**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **WASHINGTON,
        D.C. 20549**
 **FORM
        10-Q**
 
 ( **Mark
        One)**
  x
              **Quarterly
                  report pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934**
  **For
        the quarterly period ended September 30, 2007**
 
 **or**
 
 o
              **Transition
                  report pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934**
  **For
        the transition period from _____________ to _____________**
 
 **Commission
        file number: 333-113564**
 
 **Wako
        Logistics Group, Inc.**
 (Exact
        name of registrant as specified in its charter)
  **Delaware**
              **20-0262555**(State
                  or other jurisdiction of
              (IRS
                  Employer Identification No.)incorporation
                  or organization)
  **920
        East Algonquin Road, Suite 120**
 **Schaumburg,
        IL 60173 USA**
 (Address
        of principal executive offices with zip code)
 
 **224-653-2800**
 (Registrant's
        telephone number, including area code)
 
 **200
        Howard Avenue**
 Suite
        232, Des Plaines
 IL
        60018 USA
 (Former
        name, former address and former
 fiscal
        year, if changed since last report)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days. x Yes o No
 
 Indicate
        by check mark whether the Registrant is a large accelerated filer, an
        accelerated filer or a non-accelerated filer. See definition of “accelerated
        filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
 
 Large
                  accelerated filero
              Accelerated
                  filero
              Non-accelerated
                  filerx
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act.) o Yes x No
 
 As
        of
        November 14, 2007, the registrant had 31,400,094 shares of its common stock
        outstanding. ****
 
 
  **Wako
        Logistics Group, Inc.**
 
 **TABLE
        OF CONTENTS**
 
 Part
                  I:
              Financial
                  Information
              F-1Item
                  1:
              Financial
                  Statements
              F-1Condensed
                  Consolidated Statements of Operations for the Three and Nine Months
                  Ended
                  September 30, 2007 and 2006
              F-1Condensed
                  Consolidated Balance Sheets as of September 30, 2007 and December
                  31,
                  2006
              F-3Condensed
                  Consolidated Statements of Cash Flows for the Nine Months Ended
                  September
                  30, 2007 and 2006
              F-5Notes
                  to Condensed Consolidated Financial Statements
              F-6Item
                  2:
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              3Item
                  3:
              Quantitative
                  and Qualitative Disclosures About Market Risk
              16Item
                  4:
              Controls
                  and Procedures
              17Part
                  II:
              Other
                  Information
              18Item
                  1:
              Legal
                  Proceedings
              18Item
                  1A:
              Risk
                  Factors
              18Item
                  2:
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              18Item
                  3.
              Defaults
                  Upon Senior Securities
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              19Item
                  5.
              Other
                  Information
              19Item
                  6:
              Exhibits
              19Signatures
              
              20
  **NOTE
        REGARDING FORWARD LOOKING STATEMENTS**
  Certain
        statements in this report, including statements in the following discussion,
        may
        constitute forward-looking statements made pursuant to the Safe Harbor
        provisions of the Private Securities Litigation Reform Act of 1995. This
        report
        on Form 10-Q contains forward-looking statements concerning Wako Logistics
        Group, Inc. (“WLG,” the “Company” “we”, “our” or the “Group”) and its future
        operations, plans and other matters. Any statements that involve discussions
        with respect to predictions, expectations, beliefs, plans, projections,
        objectives, assumptions or future events or performance (often, but not always,
        using phrases such as “expects”, or “does not expect”, “is expected”,
“anticipates“, or “does not anticipate”, “plans”, “estimates”, or “intends”, or
        stating that certain actions, events or results “may”, “could”, “might”, or
“will” be taken or occur, or be achieved) are not statements of historical fact
        and may be “forward looking statements.”
  The
        Company cautions readers regarding certain forward-looking statements in
        this
        document and in all of its communications to shareholders and others, including
        press releases, securities filings and all other communications. WLG also
        cautions readers not to place undue reliance on any such forward-looking
        statements, which speak only as of the date made. Such forward-looking
        statements are based on the beliefs of WLG's management as well as on
        assumptions made by and information currently available to WLG at the time
        such
        statements were made. Forward-looking statements are subject to a variety
        of
        risks and uncertainties that could cause actual events or results to differ
        from
        those reflected in the forward-looking statements. Actual results could differ
        materially from those projected in the forward-looking statements, as a result
        of either the matters set forth or incorporated in this report generally
        or
        certain economic and business factors, some of which may be beyond the control
        of WLG. These factors include adverse economic conditions, entry of new and
        stronger competitors, inadequate capital, unexpected expenses, failure to
        gain
        or maintain approvals for the sale and expansion of WLG's services in the
        jurisdictions where WLG conducts its business, or the failure to capitalize
        upon
        access to new markets and those factors referred to or identified in Item
        1of
        our Report on Form 10-KSB for the year ended December 31, 2006, and in Item
        1A
        of our Report on Form 10-Q for the three and six months ended June 30, 2007.
        WLG
        disclaims any obligation subsequently to revise any forward-looking statements
        to reflect events or circumstances after the date of such statements or to
        reflect the occurrence of anticipated or unanticipated events.
 
