| WAKO                    LOGISTICS GROUP, INC.                                                       |
|-----------------------------------------------------------------------------------------------------|
| (Exact                    Name of Registrant as Specified in Its Charter)                           |
|                                                                                                |   |
| Delaware                                                                                            | 20-0262555  |
| (State                    or Other Jurisdiction ofIncorporation                    or Organization) | (I.R.S.                    EmployerIdentification                    No.) |
|                                                                                                |   |
| 200                    Howard Avenue, Suite 232, Des Plaines, Illinois                              | 60018 |
| (Address                    of Principal Executive Offices)                                         | (Zip                    Code) |
|                                                                                                |   |
| (847)                    294-1600                                                                   |
| (Registrant's                    Telephone Number, Including Area                    Code)          |

----

**WAKO        LOGISTICS GROUP, INC. **

**FORM        10-QSB**

**QUARTER        ENDED JUNE 30, 2005 **

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

----

**PART        I. FINANCIAL INFORMATION**

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

| **Wako                Logistics Group, Inc.**                                                                 |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                    |   |
| **Condensed                Consolidated Statements of Operations**                                                 |   |
| 6                months period ended June 30, 2004                and 2005                                         |   |
| *(Dollars                in thousands except share data and per share                amounts)*                     |   |
|                                                                                                                    |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   | **3                  months period ended****June                  30,** |   | **6                  months period ended****June                  30,** |   |
|                                                                                                                    |   |   |   | **2004** |   | **2005** |   | **2004** |   | **2005** |   |
|                                                                                                                    |   | *Note* |   | *US$* |   | *US$* |   | *US$* |   | *US$* |   |
|                                                                                                                    |   |   |   | *(unaudited)* |   | *(unaudited)* |   | *(unaudited)* |   | *(unaudited)* |   |
| **Revenues:**                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| Freight                                                                                                                 |   |   |   |   |   | 4,576 |   |   | 8,424 |   |   | 8,619 |   |   | 14,923 |   |
| Agency                  services                                                                                        |   |   |   |   |   | 117 |   |   | (444 | ) |   | 221 |   |   | (820 | ) |
| Other                  services                                                                                         |   |   |   |   |   | 487 |   |   | 1,431 |   |   | 917 |   |   | 2,155 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Total                  revenues**                                                                                     |   |   |   |   |   | 5,180 |   |   | 9,411 |   |   | 9,757 |   |   | 16,258 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Operating                  expenses**                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost                  of forwarding                                                                                     |   |   |   |   |   | (4,408 | ) |   | (7,638 | ) |   | (8,191 | ) |   | (13,386 | ) |
| Selling                  and administrative expenses                                                                    |   |   |   |   |   | (705 | ) |   | (1,659 | ) |   | (1,356 | ) |   | (2,595 | ) |
| Depreciation                  and amortization                                                                          |   |   |   |   |   | (15 | ) |   | (53 | ) |   | (23 | ) |   | (75 | ) |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  operating expenses                                                                               |   |   |   |   |   | (5,128 | ) |   | (9,350 | ) |   | (9,570 | ) |   | (16,056 | ) |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from operations**                                                                             |   |   |   |   |   | 52 |   |   | 61 |   |   | 187 |   |   | 202 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other                  income (expense)**                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income                                                                                        |   |   |   |   |   | — |   |   | 2 |   |   | 1 |   |   | 6 |   |
| Interest                  expense                                                                                       |   |   |   |   |   | (1 | ) |   | (22 | ) |   | (1 | ) |   | (26 | ) |
| Other                  income, net                                                                                      |   |   |   |   |   | 26 |   |   | 15 |   |   | 30 |   |   | 39 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  before income taxes**                                                                         |   |   |   |   |   | 77 |   |   | 56 |   |   | 217 |   |   | 221 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision                  for income taxes                                                                             |   |   |   |   |   | (23 | ) |   | (41 | ) |   | (50 | ) |   | (80 | ) |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Income                  from operations**                                                                             |   |   |   |   |   | 54 |   |   | 15 |   |   | 167 |   |   | 141 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic                  earnings per share**                                                                           |   |   |   |   |   | — |   |   | — |   |   | 0.01 |   |   | 0.01 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Diluted                  earnings per share**                                                                         |   |   |   |   |   | — |   |   | — |   |   | 0.01 |   |   | 0.01 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Weighted                  average common shares outstanding**                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                   |   |   |   |   |   | 20,441,000 |   |   | 20,641,000 |   |   | 20,441,000 |   |   | 20,541,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                                                                                                 |   |   |   |   |   | 20,441,000 |   |   | 22,641,000 |   |   | 20,441,000 |   |   | 21,541,000 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                financial statements should be read                in conjunction with the accompanying notes.  |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| **Wako                Logistics Group, Inc.**                                                                                                                                 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                          |   |
| **Condensed                  Consolidated Balance Sheets**                                                                                                               |   |
| At                December 31, 2004 and June 30,                2005                                                                                                          |   |
| *(Dollars                in thousands except share data and per share                amounts)*                                                                           |   |
|                                                                                                                                                                          |   |
|                                                                                                                                                                          |   |   |   | **At****December                  31,****2004** |   | **At                  June 30,****2005** |   |
|                                                                                                                                                                          |   | *Note* |   | *US$* |   | *US$* |   |
|                                                                                                                                                                          |   |   |   |   |   | *(unaudited)* |   |
| **ASSETS**                                                                                                                                                                    |   |   |   |   |   |   |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |
| **Current                  assets**                                                                                                                                           |   |   |   |   |   |   |   |
| Cash                  and cash equivalents                                                                                                                                    |   |   |   |   |   | 306 |   |   | 810 |   |
| Restricted                  cash                                                                                                                                              |   |   |   |   |   | 345 |   |   | 409 |   |
| Certificates                  of deposit                                                                                                                                      |   |   |   |   |   | 115 |   |   | 115 |   |
| Trade                  receivables, net                                                                                                                                       |   |   |   |   |   | 3,690 |   |   | 5,610 |   |
| Deposits,                  prepayments and other current assets                                                                                                               |   |   |   |   |   | 155 |   |   | 203 |   |
| Due                  from related parties                                                                                                                                     |   |   | *4* |   |   | 369 |   |   | 83 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| **Total                  current assets**                                                                                                                                     |   |   |   |   |   | 4,980 |   |   | 7,230 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Goodwill                                                                                                                                                                      |   |   |   |   |   | — |   |   | 766 |   |
| Intangible                  assets                                                                                                                                            |   |   | *6* |   |   | — |   |   | 487 |   |
| Property,                  plant and equipment, net                                                                                                                           |   |   |   |   |   | 166 |   |   | 280 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| **Total                  assets**                                                                                                                                             |   |   |   |   |   | 5,146 |   |   | 8,763 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES                  AND STOCKHOLDERS' EQUITY**                                                                                                                     |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| **Current                  liabilities**                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |
| Bank                  overdrafts                                                                                                                                              |   |   |   |   |   | 139 |   |   | 3 |   |
| Trade                  payables                                                                                                                                               |   |   |   |   |   | 2,342 |   |   | 4,187 |   |
| Accrued                  charges and other creditors                                                                                                                          |   |   |   |   |   | 219 |   |   | 379 |   |
| Bank                  loan - maturing within one year                                                                                                                         |   |   | *2* |   |   | 241 |   |   | 624 |   |
| Current                  portion of capital lease obligation                                                                                                                  |   |   |   |   |   | — |   |   | 4 |   |
| Due                  to related parties                                                                                                                                       |   |   | *4* |   |   | 53 |   |   | 1 |   |
| Due                  to directors                                                                                                                                             |   |   | *4* |   |   | 733 |   |   | 1,990 |   |
| Income                  tax payable                                                                                                                                           |   |   |   |   |   | 124 |   |   | 187 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Total                  current liabilities                                                                                                                                    |   |   |   |   |   | 3,851 |   |   | 7,375 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| **Non-current                  liabilities**                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |
| Bank                  loan - maturing after one year                                                                                                                          |   |   | *2* |   |   | 187 |   |   | 75 |   |
| Non-current                  portion of capital lease obligation                                                                                                              |   |   |   |   |   | — |   |   | 8 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                          |   |   |   |   |   | 187 |   |   | 83 |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| Commitments                  and contingencies                                                                                                                                |   |   | *3* |   |   | — |   |   | — |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |
| The                financial statements should be read in conjunction with the accompanying                notes.           |   |

