) posted a net income of
$85,000 and $41,000, respectively, for the three months ended March 31, 2010,
compared to a net loss of $0.26 million and a net income of $94,000 for the same
period in 2009.  WLG (UK) and WCS reported net losses of $31,000 and
$0.10 million, respectively, for the first quarter of 2010, compared to a net
income of $97,000 and net loss of $0.39 million, respectively, for the same
period in 2009.




Customs brokerage
services:  Asean, WLG (UK) and WCS each have a division that
provides customs brokerage services.  For the three months ended March
31, 2010, revenues from customs brokerage services totaled approximately $13.13
million, compared to $12.06 million for the same period in 2009, for an increase
of about $1.07 million.  Direct and administrative costs for this
segment totaled about $13.18 million, producing a net loss of $42,000 for the
three months ended March 31, 2010, compared to a net loss of $0.27 million for
the same period in 2009.  Most of the loss is attributable to WCS,
which reported a net loss of $71,000, compared to a net loss of $0.17
million for same period last year.  Asean reported net income of
$39,000 for the three months ended March 31, 2010, compared to a loss of
$41,000 for the same period in 2009.   Lastly, during the first
quarter of 2010, WLG (UK) posted a net loss of $10,000, which compared to a loss
of $51,000 in the first quarter of 2009.





Other
Operating Expenses





Salaries
and allowances




Salaries
and related expenses increased by $0.76 million, from $3.75 million for the
three months ended March 31, 2009 to $4.51 million for the same period in
2010.  Asean added salary costs of $0.48 million due to an increase in
staff for its warehouse business and a strengthening of the Australian currency
against the US dollar. In addition, our new Asia-Pacific team based in Hong Kong
and China added salaries of about $0.31 million.




9




Rent




Rent
expense for our facilities increased by 9% from $0.43 million for the three
months ended March 31, 2009, to $0.47 million for the same period in 2010, for
an overall increase of $0.04 million.  Asean and WLG (UK) reported an
increase in rental expense of $44,000 and $10,000, respectively, because of a
strengthening in their local currencies. WE China’s rent expense increased by
$20,000 for the first quarter of 2010, mainly due to the increase in warehouse
space added in June 2009. There was a reduction in rent expense of about $18,000
for our Hong Kong facilities.





Other
selling and administrative expenses





Other
SG&A expense totaled about $1.41 million for the three months ended March
31, 2010, compared to $1.18 million for the same period in 2009, for an increase
of $0.23 million.  The increase was mainly attributable to the growth
in our business during the first quarter of 2010.




Depreciation
and Amortization




For the
three months ended March 31, 2010, depreciation expense for property, plant and
equipment was $0.11 million, compared to $83,000 for the same period in 2009,
for an increase of $27,000.  Asean acquired new office equipment which
increased its depreciation expense by about $20,000.





Amortization
expense is attributable to the customer lists acquired in the acquisitions of
WLG (USA), Asean, WLG (UK) and WCS.  In connection with the
acquisition of WLG (USA), we recorded a customer list asset of $0.51 million,
which is now being amortized on a straight-line basis over 4
years.  Asean's customer list was valued at $1.56 million and is being
amortized on a straight-line basis over 8 years.  WLG (UK)'s customer
list was valued at $0.83 million and was being amortized over 5
years.  In 2009, WLG (UK)’s customer list became fully amortized due
to prior amortization and a reduction in carrying value of $0.60 million
resulting from the cancellation of an earn-out arrangement.  WCS’s
customer list was valued at $2.84 million and is being amortized over 9
years.   In addition, the Group periodically reviews the book value
and estimated useful lives of its intangible assets to ensure that the rate of
amortization is consistent with the expected pattern of economic benefits to be
received from its intangible assets.  This review for 2009 resulted in
the Group recognizing an impairment charge of $0.72 million to WCS’s customer
list.  In 2008, a similar review indicated that the remaining useful
lives for the intangible assets of WLG (USA) and WLG (UK) were 4 years and 5
years, respectively.  Due to this review, the useful lives of the
intangible assets of WLG (USA) and WLG (UK) were extended from 1.25 years to 4
years and from 3 years to 5 years, respectively, effective from January 1,
2009. For the three months ended March 31, 2010, amortization expense
totaled $0.11 million, and is attributable to WLG (USA), Asean and WCS in the
approximate amounts of $8,000, $49,000 and $51,000,
respectively.  Amortization expense for the three months ended March
31, 2009 was $0.16 million and related to WLG (USA), Asean, WLG (UK) and WCS in
the approximate amounts of $8,000, $49,000, $24,000 and $79,000,
respectively.