 2
  **Part
            I: Financial Information**
 
 **Item
            1: Financial Statements**
  **Wako
            Logistics Group, Inc.**
 
 **Condensed
            Consolidated Statements of Operations**
 For
            the 3 and 9 months ended September 30, 2006 and 2007
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **3
                      months ended**
                    **September
                      30,**
                  
                  **9
                      months ended**
                    **September
                      30,****2006**
                  
                  **2007**
                  
                  **2006**
                  
                  **2007***Note*
                  
                  *US$*
                  
                  *US$*
                  
                  *US$*
                  
                  *US$**(unaudited)*
                  
                  *(unaudited)*
                  
                  *(unaudited)*
                  
                  *(unaudited)***Revenues:**Freight
                  
                  
                  
                  
                  
                  13,169
                  
                  
                  33,914
                  
                  
                  38,428
                  
                  
                  67,950Agency
                      services
                  
                  
                  
                  
                  
                  767
                  
                  
                  1,003
                  
                  
                  2,082
                  
                  
                  3,160Other
                      services
                  
                  
                  
                  
                  
                  12,347
                  
                  
                  19,996
                  
                  
                  26,385
                  
                  
                  44,994**Total
                      revenues**
                  
                  
                  
                  
                  
                  26,283
                  
                  
                  54,913
                  
                  
                  66,895
                  
                  
                  116,104**Operating
                      expenses**Cost
                      of forwarding
                  
                  
                  
                  
                  
                  (22,271
                  )
                  
                  (48,200
                  )
                  
                  (56,303
                  )
                  
                  (99,619
                  )Selling
                      and administrative expenses
                  
                  
                  
                  
                  
                  (3,163
                  )
                  
                  (5,806
                  )
                  
                  (9,528
                  )
                  
                  (14,413
                  )Depreciation
                      and amortization
                  
                  
                  
                  
                  
                  (141
                  )
                  
                  (324
                  )
                  
                  (427
                  )
                  
                  (810
                  )Total
                      operating expenses
                  
                  
                  
                  
                  
                  (25,575
                  )
                  
                  (54,330
                  )
                  
                  (66,258
                  )
                  
                  (114,842
                  )**Income
                      from operations**
                  
                  
                  
                  
                  
                  708
                  
                  
                  583
                  
                  
                  637
                  
                  
                  1,262**Other
                      income / (expense)**Interest
                      income
                  
                  
                  
                  
                  
                  6
                  
                  
                  11
                  
                  
                  28
                  
                  
                  45Interest
                      expense
                  
                  
                  
                  
                  
                  (91
                  )
                  
                  (199
                  )
                  
                  (273
                  )
                  
                  (404
                  )Other
                      income, net
                  
                  
                  
                  
                  
                  5
                  
                  
                  23
                  
                  
                  72
                  
                  
                  85**Income
                      before income taxes**
                  
                  
                  
                  
                  
                  628
                  
                  
                  418
                  
                  
                  464
                  
                  
                  988Provision
                      for income taxes
                  
                  
                  
                  
                  
                  (225
                  )
                  
                  (217
                  )
                  
                  (313
                  )
                  
                  (427
                  )**Net
                      Income**
                  
                  
                  
                  
                  
                  403
                  
                  
                  201
                  
                  
                  151
                  
                  
                  561Dividends
                      on preferred stock
                  
                  
                  
                  
                  
                  (23
                  )
                  
                  (23
                  )
                  
                  (68
                  )
                  
                  (68
                  )**Income
                      applicable to common stock**
                  
                  
                  
                  
                  
                  380
                  
                  
                  178
                  
                  
                  83
                  
                  
                  493Other
                      comprehensive incomeForeign
                      currency translation adjustment
                  
                  
                  
                  
                  
                  18
                  
                  
                  70
                  
                  
                  28
                  
                  
                  165**Total
                      comprehensive income**
                  
                  
                  
                  
                  
                  **398**
                  
                  
                  **248**
                  
                  
                  **111**
                  
                  
                  **658**
  The
            financial statements should be read in conjunction with the accompanying
            notes.
  F-1
 **Wako
            Logistics Group, Inc.**
 
 **Condensed
            Consolidated Statements of Operations**
 For
            the 3 and 9 months ended September 30, 2006 and 2007
 *(Dollars
            in thousands except share data and per share amounts)*
  **3
                      months ended**
                    **September
                      30,**
                  
                  **9
                      months ended**
                    **September
                      30,****2006**
                  
                  
                  **2007**
                  
                  
                  **2006**
                  
                  
                  **2007***US$*
                  
                  
                  *US$*
                  
                  
                  *US$*
                  
                  
                  *US$**(unaudited)*
                  
                  
                  *(unaudited)*
                  
                  
                  *(unaudited)*
                  
                  
                  *(unaudited)***Net
                      Income per share:****Basic
                      earnings per share**
                  