----

| **Wako                Logistics Group, Inc.**                                                                                                                                                            |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                     |   |
| **Condensed                Consolidated Balance Sheets**                                                                                                                                                 |   |
| At                December 31, 2004 and June 30,                2005                                                                                                                                     |   |
| *(Dollars                in thousands except share data and per share                amounts)*                                                                                       |   |
|                                                                                                                                                                                                     |   |   |   |   |   |
|                                                                                                                                                                                                     |   |  **At****December                  31,****2004** |   | **At                  June 30,****2005** |   |
|                                                                                                                                                                                                     |   |  *US$* |   | *US$* |   |
|                                                                                                                                                                                                     |   |    |   | *(unaudited)* |   |
|                                                                                                                                                                                                     |   |    |   |   |   |
| **Stockholders'                  equity**                                                                                                                                                                |   |    |   |   |   |
| Preferred                  stock, US$0.001 par value, 5 million shares authorized and nil                  issued                                                                                        |   |    |   |   |   |
| Common                  stock US$0.001 par value, 55 million shares authorized,20,641,000                  *(At                  31.12.2004: 20,441,000)*                  shares issued and outstanding |   |   | 20 |   |   | 20 |   |
| Additional                  paid-in capital                                                                                                                                                              |   |   | 456 |   |   | 506 |   |
| Accumulated                  other comprehensive income                                                                                                                                                  |   |   | 3 |   |   | 9 |   |
| Retained                  earnings                                                                                                                                                                       |   |   | 629 |   |   | 770 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **Total                  stockholders' equity**                                                                                                                                                          |   |   | 1,108 |   |   | 1,305 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| **Total                  liabilities and stockholders' equity**                                                                                                                                          |   |   | 5,146 |   |   | 8,763 |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |
|                                                                                                                                                                                                     |   |   |   |   |   |   |   |
| The                  financial statements should be read in conjunction with the accompanying                  notes.                                                                               |   |