Interest
Expense




Interest
expense grew from $0.16 million for the three months ended March 31, 2009 to
$0.18 million for the same period in 2010, for an increase of $0.02
million.  Asean’s interest expense was higher by $26,000, mainly as a
result of an increase in its bank borrowings, an increase in interest rates and
a strengthening of Australia's currency.  In addition, WEHK and WAE
obtained new bank loans at the beginning of 2010 and incurred interest of
$6,000. Interest expense for the director’s loans and Series B Preferred Stock
decreased from $78,000 for the three months ended March 31, 2009 to $69,000 for
the same period in 2010, as one of the loans was fully repaid in
2009.  All director loans and the Series B Preferred Stock carry an
interest and dividend rate of 12% per annum.





10




Other
income / expense





Other
income for the three months ended March 31, 2010, totaled $17,000, compared to
other income of $71,000, for the same period in 2009, for a decrease of
$54,000.  The decline is mainly attributable to a decrease of
miscellaneous income in several of our operating companies.





Provision
for Income Taxes





The
provision for income taxes is $38,000 for the three months ended March 31, 2010,
compared to income tax benefits of about $0.14 million for the same period in
2009.  Income tax of $28,000 was provided on WEHK’s net income of
$0.17, for an effective tax rate of 16.5%.  In addition, WAE
posted a net loss of $97,000 for which a tax benefit of $16,000 was
provided. WLG (UK) and WE China recorded a net loss of $0.16 million and
$44,000, respectively, and no tax benefits were provided for their losses. Our
Australian operations reported net income of $77,000 and recorded an income tax
provision of $26,000. The US operations of WLG (USA) 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
$0.53 million, which included amortization expense of $99,000 that is not
deductible for income tax purposes.  No federal tax benefit was
provided for the US losses.





LIQUIDITY
AND CAPITAL RESOURCES




Our
operations used cash of approximately $0.78 million for the three months ended
March 31, 2010, compared to cash of $1.11 million provided by operations for the
same period in 2009.  During the first quarter of 2010, cash was
provided by the following sources: amortization and depreciation expense of
$0.22 million; provision for bad debts of $63,000; decrease in trade receivables
of $14,000 and an increase in trade payables of $31,000.  Major components
that used cash for operations during the first quarter of 2010 include: net loss
of $0.62 million; increases in deposits and prepayments of $0.26 million; a
decrease in other accrued liabilities of $0.18 million; decrease in due to
director of $26,000 and a decrease in income tax payable of
$24,000.




Net cash
provided by financing activities totaled about $0.65 million for the three
months ended March 31, 2010, compared to net cash of $1.11 million used by
financing activities for the same period in 2009.  Cash used by
financing activities in the first quarter of 2009 included a decrease in bank
debt of $1.19 million; repayment of capital leases of $18,000 and cash dividends
of $23,000 paid on preferred stock.  Cash provided by financing
activities in the first quarter of 2009 included a decrease in restricted cash
of $0.11 million. Cash used by financing activities for the three months ended
March 31, 2010, included repayment of a loan from a director of $18,000;
repayment of capital lease obligations of $21,000; and cash dividends of $23,000
paid on our preferred stock.  Cash provided by financing activities
for the three months ended March 31, 2010, included an increase in bank debt
totaling $0.72 million.




As of
March 31, 2010, 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 held in restricted bank
accounts.





An
Australian bank has provided a guarantee of about $0.13 million in favor of the
owner of the office premises occupied by Asean.  In addition, a UK
bank has provided a guarantee of $0.45 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 grants credit terms to WLG
(UK).  A parent company guarantee has been given to the UK
bank.  In addition, a parent company guarantee has been given as
support for the future rental obligations related to WLG (UK)’s office and
warehouse facilities.  This latter guarantee is limited to an amount
equal to three years rent at the date the guarantee is enforced.  As
of March 31, 2010, our contingent obligation under this guarantee was about
$0.91 million.




11





In
January 2010, WEHK borrowed $0.32 million for use as general working capital,
and this loan is repayable in equal installments over five years. As of March
31, 2010, the outstanding balance of this loan was $0.31 million.





In
December 2009, WAE borrowed $0.26 million for use as general working capital,
and this loan is repayable in equal installments over five years. As of March
31, 2010, the outstanding balance of this loan was $0.25 million.





Asean has
a revolving loan facility in the face amount of approximately $3.68 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
$0.62 million.  At March 31, 2010, Asean's bank debt under its
revolving loan and overdraft facilities was $2.42 million and $0.62 million,
respectively, with interest rates of approximately 9.93% for the receivables
line and 9.03% 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 its remaining assets.  Asean’s overdraft
facility is guaranteed by the Group’s parent company.