                  
                  ***2***
                  
                  
                  **0.01**
                  
                  
                  **0.01**
                  
                  
                  **0.00**
                  
                  
                  **0.02****Diluted
                      earnings per share**
                  
                  
                  ***2***
                  
                  
                  **0.01**
                  
                  
                  **0.01**
                  
                  
                  **0.00**
                  
                  
                  **0.02****Weighted
                      average common shares outstanding**Basic
                  
                  
                  
                  
                  
                  25,390,080
                  
                  
                  29,813,024
                  
                  
                  25,390,080
                  
                  
                  27,742,500Diluted
                  
                  
                  
                  
                  
                  27,416,244
                  
                  
                  29,867,089
                  
                  
                  25,421,577
                  
                  
                  27,830,353
   
 The
            financial statements should be read in conjunction with the accompanying
            notes.
  F-2
  **Wako
            Logistics Group, Inc.**
 
 **Condensed
            Consolidated Balance Sheets**
 At
            December 31, 2006 and September 30, 2007
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **At**
                    **December 31,**
                    **2006**
                  
                  **At**
                    **September 30,**
                    **2007***Note*
                  
                  *US$*
                  
                  *US$**(unaudited)***ASSETS****Current
                      assets**Cash
                      and cash equivalents
                  
                  
                  
                  
                  
                  1,528
                  
                  
                  1,904Restricted
                      cash
                  
                  
                  
                  
                  
                  372
                  
                  
                  610Certificates
                      of deposit, restricted
                  
                  
                  
                  
                  
                  245
                  
                  
                  -Trade
                      receivables, net of allowance*(2006:
                      $520; 2007: $799)*
                  
                  
                  
                  
                  
                  14,635
                  
                  
                  21,525Deposits,
                      prepayments and other current assets
                  
                  
                  
                  
                  
                  687
                  
                  
                  964Prepaid
                      taxes
                  
                  
                  
                  
                  
                  108
                  
                  
                  15Due
                      from related parties
                  
                  
                  *5*
                  
                  
                  198
                  
                  
                  239**Total
                      current assets**
                  
                  
                  
                  
                  
                  17,773
                  
                  
                  25,257Property,
                      plant and equipment, net
                  
                  
                  
                  
                  
                  927
                  
                  
                  1,430Deposits
                      and other non-current assets
                  
                  
                  
                  
                  
                  216
                  
                  
                  228Deferred
                      tax assets
                  
                  
                  
                  
                  
                  231
                  
                  
                  337Intangible
                      assets, net
                  
                  
                  
                  
                  
                  4,052
                  
                  
                  6,347Goodwill
                  
                  
                  
                  
                  
                  3,888
                  
                  
                  9,328**Total
                      assets**
                  
                  
                  
                  
                  
                  27,087
                  
                  
                  42,927**LIABILITIES
                      AND STOCKHOLDERS' EQUITY****Current
                      liabilities**Bank
                      overdrafts
                  
                  
                  
                  
                  
                  616
                  
                  
                  922Trade
                      payables
                  
                  
                  
                  
                  
                  8,006
                  
                  
                  10,191Accrued
                      charges and other creditors
                  
                  
                  
                  
                  
                  3,534
                  
                  
                  5,763Bank
                      debt - maturing within one year
                  
                  
                  *3*
                  
                  
                  3,383
                  
                  
                  7,443Current
                      portion of capital lease obligations
                  
                  
                  
                  
                  
                  138
                  
                  
                  117Due
                      to directors
                  
                  
                  *5*
                  
                  
                  439
                  
                  
                  1,828Income
                      tax payable
                  
                  
                  
                  
                  
                  287
                  
                  
                  430**Total
                      current liabilities**
                  
                  
                  
                  
                  
                  16,403
                  
                  
                  26,694**Non-current
                      liabilities**Non-current
                      portion of capital lease obligations
                  
                  
                  
                  
                  
                  38
                  
                  
                  136Other
                      non-current liabilities
                  
                  
                  
                  
                  
                  28
                  
                  
                  221Bank
                      debt –
                      maturing after one year
                  
                  
                  *3*
                  
                  
                  800
                  
                  
                  650**Total
                      non-current liabilities**
                  
                  
                  
                  
                  
                  866
                  
                  
                  1,007Commitments
                      and contingencies
                  
                  
                  *4*
                  
                  
                  -
                  
                  
                  -
 
 The
            financial statements should be read in conjunction with the accompanying
            notes.
  F-3
 **Wako
              Logistics Group, Inc.**
 
 **Condensed
              Consolidated Balance Sheets**
 At
              December 31, 2006 and September 30, 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 **At**
                    **December
                      31,**
                    **2006**
                  
                  **At**
                    **September 30**
                    **2007***US$*
                  
                  *US$**(unaudited)***Stockholders'
                      equity**Preferred
                      stock, $0.001 par value, 5 million shares authorized and none
                      issued
                  
                  
                  -
                  
                  
                  -Convertible
                      redeemable preferred stock, $0.001 par value, 2.0 million shares
                      authorized and issued (Redemption and liquidation value
                      $1,500)
                  
                  
                  2
                  
                  
                  2Common
                      stock, $0.001 par value, 55 million shares authorized, 31,400,094*(2006:
                      25,390,080)*shares issued and outstanding
                  
                  
                  25
                  
                  
                  31Additional
                      paid-in capital
                  
                  
                  8,014
                  
                  
                  12,758Accumulated
                      other comprehensive income
                  
                  
                  115
                  
                  
                  280Retained
                      earnings
                  
                  
                  1,662
                  
                  
                  2,155**Total
                      stockholders' equity**
                  
                  
                  9,818
                  
                  
                  15,226**Total
                      liabilities and stockholders' equity**
                  
                  
                  27,087
                  
                  
                  42,927
 
 The
            financial statements should be read in conjunction with the accompanying
            notes.
 