----

| **Wako                  Logistics Group, Inc.**                                                                       |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                            |   |
| **Condensed                  Consolidated Statements of Cash Flows**                                                            |   |
| 6                  months period ended June 30, 2004 and 2005                                                                   |   |
| *(Dollars                  in thousands except share data and per share                  amounts)*               |   |
|                                                                                                                            |   |
|                                                                                                                            |   | **6                    months period ended****June                    30,** |   |
|                                                                                                                            |   | **2004** |   | **2005** |   |
|                                                                                                                            |   | *US$* |   | *US$* |   |
|                                                                                                                            |   | *(unaudited)* |   | *(unaudited)* |   |
| **Cash                    flows from****operating activities:**                                                                 |   |   |   |   |   |
| Net                    income                                                                                                   |   |   | 167 |   |   | 141 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Adjustments                    to reconcile net income to net cash provided by****operating                    activities**   |   |   |   |   |   |   |   |
| Depreciation                                                                                                                    |   |   | 23 |   |   | 49 |   |
| Bad                    debts written off                                                                                        |   |   | 17 |   |   | — |   |
| Amortization                    of intangible assets                                                                            |   |   | — |   |   | 26 |   |
| Other                    non-cash items                                                                                         |   |   | 61 |   |   | 6 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Changes                    in working capital:**                                                                              |   |   |   |   |   |   |   |
| Trade                    receivables                                                                                            |   |   | (253 | ) |   | (681 | ) |
| Deposits                    and prepayments                                                                                     |   |   | (30 | ) |   | — |   |
| Due                    from related parties                                                                                     |   |   | 391 |   |   | 193 |   |
| Trade                    payables                                                                                               |   |   | 361 |   |   | 764 |   |
| Accrued                    charges and other creditors                                                                          |   |   | (30 | ) |   | (62 | ) |
| Due                    to related parties                                                                                       |   |   | (2 | ) |   | (53 | ) |
| Due                    to directors                                                                                             |   |   | 10 |   |   | 258 |   |
| Income                    tax payable                                                                                           |   |   | 50 |   |   | 63 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Net                    cash provided by operating activities**                                                                |   |   | 765 |   |   | 704 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Cash                    flows from investing activities:**                                                                    |   |   |   |   |   |   |   |
| Acquisition                    of property, plant and equipment                                                                 |   |   | (114 | ) |   | (137 | ) |
| Acquisition                    of a subsidiary                                                                                  |   |   | — |   |   | (1,000 | ) |
| Due                    to and (from) related parties                                                                            |   |   | (11 | ) |   | 93 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
|                                                                                                                            |   |   | (125 | ) |   | (1,044 | ) |
| **Cash                    flows from financing activities:**                                                                    |   |   |   |   |   |   |   |
| Restricted                    cash                                                                                              |   |   | (65 | ) |   | (64 | ) |
| Bank                    overdrafts                                                                                              |   |   | (157 | ) |   | (137 | ) |
| New                    bank debt                                                                                                |   |   | 50 |   |   | 175 |   |
| Bank                    loan repaid                                                                                             |   |   | — |   |   | (129 | ) |
| Repayment                    of capital lease obligation                                                                        |   |   | — |   |   | (1 | ) |
| Dividends                    paid                                                                                               |   |   | (538 | ) |   | — |   |
| Advance                    from director                                                                                        |   |   | — |   |   | 1,000 |   |
| Issuance                    of new shares                                                                                       |   |   | 159 |   |   | — |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Net                    cash****(used in) provided by financing                    activities**                                |   |   | (551 | ) |   | 844 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Net                    increase in cash and cash equivalents**                                                                |   |   | 89 |   |   | 504 |   |
| **Cash                    and cash equivalents at beginning of period**                                                         |   |   | 70 |   |   | 306 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| **Cash                    and cash equivalents at end of period**                                                               |   |   | 159 |   |   | 810 |   |
|                                                                                                                            |   |   |   |   |   |   |   |
| The                    financial statements should be read in conjunction with the accompanying                    notes.  |   |

----

| **Wako                    Logistics Group, Inc.**                                                              |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |
| **Notes                    to the Consolidated Financial Statements **                                              |   |
| 6                    months period ended June 30, 2004 and 2005                                                          |   |
| *(Dollars                    in thousands except share data and per share                    amounts)*    |   |
|                                                                                                                     |

|                                                                                                                                                                                                                |   | **At**                               |   | **At**                           |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|---------------------------------------|--------|
|                                                                                                                                                                                                                |   | **December                    31,**  |   | **June                    30,**  |   |
|                                                                                                                                                                                                                |   | **2004**                             |   | **2005**                         |   |
|                                                                                                                                                                                                                |   | *US$*                                |   | *US$*                            |   |
|                                                                                                                                                                                                                |   |                                      |   | *(unaudited)*                    |   |
| **Facilities                  granted**                                                                                                                                                                        |   |                                      |   |                                  |   |
| Committed                    line - bank guarantee                                                                                                                                                                  |   |                                      | 446    |                                  |   | 510 |   |
|                                                   - bank loan |   |                                      | 516    |                                  |   | 949 |   |
|                                                                                                                                                                                                                |   |                                      |   |                                  |   |   |   |
| Total                    line                                                                                                                                                                                       |   |                                      | 962    |                                  |   | 1,459 |   |

----

| **Wako                    Logistics Group, Inc.**                                                              |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |
| **Notes                    to the Consolidated Financial Statements **                                              |   |
| 6                    months period ended June 30, 2004 and 2005                                                          |   |
| *(Dollars                    in thousands except share data and per share                    amounts)*    |   |
|                                                                                                                     |

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

|   |   | **At****December                      31,****2004** |   | **At****June                      30,****2005** |   |
|--------|--------|-----------------------------------------------------|--------|-------------------------------------------------|--------|
|   |   | *US$*                                               |   | *(unaudited)*                                   |   |
|   |   |                                                |   |                                            |   |  *US$* |   |

| **Utilized**                                                                                                                                                                                                   |   |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Committed                    line - bank guarantee                                                                                                                                                                  |   |   | 446    |   |   | 510 |   |
|                                                   - bank loan |   |   | 428    |   |   | 699 |   |
|                                                                                                                                                                                                                |   |   |   |   |   |   |   |
| Total                    utilized                                                                                                                                                                                   |   |   | 874    |   |   | 1,209 |   |