During
2008, WCS had a revolving loan facility from a bank in the face amount of $3.0
million.  This facility, which was secured in part by all of the trade
receivables of WCS, MSA and WLG (USA), allowed borrowings equal to 80% of the
eligible receivables of all three companies.  The loan facility was
renewed in October 2009 in the face amount of $2.5 million, but was subsequently
reduced to $2.08 million when it was renewed in November 2009. This loan
facility expired on February 28, 2010 and was not renewed. In February
2010, WCS and WLG (USA) obtained a revolving banking facility of $3.0
million from another lender, and this new facility will expire in
February 2011. This loan facility, which carries a minimum interest rate of 9.5%
per annum, is secured by all of the assets of WCS and WLG (USA) and by a
guarantee from the Group’s parent company.  In addition, an origination and
commitment fee totally 2% of the loan facility and other charges are payable for
this loan facility. As of March 31, 2010, our US companies owed
approximately $2.65 million to the bank.




12








In our
past reports, we have expressed a strong intent to continue executing our
business plan, which, among other things, called 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.  In May of 2009, we hired
approximately 10 individuals that had previously worked with an international
freight forwarding company in New York.  Several of the new
employees have strong business connections in Asia and specialize in air-freight
shipments in the US-Asia trade lanes.  We paid no cash to hire these
individuals, but we did incur some capital costs and also added office
space to our existing branch office in New York.    Late in
2009 and during the first quarter of 2010, we added about
seventeen employees to our operations in Hong Kong and China without
incurring any outlay of funds, except for on-going salaries.  All of
these individuals previously worked for a large multi-national freight
forwarding and logistics company and have strong backgrounds in sales,
air-freight forwarding and logistics. For the coming year, we intend to
focus on growing our existing business and improving our profitability. This may
require us to raise new capital, either by taking on new debt, bringing in new
equity, selling assets or a combination of all three.




Our
approximate contractual cash obligations as of March 31, 2010, for the periods
shown are set forth in the table below and are expected to equal approximately
$0.54 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
                                          yearsShort-term debt
                                        
                                        $
                                        582
                                        
                                        
                                        $
                                        582
                                        
                                        
                                        $
                                        —
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —Facilities
      rental and equipment leases
                                        
                                        $
                                        7,376
                                        
                                        
                                        $
                                        1,893
                                        
                                        
                                        $
                                        2,729
                                        
                                        
                                        $
                                        1,890
                                        
                                        
                                        $
                                        864Cargo
      space commitments
                                        
                                        $
                                        3,977
                                        
                                        
                                        $
                                        3,977
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —Redeemable
      preferred stock
                                        
                                        $
                                        1,700
                                        
                                        
                                        
                                        —
                                        
                                        
                                        $
                                        1,700
                                        
                                        
                                        
                                        —
                                        
                                        
                                        
                                        —Total
      contractual cash obligations
                                        
                                        $
                                        13,635
                                        
                                        
                                        $
                                        6,452
                                        
                                        
                                        $
                                        4,429
                                        
                                        
                                        $
                                        1,890
                                        
                                        
                                        $
                                        864




During
the years ended March 31, 2010 and 2009, 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.




13





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





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





ITEM 4. CONTROLSANDPROCEDURES





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





There has
been no change in the Company’s internal control over financial reporting during
the period covered by the Report on Form 10-Q that has materially affected, or
is reasonably likely to materially affect, the Company’s internal control over
financial reporting.





Part
II: Other Information




Item
1: Legal Proceedings:





During
the three months ended March 31, 2010, 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, 2009.





Items 1A: Risk Factors: There
have been no material changes in the Risk Factors set forth in our Annual Report
on Form10-K for the year ended December 31, 2009.




Item
6. Exhibits.





Exhibits





31.1
            
            Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 (Rule15d-14(a)).31.2
            
            Certification
      of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley Act of
      2002 (Rule 15d-14(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
15d-14(b)).







14











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:
      May 14, 2010
              By:
              /s/ Andrew
      JillingsAndrew
      JillingsChief
      Executive Officer,
                (
      Principal Executive Officer) and DirectorDate:
      May 14, 2010
              By:
              /s/ David
      L. KoontzDavid
      L. KoontzChief Financial Officer,
                (Principal Financial Officer and Accounting Officer)
                and Director





15





EXHIBIT
INDEX





Exhibit
              Number
            
            Description of Exhibit31.1
            
            Certification
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002(Rule 15d-14(a)).31.2
            
            Certification
      of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley Act of
      2002 (Rule15d-14(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
15d-14(b)).







16