 F-4
  **Wako
            Logistics Group, Inc.**
 
 **Condensed
            Consolidated Statements of Cash Flows**
 For
            the 9 months ended September 30, 2006 and 2007
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **9
                      months ended**
                    **September
                      30,****2006**
                  
                  **2007***US$*
                  
                  *US$**(unaudited)*
                  
                  *(unaudited)***Cash
                      flows from****operating
                      activities:**Net
                      income
                  
                  
                  151
                  
                  
                  561**Adjustments
                      to reconcile net income to net cash****(used
                      in)/provided by operating activities**Depreciation
                  
                  
                  177
                  
                  
                  270Amortization
                  
                  
                  249
                  
                  
                  540Stock
                      based compensation
                  
                  
                  1
                  
                  
                  40Provision
                      for bad debts
                  
                  
                  83
                  
                  
                  229**Changes
                      in working capital, net of acquisition of UK Division and
                      WCS:**Trade
                      receivables
                  
                  
                  (570
                  )
                  
                  (1,616
                  )Deposits,
                      prepayments and other current assets
                  
                  
                  (751
                  )
                  
                  109Due
                      from related parties
                  
                  
                  215
                  
                  
                  (18
                  )Trade
                      payables
                  
                  
                  (105
                  )
                  
                  853Accrued
                      charges and other creditors
                  
                  
                  399
                  
                  
                  699Due
                      to related parties
                  
                  
                  (22
                  )
                  
                  -Due
                      to directors
                  
                  
                  (125
                  )
                  
                  (112
                  )Income
                      tax payable
                  
                  
                  72
                  
                  
                  132**Net
                      cash (used in)/provided by operating activities**
                  
                  
                  (226
                  )
                  
                  1,687**Cash
                      flows from investing activities:**Acquisitions
                      of property, plant and equipment
                  
                  
                  (73
                  )
                  
                  (377
                  )Acquisition
                      of WCS
                  
                  
                  -
                  
                  
                  (2,550
                  )Acquisition
                      of operating assets of UK Division
                  
                  
                  (163
                  )
                  
                  -Due
                      from related parties
                  
                  
                  114
                  
                  
                  -**Net
                      cash (used in) investing activities**
                  
                  
                  (122
                  )
                  
                  (2,927
                  )**Cash
                      flows from financing activities:**Restricted
                      cash
                  
                  
                  (90
                  )
                  
                  8Bank
                      overdrafts
                  
                  
                  338
                  
                  
                  305Bank
                      loans repaid
                  
                  
                  (356
                  )
                  
                  (28
                  )Capital
                      lease obligations paid
                  
                  
                  (75
                  )
                  
                  (101
                  )Payment
                      of dividends on preferred stock
                  
                  
                  (68
                  )
                  
                  (68
                  )Loans
                      from directors
                  
                  
                  -
                  
                  
                  1,500Advance
                      from a director
                  
                  
                  259
                  
                  
                  -**Net
                      cash****provided
                      by financing activities**
                  
                  
                  8
                  
                  
                  1,616**Net
                      (decrease)/increase in cash and cash equivalents**
                  
                  
                  (340
                  )
                  
                  376**Cash
                      and cash equivalents at beginning of period**
                  
                  
                  1,212
                  
                  
                  1,528**Cash
                      and cash equivalents at end of period**
                  
                  
                  872
                  
                  
                  1,904
  The
            financial statements should be read in conjunction with the accompanying
            notes.
  F-5
  **Wako
            Logistics Group, Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 For
            the 3 and 9 months ended September 30, 2006 and 2007
 *(Dollars
            in thousands except share data and per share amounts)*
 **1.**  **ORGANIZATION
            AND BASIS OF PRESENTATION**
 
 Wako
            Logistics Group, Inc. (“WLG” or the “Company” or together with its subsidiaries,
            collectively the “Group”) is an international, non-asset-based logistics company
            that provides air and ocean freight forwarding, contract logistics, customs
            brokerage and other supply chain management services from its offices
            in Hong
            Kong, the People’s Republic of China (“PRC” or “China”), Australia, United
            States (“US”), United Kingdom (“UK”) and through a worldwide network of
            independent cargo agents.
 