**3.                   **
**COMMITMENTS        AND CONTINGENCIES**

***Commitments        under operating leases***

|                                                             |   | **At****June                    30,****2005** |   | **At****June                    30,****2005** |   |
|------------------------------------------------------------------|--------|-----------------------------------------------|--------|-----------------------------------------------|--------|
|                                                             |   | *US$*                                         |   | *(unaudited)*                                 |   |
|                                                             |   |                                          |   | *US$*                                         |   |
|                                                             |   |                                          |   |                                          |   |
| Within                    one year                               |   |                                          | 242    |                                          |   | 294 |   |
| Over                    one year but not exceeding two years     |   |                                          | 96     |                                          |   | 114 |   |
| Over                    two years but not exceeding three years  |   |                                          | 13     |                                          |   | 81 |   |
| Over                    three years but not exceeding four years |   |                                          | 13     |                                          |   | 26 |   |
| Over                    four years but not exceeding five years  |   |                                          | 4      |                                          |   | — |   |
|                                                             |   |                                          |   |                                          |   |   |   |
| Total                    operating lease commitments             |   |                                          | 368    |                                          |   | 515 |   |
|                                                             |   |                                          |   |                                          |   |   |   |

|   | Rent                  expense under operating leases for the 6 months ended June                  30, 2004                  and 2005 was US$107 and US$170                  respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| **Wako                      Logistics Group, Inc.**                                                                |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                         |   |
| **Notes                      to the Consolidated Financial Statements **                                                |   |
| 6                      months period ended June 30, 2004 and 2005                                                            |   |
| *(Dollars                      in thousands except share data and per share                      amounts)*    |   |
|                                                                                                                         |

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

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

|   | The                  Group has entered into written agreements with various freight                  carriers pursuant to which the Group is committed to utilize                  a                  guaranteed minimum amount of cargo space each year. For the twelve                  months                  ending June 30, 2006, WLG is committed to use cargo space costing                  US$723. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | WLG                  is subject to claims that arise primarily in the ordinary course                  of                  business. In general, such claims are covered by an insurance policy                  that                  covers the Group’s businesses. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**4.                 **
**RELATED      PARTY TRANSACTIONS**

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

----

| **Wako                    Logistics Group, Inc.**                                                              |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |
| **Notes                    to the Consolidated Financial Statements **                                              |   |
| 6                    months period ended June 30, 2004 and 2005                                                          |   |
| *(Dollars                    in thousands except share data and per share                    amounts)*    |   |
|                                                                                                                     |

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

| **Details                of related parties** |
|-----------------------------------------------|
|                                          |   |   |   |   |   |   |
| Name                                          |   | Principal                activities |   | Ownership                (as of June 30, 2005) |
|                                          |   |   |   | *Name                of owner* |   | *%                held* |
|                                          |   |   |   |   |   |   |
| WEC                                           |   | Provision                of sea freight and air freight forwarding services in the PRC                # |   | CW |   | 50% |
|                                          |   |   |   | PY |   | 50% |
|                                          |   |   |   |   |   |   |
| ACSP                                          |   | Provision                of sea freight and air freight forwarding services in Australia                # |   | CW                (up to June 25, 2004) |   | 40% |
|                                          |   |   |   | Others |   | 60%  |
|                                          |   |   |   |   |   |   |
| ALI                                           |   | Provision                of sea freight and air freight forwarding services in the United                States                # |   | PY |   | 35% |
|                                          |   |   |   | Others  |   | 55%  |
| WLT                                           |   | Provision                of sea freight and air freight forwarding services in Thailand                # |   | CW                (up to January 3, 2005) |   | 50% |
|                                          |   |   |   | Others |   | 50% |
|                                          |   |   |   |   |   |   |
| MDL                                           |   | Property                holding for letting to the Group until February 2004 |   | CW |   | 100% |
|                                          |   |   |   |   |   |   |
| JWP                                           |   | Property                holding for letting to the Group |   | CW |   | 100% |
|                                          |   |   |   |   |   |   |
| YHKL                                          |   | Property                holding for letting to the Group |   | PY                and his spouse |   | 100% |

----

| **Wako                      Logistics Group, Inc.**                                                                |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                         |   |
| **Notes                      to the Consolidated Financial Statements **                                                |   |
| 6                      months period ended June 30, 2004 and 2005                                                            |   |
| *(Dollars                      in thousands except share data and per share                      amounts)*    |   |

|                                                           |   |                              |   |                                |   |
|----------------------------------------------------------------|--------|-----------------------------------|--------|-------------------------------------|--------|
|                                                           |   | **At**                       |   | **At**                              |   |
|                                                           |   | **December                  31,** |   | **June                  30,**  |   |
|                                                           |   | **2004**                          |   | **2005**                            |   |
|                                                           |   | *US$*                             |   | *(unaudited)*                       |   |
|                                                           |   |                              |   | *US$*                          |   |
| **Due                  from related parties (Note (i))**  |   |                              |   |                                |   |
| WEC                                                            |   |                              | 258    |                                |   | 81 |   |
| ALI                                                            |   |                              | 97     |                                |   | — |   |
| WLT                                                            |   |                              | 14     |                                |   | 2 |   |
|                                                           |   |                              |   |                                |   |   |   |
|                                                           |   |                              | 369    |                                |   | 83 |   |
|                                                           |   |                              |   |                                |   |   |   |
| **Due                  to related parties (Note (i))**         |   |                              |   |                                |   |   |   |
| WEC                                                            |   |                              | 50     |                                |   | — |   |
| WLT                                                            |   |                              | 3      |                                |   | 1 |   |
|                                                           |   |                              |   |                                |   |   |   |
|                                                           |   |                              | 53     |                                |   | 1 |   |
|                                                           |   |                              |   |                                |   |   |   |
| **Due                  to directors**                          |   |                              |   |                                |   |   |   |
| CW                                                             |   |                              | 733    |                                |   | 1,991 |   |

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

----

| **Wako                            Logistics Group, Inc.**                                                                      |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                     |   |
| **Notes                            to the Consolidated Financial Statements **                                                      |   |
| 6                            months period ended June 30, 2004 and 2005                                                                  |   |
| *(Dollars                            in thousands except share data and per share                            amounts)*    |   |
|                                                                                                                                     |

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

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

|                                               |   | **WEC** |    | **ACSP** |   | **ALI** |   | **WLT** |    | **Total** |   |
|----------------------------------------------------|--------|---------|---------|----------|--------|---------|--------|---------|---------|-----------|--------|
|                                               |   | *US$*   |    | *US$*    |   | *US$*   |   | *US$*   |    | *US$*     |   |
|                                               |   |    |    |     |   |    |   |    |    |      |   |
| January                1, 2004                     |   |    | 700     |     |   | 224     |   |    | 213     |      |   | 25 |   |   | 1,162 |   |
|                                               |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Trade                transactions                  |   |    | 241     |     |   | 576     |   |    | 211     |      |   | 20 |   |   | 1,048 |   |
| Expenses                                           |   |    | 114     |     |   | 68      |   |    | 5       |      |   | — |   |   | 187 |   |
| Net                settlements                     |   |    | (834    | )        |   | (432    | )      |    | (322    | )         |   | (25 | ) |   | (1,613 | ) |
|                                               |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| June                30, 2004                       |   |    | 221     |     |   | 436     |   |    | 107     |      |   | 20 |   |   | 784 |   |
|                                               |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| January                1, 2005                     |   |    | 208     |     |   | — |   |    | 97      |      |   | 11 |   |   | 316 |   |
|                                               |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| Trade                transactions                  |   |    | 203     |     |   | — |   |    | — |      |   | 10 |   |   | 213 |   |
| Expenses                                           |   |    | 128     |     |   | — |   |    | — |      |   | — |   |   | 128 |   |
| Net                settlements                     |   |    | (458    | )        |   | — |   |    | — |      |   | (19 | ) |   | (477 | ) |
| Reclassified                as non-related parties |   |    | — |     |   | — |   |    | (97     | )         |   | — |   |   | (97 | ) |
|                                               |   |    |    |     |   |    |   |    |    |      |   |   |   |   |   |   |
| June                30, 2005                       |   |    | 81      |     |   | — |   |    | — |      |   | 2 |   |   | 83 |   |

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

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

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

----

| **Wako                        Logistics Group, Inc.**                                                                  |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                             |   |
| **Notes                        to the Consolidated Financial Statements **                                                  |   |
| 6                        months period ended June 30, 2004 and 2005                                                              |   |
| *(Dollars                        in thousands except share data and per share                        amounts)*    |   |
|                                                                                                                             |

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

**Additional      details of transactions:**

|                                                                   |   |   | **3                          months period ended****June                          30**  |   |   | **6                            months period ended****June                            30,** |   |
|------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------|--------|
|                                                                   |   |   | **2004**                                                                                |   |   | **2005**                                                                               |   |   | **2004**  |   |   | **2005**  |   |
|                                                                   |   |   | *US$*                                                                                        |   |   | *(unaudited)*                                                                          |   |   | *(unaudited)*  |   |   | *(unaudited)*  |   |
|                                                                   |   |   | *(unaudited)*                                                                                |   |   |  *US$*                                                                                 |   |   | *US$*  |   |   |  *US$* |   |
|                                                                   |   |   |                                                                                         |   |   |                                                                                        |   |   |   |   |   |   |   |
| **Handling                          income received/receivable**  |   |   |                                                                                         |   |   |                                                                                        |   |   |   |   |   |   |   |
| ACSP                                                                   |   |   | 7                                                                                            |   |   | —                                                                                     |   |   | 8 |   |   | — |   |
| ALI                                                                    |   |   | 6                                                                                            |   |   | —                                                                                     |   |   | 6 |   |   | — |   |
| WEC                                                                    |   |   | 11                                                                                           |   |   | —                                                                                     |   |   | 11 |   |   | 5 |   |
| WLT                                                                    |   |   | —                                                                                      |   |   | —                                                                                     |   |   | — |   |   | 1 |   |
|                                                                   |   |   |                                                                                         |   |   |                                                                                        |   |   |   |   |   |   |   |
| **Handling                          fees paid/payable**                |   |   |                                                                                         |   |   |                                                                                        |   |   |   |   |   |   |   |
| ACSP                                                                   |   |   | 43                                                                                           |   |   | —                                                                                     |   |   | 83 |   |   | — |   |
| ALI                                                                    |   |   | 30                                                                                           |   |   | —                                                                                     |   |   | 54 |   |   | — |   |
| WEC                                                                    |   |   | 29                                                                                           |   |   | —                                                                                     |   |   | 29 |   |   | 16 |   |
| WLT                                                                    |   |   | —                                                                                      |   |   | —                                                                                     |   |   | 1 |   |   | — |   |
|                                                                   |   |   |                                                                                         |   |   |                                                                                        |   |   |   |   |   |   |   |
| **Rental                          paid/payable**                       |   |   |                                                                                         |   |   |                                                                                        |   |   |   |   |   |   |   |
| MDL                                                                    |   |   | —                                                                                      |   |   | —                                                                                     |   |   | 12 |   |   | — |   |
| JWP                                                                    |   |   | 11                                                                                           |   |   | 27                                                                                          |   |   | 22 |   |   | 43 |   |
| YHKL                                                                   |   |   | 12                                                                                           |   |   | —                                                                                     |   |   | 23 |   |   | — |   |