 WLG’s
            business is conducted by its operating subsidiaries, which includes the
            following entities: Wako Express (HK) Co. Ltd. (“WEHK”), Wako Air Express (HK)
            Co. Ltd. (“WAE”), Wako Express (China) Co. Ltd. (“WE China”), a wholly-owned
            subsidiary of WEHK, WLG (USA) LLC (“WLG (USA)”) (formerly dba “Kay O’Neill”),
            Asean Cargo Services Pty Limited (“Asean”), Asean Logistics, Inc. (“ALI”),
            Mares-Shreve & Associates, Inc. (“MSA”) and its wholly owned subsidiary, Sea
            Systems Ocean Line, Inc. (“Sea Systems”) (collectively, “MSA Group”), WLG (UK)
            Limited (“WLG (UK)”), which is wholly-owned by WLG (UK) Holdings Limited (“WLG
            UK Holdings”) and World Commerce Services, LLC (“WCS”). With
            the
            exception of performing administrative, oversight and regulatory tasks,
            no other
            business activities are carried on by the Group's parent company, Wako
            Logistics
            Group, Inc.
 
 Wako
            Logistics Group, Inc. was incorporated on December 2, 2003, pursuant
            to the laws
            of Delaware in the United States of America. Pursuant to certain Share
            Exchange
            Agreements entered into on January 18, 2004, WLG consummated a combination
            with
            WEHK and WAE by the issuance of 20,000,900 shares of its common stock
            in
            exchange for 100% of the outstanding common stock of WEHK and WAE.
 
 WEHK
            was
            incorporated in Hong Kong on June 4, 1982, and its principal activity
            is the
            provision of sea freight forwarding services. WAE was incorporated in
            Hong Kong
            on February 24, 1989, to provide air freight forwarding services.
 
 In
            July
            2004, the Group established WE China as a wholly owned subsidiary of
            WEHK. WE
            China commenced business in February 2005 to provide sea and air freight
            forwarding and logistics services in China and to companies trading with
            China.
 
 On
            April
            1, 2005, WLG completed the acquisition of 100% of the voting interests
            in Kay
            O'Neill (USA) LLC, a company based in Chicago, Illinois. Kay O’Neill changed its
            name to WLG (USA) LLC in June 2005, and now operates as WLG (USA). WLG
            (USA) is
            a non-asset based freight forwarding company and provides freight forwarding
            and
            logistics services.
 
 Effective
            October 1, 2005, WLG acquired all of the issued and outstanding shares
            of common
            stock of Asean Logistics, Inc., a California corporation, and immediately
            contributed all of the shares of ALI’s common stock to WLG (USA). ALI is a
            non-asset based freight forwarding company and provides freight-forwarding
            services to its customers, which ship products primarily between Asia
            and the
            United States. Substantially all of ALI’s administrative activities are
            performed by WLG (USA).
 
 On
            November 9, 2005, the Group acquired all of issued and outstanding common
            stock
            of Asean, which is a non-asset based freight forwarding and logistics
            provider.
            Based in Sydney, Australia, with offices in Melbourne and Brisbane, Asean
            provides freight forwarding and logistics services, as well as customs
            brokerage
            services to its customers, who ship products primarily between Asia and
            Australia.
  F-6
  **Wako
            Logistics Group, Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 For
            the 3 and 9 months ended September 30, 2006 and 2007
 *(Dollars
            in thousands except share data and per share amounts)*
 
 **1.**  **ORGANIZATION
            AND BASIS OF PRESENTATION (CONTINUED)**
 
 On
            September 15, 2006, the Group’s UK subsidiary, WLG (UK) commenced business by
            acquiring the operating assets and assuming limited liabilities of a
            division of
            a UK freight forwarding and logistics company doing business in Manchester,
            England (“UK Division”). WLG (UK) is located in Manchester, England, and it now
            operates the former business of UK Division, which provides sea and air
            freight
            forwarding, warehousing and logistics services, mostly to UK based customers.
 
 The
            Group
            on December 1, 2006, acquired all of the voting shares of Mares-Shreve
&
Associates, Inc. and its wholly owned subsidiary, Sea Systems Ocean Line,
            Inc.
            MSA, which was incorporated on May 15, 1979, in Washington State, provides
            customs brokerage and freight forwarding services, and Sea Systems, incorporated
            in Washington State on February 26, 1991, is a non-asset based freight
            forwarder
            and provides air and sea freight forwarding and related logistics services.
            The
            MSA Group mainly serves customers that ship products from Asia to the
            US.
 
 On
            July
            31, 2007, the Group acquired all of the membership interests in World
            Commerce
            Services, LLC. WCS
            is
            based in Schaumburg, Illinois and has offices in New York, Atlanta, Los
            Angeles
            and San Francisco. It is a non-asset based freight forwarding company
            and also
            has a customs brokerage practice. WCSprovides
            a full range of logistics and brokerage services to its customers, specializing
            in import transactions from Asia, mostly by sea, and with an emphasis
            on imports
            from China.
 
 As
            of September 30,
            2007,
            all subsidiaries were wholly-owned, and all material intercompany balances
            and
            transactions have been eliminated in consolidation.
 