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

|                                          |   | **CW**        |   | **PY**        |   | **Total**     |   |
|-----------------------------------------------|--------|---------------|--------|---------------|--------|---------------|--------|
|                                          |   | *(unaudited)* |   | *(unaudited)* |   | *(unaudited)* |   |
|                                          |   | *US$*         |   | *US$*         |   | *US$*         |   |
|                                          |   |          |   |          |   |          |   |
| January                1, 2004                |   |          | (1,007 | )             |   | (87           | )      |   | (1,094 | ) |
| Dividends                paid by subsidiaries |   |          | (404   | )             |   | (135          | )      |   | (539 | ) |
| Expenses                / draws               |   |          | 607    |          |   | 197           |   |   | 804 |   |
|                                          |   |          |   |          |   |          |   |   |   |   |
| June                30, 2004                  |   |          | (804   | )             |   | (25           | )      |   | (829 | ) |
|                                          |   |          |   |          |   |          |   |   |   |   |
| January                1, 2005                |   |          | (733   | )             |   | —       |   |   | (733 | ) |
| Advances                                      |   |          | (1,325 | )             |   | —       |   |   | (1,325 | ) |
| Expenses/draws                                |   |          | 68     |          |   | —       |   |   | 68 |   |
|                                          |   |          |   |          |   |          |   |   |   |   |
| June                30, 2005                  |   |          | (1,990 | )             |   | —       |   |   | (1,990 | ) |

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

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

----

| **Wako                          Logistics Group, Inc.**                                                                    |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                 |   |
| **Notes                          to the Consolidated Financial Statements **                                                    |   |
| 6                          months period ended June 30, 2004 and 2005                                                                |   |
| *(Dollars                          in thousands except share data and per share                          amounts)*    |   |
|                                                                                                                                 |

**5.                    **
**SUPPLEMENTAL          DISCLOSURES OF CASH FLOW INFORMATION**

|                                                               |   |   | **6                        months period ended****June                        30,**  |   |   |
|--------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------|--------|--------|
|                                                               |   |   | **2004**                                                                                  |   |   | **2005** |   |   |
|                                                               |   |   | *(unaudited)*                                                                        |   |   | *(unaudited)* |   |   |
|                                                               |   |   | *US$*                                                                                |   |   | *US$*  |   |   |
|                                                               |   |   |                                                                                      |   |   |   |   |   |
| **Cash                      paid                      for:**  |   |   |                                                                                      |   |   |   |   |   |
| Interest                      expenses                        |   |   | 1                                                                                         |   |   | 26 |   |   |

**6.                **
**ACQUISITION      OF SUBSIDIARY**

----

| **Wako                      Logistics Group, Inc.**                                                                |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                         |   |
| **Notes                      to the Consolidated Financial Statements **                                                |   |
| 6                      months period ended June 30, 2004 and 2005                                                            |   |
| *(Dollars                      in thousands except share data and per share                      amounts)*    |   |
|                                                                                                                         |

**6.               **
**ACQUISITION      OF SUBSIDIARY (CONTINUED)**

|                                               |   |   |   |
|----------------------------------------------------|--------|--------|--------|
| Net                assets acquired of:             |   |   |   |
|                                               |   | *US$*  |   |
|                                               |   |   |   |
| Property,                plant and equipment, net  |   |   | 26     |   |
| Intangible                assets                   |   |   | 512    |   |
| Trade                and other receivables         |   |   | 1,286  |   |
| Trade                and other payables            |   |   | (1,302 | ) |
| Capital                lease obligation            |   |   | (13    | ) |
| Bank                loan                           |   |   | (225   | ) |
|                                               |   |   |   |   |
|   Assets              net of liabilities |   |   | 284    |   |
|                                               |   |   |   |   |
| Cash                consideration                  |   |   | 1,000  |   |
| Other                cost capitalized              |   |   | 50     |   |
|                                               |   |   |   |   |
| Total                consideration                 |   |   | 1,050  |   |
|                                               |   |   |   |   |
| Goodwill                arising on acquisition     |   |   | 766    |   |
|                                               |   |   |   |   |

|                                                |   |                                                                |    |                                                                |   |
|-----------------------------------------------------|--------|---------------------------------------------------------------------|---------|---------------------------------------------------------------------|--------|
|                                                |   | **3                months period ended****June                30,** |    | **6                months period ended****June                30,** |   |
|                                                |   | **2004**                                                            |    | **2005**                                                            |   | **2004** |   | **2005** |   |
|                                                |   | *(unaudited)*                                                       |    | *(unaudited)*                                                       |   | *(unaudited)* |   | *(unaudited)* |   |
|                                                |   | *US$*                                                               |    | *US$*                                                               |   | *US$* |   | *US$* |   |
|                                                |   |                                                                |    |                                                                |   |   |   |   |   |
| Revenue                                             |   |                                                                | 6,769   |                                                                |   | 9,411 |   |   | 12,362 |   |   | 17,853 |   |
|                                                |   |                                                                |    |                                                                |   |   |   |   |   |   |   |   |   |
| Net                income                           |   |                                                                | 101     |                                                                |   | 15 |   |   | 245 |   |   | 166 |   |
|                                                |   |                                                                |    |                                                                |   |   |   |   |   |   |   |   |   |
| Net                income per share of common stock |   |                                                                |    |                                                                |   |   |   |   |   |   |   |   |   |
| -                Basic                              |   |                                                                | — |                                                                |   | — |   |   | 0.01 |   |   | 0.01 |   |
| -                Diluted                            |   |                                                                | — |                                                                |   | — |   |   | 0.01 |   |   | 0.01 |   |

----

| **Wako                      Logistics Group, Inc.**                                                                |   |
|------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                         |   |
| **Notes                      to the Consolidated Financial Statements **                                                |   |
| For                      the 3 months period ended June 30, 2004 and 2005                                          |   |
| *(Dollars                      in thousands except share data and per share                      amounts)*    |   |
|                                                                                                                         |

**7.               **
**SEGMENTS      OF THE BUSINESS**

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

**(i)           During the 3 month periods ended June 30, 2004 and 2005        (unaudited)**

|                                                     |   | **Air                forwarding** |    | **Sea                forwarding** |   | **Reclassifications****and****Eliminations** |   | **Total** |    |
|----------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|----------------------------------------------|--------|-----------|---------|
|                                                     |   | **2004**                          |    | **2005**                          |   | **2004**                                     |   | **2005**  |    | **2004** |   | **2005** |   | **2004** |   | **2005** |   |
|                                                     |   | *US$*                             |    | *US$*                             |   | *US$*                                        |   | *US$*     |    | *US$* |   | *US$* |   | *US$* |   | *US$* |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |
| Revenue                                                  |   |                              | 3,053   |                              |   | 4,957                                        |   |      | 2,127   |   |   | 4,454 |   |   |   |   |   |   |   |   | 5,180 |   |   | 9,411 |   |
| Cost                of forwarding                        |   |                              | (2,801  | )                                 |   | (4,327                                       | )      |      | (1,607  | ) |   | (3,311 | ) |   |   |   |   |   |   |   | (4,408 | ) |   | (7,638 | ) |
| Depreciation                                             |   |                              | (5      | )                                 |   | (10                                          | )      |      | (10     | ) |   | (17 | ) |   |   |   |   |   |   |   | (15 | ) |   | (27 | ) |
| Interest                income                           |   |                              | — |                              |   | 2                                            |   |      | — |   |   | — |   |   |   |   |   |   |   |   | — |   |   | 2 |   |
| Interest                expense                          |   |                              | — |                              |   | (3                                           | )      |      | (1      | ) |   | (5 | ) |   |   |   |   |   |   |   | (1 | ) |   | (8 | ) |
| Other                segment income                      |   |                              | 19      |                              |   | 9                                            |   |      | 7       |   |   | 60 |   |   |   |   |   | (54 | ) |   | 26 |   |   | 15 |   |
| Other                segment expenses                    |   |                              | (272    | )                                 |   | (592                                         | )      |      | (426    | ) |   | (1,083 | ) |   |   |   |   | 54 |   |   | (698 | ) |   | (1,621 | ) |
| Taxation                                                 |   |                              | (8      | )                                 |   | (15                                          | )      |      | (15     | ) |   | (26 | ) |   |   |   |   |   |   |   | (23 | ) |   | (41 | ) |
|                                                     |   |                              | (14     | )                                 |   | 21                                           |   |      | 75      |   |   | 72 |   |   |   |   |   |   |   |   | 61 |   |   | 93 |   |
| Corporate                expenses                        |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | (7 | ) |   | (78 | ) |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment                income before income taxes        |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 54 |   |   | 15 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment                assets                            |   |                              | 2,742   |                              |   | 3,436                                        |   |      | 1,346   |   |   | 4,073 |   |   | (65 | ) |   |   |   |   | 4,023 |   |   | 7,509 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated                assets                        |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 150 |   |   | 1,254 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                              |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 4,173 |   |   | 8,763 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,                plant and equipment - additions |   |                              | 23      |                              |   | 23                                           |   |      | 57      |   |   | 48 |   |   |   |   |   |   |   |   | 80 |   |   | 71 |   |

----

| **Wako                        Logistics Group, Inc.**                                                                  |   |
|----------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                             |   |
| **Notes                        to the Consolidated Financial Statements **                                                  |   |
| For                        the 3 months period ended June 30, 2004 and                        2005                     |   |
| *(Dollars                        in thousands except share data and per share                        amounts)*    |   |
|                                                                                                                             |

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

**(ii)**
**During      the 6 month periods ended June 30, 2004 and 2005      (unaudited)**

|                                                     |   | **Air                forwarding** |    | **Sea                forwarding** |   | **Reclassifications****and****Eliminations** |   | **Total** |    |
|----------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|----------------------------------------------|--------|-----------|---------|
|                                                     |   | **2004**                          |    | **2005**                          |   | **2004**                                     |   | **2005**  |    | **2004** |   | **2005** |   | **2004** |   | **2005** |   |
|                                                     |   | *US$*                             |    | *US$*                             |   | *US$*                                        |   | *US$*     |    | *US$* |   | *US$* |   | *US$* |   | *US$* |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |
| Revenue                                                  |   |                              | 5,701   |                              |   | 9,079                                        |   |      | 4,056   |   |   | 7,179 |   |   |   |   |   |   |   |   | 9,757 |   |   | 16,258 |   |
| Cost                of forwarding                        |   |                              | (5,180  | )                                 |   | (8,069                                       | )      |      | (3,011  | ) |   | (5,317 | ) |   |   |   |   |   |   |   | (8,191 | ) |   | (13,386 | ) |
| Depreciation                                             |   |                              | (7      | )                                 |   | (17                                          | )      |      | (16     | ) |   | (32 | ) |   |   |   |   |   |   |   | (23 | ) |   | (49 | ) |
| Interest                income                           |   |                              | 1       |                              |   | 5                                            |   |      | — |   |   | 1 |   |   |   |   |   |   |   |   | 1 |   |   | 6 |   |
| Interest                expenses                         |   |                              | — |                              |   | (5                                           | )      |      | (1      | ) |   | (7 | ) |   |   |   |   |   |   |   | (1 | ) |   | (12 | ) |
| Other                segment income                      |   |                              | 19      |                              |   | 14                                           |   |      | 11      |   |   | 116 |   |   |   |   |   | (91 | ) |   | 30 |   |   | 39 |   |
| Other                segment expenses                    |   |                              | (490    | )                                 |   | (915                                         | )      |      | (796    | ) |   | (1,712 | ) |   |   |   |   | 91 |   |   | (1,286 | ) |   | (2,536 | ) |
| Taxation                                                 |   |                              | (8      | )                                 |   | (27                                          | )      |      | (42     | ) |   | (53 | ) |   |   |   |   |   |   |   | (50 | ) |   | (80 | ) |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                     |   |                              | 36      |                              |   | 65                                           |   |      | 201     |   |   | 175 |   |   |   |   |   |   |   |   | 237 |   |   | 240 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Corporate                expenses                        |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | (70 | ) |   | (99 | ) |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment                income before income taxes        |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 167 |   |   | 141 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Segment                assets                            |   |                              | 2,742   |                              |   | 3,436                                        |   |      | 1,346   |   |   | 4,073 |   |   | (65 | ) |   |   |   |   | 4,023 |   |   | 7,509 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unallocated                assets                        |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 150 |   |   | 1,254 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                assets                              |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   | 4,173 |   |   | 8,763 |   |
|                                                     |   |                              |    |                              |   |                                         |   |      |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property,                plant and equipment - additions |   |                              | 38      |                              |   | 50                                           |   |      | 76      |   |   | 87 |   |   |   |   |   |   |   |   | 114 |   |   | 137 |   |