 The
            accompanying financial data as of September 30,
            2007,
            and for the 3 and 9 months ended September 30, 2007 and 2006, have been
            prepared
            by the Company, without audit.
 
 Certain
            information and footnote disclosures normally included in financial statements
            prepared in accordance with accounting principles generally accepted
            in the
            United States of America have been condensed or omitted pursuant to such
            rules
            and regulations. However, the Company believes that the disclosures herein
            are
            adequate to make the information presented not misleading. These financial
            statements should be read in conjunction with the Company’s audited consolidated
            financial statements and notes thereto for the year ended December 31,
            2006.
 
 The
            preparation of financial statements in conformity with accounting principles
            generally accepted in the United States of America requires management
            to make
            estimates that affect the reported amounts of assets, liabilities, revenues
            and
            expenses and the disclosure of contingent assets and liabilities. Actual
            results
            could differ from these estimates.
 
 The
            unaudited, interim consolidated financial statements of the Company have
            been
            prepared in accordance with accounting principles generally accepted
            in the
            United States for interim financial information. In the opinion of the
            management, all adjustments (which include only normal recurring adjustments)
            necessary to present fairly the financial position as of September 30,
            2007, and
            results of operations and cash flows for the 3 and 9 months ended September 30,
            2007
            and 2006, have been made. The results of operations for the 3 and 9 months
            ended September 30,
            2007
            and 2006, are not necessarily indicative of the operating results for
            the full
            year.
  F-7
 **Wako
                Logistics Group, Inc.**
 
 **Notes
                to the Consolidated Financial Statements**
 For
                the 3
                and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                in thousands except share data and per share amounts)*
 
 **2.**
                      **EARNINGS
                          PER SHARE**
 
 Earnings
                per share were computed as
                follows:
 
 **3
                          months ended September 30, 2006****Income**
                      
                      **Weighted average
                          number of shares**
                      
                      **Per share**
                        **amount***US$*Net
                          income
                      
                      
                      403Dividends
                          on convertible redeemable preferred stock
                      
                      
                      (23
                      )
                      
                      2,000,000
                      
                      
                      0.01Basic
                          earnings per shareIncome
                          available to common stockholders
                      
                      
                      380
                      
                      
                      25,390,080
                      
                      
                      0.01Effect
                          of dilutive securitiesWarrants
                      
                      
                      -
                      
                      
                      26,164Convertible
                          redeemable preferred stock
                      
                      
                      -
                      
                      
                      2,000,000Diluted
                          earnings per shareIncome
                          available to common stockholders assuming conversion of
                          dilutive
                          securities
                      
                      
                      403
                      
                      
                      27,416,244
                      
                      
                      0.01
 
 **9
                          months ended September 30, 2006****Income**
                      
                      **Weighted average
                          number of shares**
                      
                      **Per share**
                        **amount***US$*Net
                          income
                      
                      
                      151Dividends
                          on convertible redeemable preferred stock
                      
                      
                      (68
                      )
                      
                      2,000,000
                      
                      
                      0.03Basic
                          earnings per shareIncome
                          available to common stockholders
                      
                      
                      83
                      
                      
                      25,390,080
                      
                      
                      0.00Effect
                          of dilutive securities *(Note *)*Warrants
                      
                      
                      -
                      
                      
                      31,497Convertible
                          redeemable preferred stock
                      
                      
                      -
                      
                      
                      -Diluted
                          earning per shareIncome
                          available to common stockholders assuming conversion of
                          dilutive
                          securities
                      
                      
                      83
                      
                      
                      25,421,577
                      
                      
                      0.00
 
 ***
                      *Common
                          stock equivalents related to convertible redeemable preferred
                          stock of
                          2,000,000 are not included in the calculation of dilutive
                          earnings per
                          share for the nine months ended September 30, 2006, because
                          to do so would
                          have an anti-dilutive effect.*
  F-8
  **Wako
                Logistics Group, Inc.**
 
 **Notes
                to the Consolidated Financial Statements**
 For
                the 3
                and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                in thousands except share data and per share amounts)*
  **2.**
                      **EARNINGS
                          PER SHARE (CONTINUED)**
  **3 months ended September 30, 2007****Income**
                        
                        **Weighted average**
                          **number of shares**
                        
                        **Per share**
                          **amount***US$*Net
                            income
                        
                        
                        201Dividends
                            on convertible redeemable preferred stock
                        
                        
                        (23
                        )
                        
                        2,000,000
                        
                        
                        0.01Basic
                            earnings per shareIncome
                            available to common stockholders
                        
                        
                        178
                        
                        
                        29,813,024
                        
                        
                        0.01Effect
                            of dilutive securitiesWarrants*(Note #)*
                        
                        
                        -
                        
                        
                        -Share
                            options
                        
                        
                        -
                        
                        
                        54,065Convertible
                            redeemable preferred stock  *(Note #)*
                        
                        
                        -
                        
                        
                        -Diluted
                            earnings per shareIncome
                            available to common stockholders assuming conversion
                            of dilutive
                            securities
                        