----

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

----

----

*Salaries      and Allowances*

** **

**Segment      Information**

***Airfreight      operations***

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

----

** **

**Other      Operating Expenses**

*Salaries      and allowances*

*Sales      Commissions*

*Rent*

*Depreciation      and Amortization*

----

*Interest      Expenses*

*Provision      for Income Taxes*

**.**

*Salaries      and Allowances*

** **

**Segment      Information**

***Airfreight      operations***

----

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

** **

**Other      Operating Expenses**

*Salaries      and allowances*

*Sales      Commissions*

*Rent*

----

*Depreciation      and Amortization*

*Interest      Expenses*

*Provision      for Income Taxes*

**.**

**LIQUIDITY      AND CAPITAL RESOURCES **

----

|                                                                           |   | **Payments                Due by Period** **(in                thousands)**  |   |
|-------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------|--------|
|                                                                           |   |                                                                              |   |
| **Contractual                Obligations**                                     |   | **Total**                                                                         |   | **Less                than 1 year**  |   | **1-3                years**  |   | **4-5                years**  |   | **After                5 years**  |   |
| Facilities                Obligation: Equipment lease and office rental obligations |   | $                                                                                      | 515    |   | $ | 294 |   | $ | 195 |   | $ | 26 |   | $ | — |   |
|                                                                           |   |                                                                                   |        |   |   |  |   |   |  |   |   |  |   |   |  |   |
| Other                Obligations: Cargo space commitments                      |   |                                                                                   | 723    |   |   | 723 |   |   | — |   |   | — |   |   | — |   |
|                                                                           |   |                                                                              |   |   |    |   |   |    |   |   |    |   |   |    |   |   |
| Total                Contractual Cash Obligations                              |   | $                                                                                      | 1,238  |   | $ | 1,017 |   | $ | 195 |   | $ | 26 |   | $ | — |   |

**CRITICAL      ACCOUNTING POLICIES AND ESTIMATES **

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

**Revenue      Recognition Policy **

----

**Recognition      of Cost of Forwarding **

**Accounting      for Income Taxes **

----

**ITEM      3.**
**CONTROL      AND PROCEDURES**

**PART      II. OTHER INFORMATION**

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

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

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

**.**

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

** **

**ITEM      5. OTHER INFORMATION**

----

**ITEM      6. EXHIBITS **

| 31.1 | Certification                of the Chief Executive Officer pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002 (Rule                13a-4(a)). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certification                of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley                Act of                2002 (Rule 13a-4(a)). |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification                of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                (Rule                13a-14(b)). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification                of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,                as                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                (Rule                13a-14(b)). |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

----

**SIGNATURES**

|                                    |                                                                                                            |                                   |
|-----------------------------------------|-----------------------------------------------------------------------------------------------------------------|----------------------------------------|
|                                    | **WAKO              LOGISTICS GROUP, INC.**                                                                     |
|                               |                                                                                                       |                              |
| Date: August              15, 2005 | By:                                                                                                   | /s/ Christopher              Wood |
|                                    | Christopher WoodChief Executive Officer, Principal Executive                Officer and                Director |

|                                    |                                                                               |                                  |
|-----------------------------------------|------------------------------------------------------------------------------------|---------------------------------------|
|                                    | **WAKO              LOGISTICS GROUP, INC.**                                        |
|                               |                                                                          |                             |
| Date: August              15, 2005 | By:                                                                      | /s/ David              L. Koontz |
|                                    | David L. KoontzChief Financial Officer, Principal Financial                Officer |

----

**EXHBIT      INDEX**

| **Exhibit                  Number** |   | **Description                  of Exhibit**                                                                                                                                                                                                                  |
|-------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                                |   | Certification                  of the Chief Executive Officer pursuant to Section 302 of the                  Sarbanes-Oxley Act of 2002 (Rule 13a-4(a)).                                                                                                    |
| 31.2                                |   | Certification                  of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley                  Act of                  2002 (Rule 13a-4(a)).                                                                                            |
| 32.1                                |   | Certification                  of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,                  as                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                  (Rule                  13a-14(b)). |
| 32.2                                |   | Certification                  of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,                  as                  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                  (Rule                  13a-14(b)). |