                        
                        178
                        
                        
                        29,867,089
                        
                        
                        0.01
  F-9
  **Wako
                Logistics Group, Inc.**
 
 **Notes
                to the Consolidated Financial Statements**
 For
                the 3
                and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                in thousands except share data and per share amounts)*
  **2.**
                      **EARNINGS
                          PER SHARE (CONTINUED)**
  **9 months ended September 30, 2007****Income**
                        
                        **Weighted average**
                          **number of shares**
                        
                        **Per share**
                          **amount***US$*Net
                            income
                        
                        
                        561Dividends
                            on convertible redeemable preferredstock
                        
                        
                        (68
                        )
                        
                        2,000,000
                        
                        
                        0.03Basic
                            earnings per shareIncome
                            available to common stockholders
                        
                        
                        493
                        
                        
                        27,742,500
                        
                        
                        0.02Effect
                            of dilutive securitiesWarrant*(Note #)*
                        
                        
                        -
                        
                        
                        -Share
                            options
                        
                        
                        -
                        
                        
                        87,853Convertible
                            redeemable preferred stock*(Note
                            #)*
                        
                        
                        -
                        
                        
                        -Diluted
                            earnings per shareIncome
                            available to common stockholdersassuming
                            conversion of dilutive securities
                        
                        
                        493
                        
                        
                        27,830,353
                        
                        
                        0.02
  *#
                        :*
                      *Common
                          stock is not increased by 2,000,000 shares related to convertible
                          redeemable preferred stock or the conversion of the 100,000
                          outstanding
                          warrants because the effect of the conversions would be
                          anti-dilutive.*
  On
                  September 28, 2007, WLG issued 1,300,000 shares of its common stock
                  as an
                  earn-out payment pursuant to the acquisition agreement by which
                  it acquired
                  Asean in November 2005, and, on July 31, 2007, WLG issued 4,710,014
                  shares of
                  its common stock as part of the consideration for the acquisition
                  of WCS.
                  Computations of basic earnings per share and diluted earnings per
                  share for the
                  3 and 9 months ended September 30, 2007, includes the effects of
                  the issuance of
                  the 1,300,000 shares of common stock from the date the shares were
                  earned, which
                  was January 1, 2007, and the issuance of the 4,710,014 shares of
                  common stock on
                  the closing date of the WCS acquisition, which was July 31,
                  2007.
 F-10
  **Wako
                  Logistics Group, Inc.**
 
 **Notes
                  to the Consolidated Financial Statements**
 For
                  the 3
                  and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                  in thousands except share data and per share amounts)*
  **3.**
                      **BANKING
                          FACILITIES**
 
 The
                          Group has obtained bank facilities from creditworthy commercial
                          banks as
                          follows:
 
 **At**
                        **December 31,**
                        **2006**
                      
                      **At**
                        **September 30,**
                        **2007***(unaudited)**US$*
                      
                      *US$***Facilities
                          granted**-
                          bank guarantees
                      
                      
                      784
                      
                      
                      1,121-
                          overdraft facilities
                      
                      
                      616
                      
                      
                      599-
                          bank loans
                      
                      
                      5,266
                      
                      
                      12,913-
                          foreign exchange facilities
                      
                      
                      -
                      
                      
                      222-
                          lease facilities
                      
                      
                      -
                      
                      
                      262Total
                          bank facilities
                      
                      
                      6,666
                      
                      
                      15,117
 
 The
                terms
                of the loan facilities, including the amounts and maturity dates,
                are agreed
                between the banks and the Group from time to time.
 
 Bank
                guarantees of $590 will expire within one year from September 30,
                2007, but may
                be renewed, provided the Group makes available the cash required
                by the banks to
                collateralize each guarantee. A bank guarantee of $122 and the overdraft
                facilities have no expiry dates, but the bank or WLG may terminate
                either
                facility by giving 30 days notice to the other party. The remaining
                bank
                guarantee of $409 has no fixed expiration date and is cancelable
                and/or
                renewable at the option of the bank. The bank loans mature on various
                dates as
                follows: (i) $114 on October 17, 2007; (ii) $1,000 revolving line
                of credit in
                October 2007; (iii) $250 term loan in November 2007; (iv) $7,000
                revolving
                credit facility in May 2008 and (v) $1,000 term loan in November
                2011. The
                remaining loan facility of $3,549 is an ongoing facility that may
                be terminated
                by either the bank or WLG giving 30 days notice to the other party.
 
 The
                bank
                loans and revolving credit facilities of $12,913 are secured as follows:
                (i)
                term loan of $114 is unsecured and repayable within one year by monthly
                installments; (ii) the $1,000 revolving line of credit, the $250
                short term loan
                and the $1,000 five year term loan are secured by a first position
                blanket lien
                on substantially all of the assets of WLG (USA) and the MSA Group
                and a
                guarantee provided by the Group’s parent company; (iii) $3,549 is secured by
                Asean’s accounts receivable and a registered mortgage charge over the assets
                of
                Asean and (iv) $7,000 is secured by WCS’s accounts receivable and a guarantee
                provided by the Group’s parent company. As of September 30, 2007, the bank loans
                and revolving credit facilities carried interest rates from 7.00%
                to 10.30% per
                annum.
 
 Certain
                of the bank guarantees, totaling $590, are collateralized by cash
                of $610. In
                addition, a bank guarantee of $122 is secured by (i) a letter of
                support from
                the Group’s parent company and (ii) a registered mortgage debenture over all
                of
                the assets of Asean. The remaining bank guarantee of $409 is secured
                by a fixed
                and floating charge on all of the assets of WLG (UK) and by a guarantee
                of the
                Group’s parent company. The overdraft facility of $599 is secured by (i)
                a
                comfort letter from the Group’s parent company and (ii) a registered mortgage
                debenture over all of Asean’s assets.
 
 F-11
  **Wako
                  Logistics Group, Inc.**
 
 **Notes
                  to the Consolidated Financial Statements**
 For
                  the 3
                  and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                  in thousands except share data and per share amounts)*
 **3.**
                      **BANKING
                          FACILITIES (CONTINUED)**
 
 Asean
                has
                a foreign exchange facility in the amount of $222, which at September
                30, 2007,
                had not been utilized. The foreign exchange facility is secured by
                a comfort
                letter from the Group’s parent company. Asean has a leasing facility of $262,
                and $74 was outstanding as of September 30, 2007. This facility is
                secured by
                the assets under lease and the comfort letter from the Group’s parent company.
                As of September 30, 2007, the leasing facility carried interest rates
                of 7.00%
                to 8.44% per annum.
 
 **At**
                        **December 31,**
                        **2006**
                      
                      **At**
                        **September 30,**
                        **2007***(unaudited)**US$*
                      
                      *US$***Utilized**-
                          bank guarantees
                      
                      
                      784
                      
                      
                      1,121-
                          overdraft facilities
                      
                      
                      616
                      
                      
                      599-
                          bank loans
                      
                      
                      4,183
                      
                      
                      8,093-
                          foreign exchange facilities
                      
                      
                      -
                      
                      
                      --
                          lease facilities
                      
                      
                      -
                      
                      
                      74Total
                          bank facilities utilized
                      
                      
                      5,583
                      
                      
                      9,887
  **4.**
                      **COMMITMENTS
                          AND CONTINGENCIES**
 
 ***Commitments
                under operating leases***
 
 The
                          Group rents office and warehouse space, staff quarters
                          and office and
                          warehouse equipment under non-cancellable operating leases.
                          The following
                          table summarizes the approximate future minimum lease payments
                          for
                          operating leases in effect as of December 31, 2006, and
                          September 30,
                          2007.
 
 **At**
                        **December 31,**
                        **2006**
                      
                      **At**
                        **September 30,**
                        **2007***(unaudited)**US$*
                      
                      *US$*Within
                          one year
                      
                      
                      790
                      
                      
                      1,339Over
                          one year but not exceeding two years
                      
                      
                      543
                      
                      
                      1,017Over
                          two years but not exceeding three years
                      
                      
                      300
                      
                      
                      569Over
                          three years but not exceeding four years
                      
                      
                      122
                      
                      
                      274Over
                          four years but not exceeding five years
                      
                      
                      8
                      
                      
                      122Total
                          operating lease commitments
                      
                      
                      1,763
                      
                      
                      3,321
 
 Rent
                          expense under operating leases for the 9 months ended September
                          30, 2006
                          and 2007, was $555 and $786,
                          respectively.
 
 F-12
  **Wako
                  Logistics Group, Inc.**
 
 **Notes
                  to the Consolidated Financial Statements**
 For
                  the 3
                  and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                  in thousands except share data and per share amounts)*
 
 **4.**
                      **COMMITMENTS
                          AND CONTINGENCIES
                          (CONTINUED)**
 
 ***Cargo
                          space commitments***
 
 The
                          Group in the course of its business enters into agreements
                          with various
                          freight carriers pursuant to which the Group commits to
                          utilize a minimum
                          amount of cargo space each year. As of September 30, 2007,
                          the cost of the
                          minimum amount of cargo space the Group had committed to
                          use for the
                          following twelve months is $2,070.
 
 ***Contingencies***
 
 The
                Group
                is subject to claims that arise primarily in the ordinary course
                of business. In
                general, such claims are covered by insurance policies issued to
                cover the
                Group’s business. As
                of
                September 30, 2007, the aggregate, outstanding amount of claims was
                approximately $179. Management
                believes that the disposition or ultimate resolution of such claims
                will not
                have a material adverse effect on the financial position of the Group.
 
 WCS
                has
                been named as a third-party defendant in pending proceedings filed
                in the United
                States District Court for the Southern District of New York and the
                United
                States District Court, Central District of California relating to
                claims arising
                out of the
                derailment on April 21, 2005, at Tyrone, Oklahoma, of three rail
                cars attached
                to a Union Pacific train .
                The
                total amount of damages sought equal approximately $6.8 million including
                an
                unspecified amount for costs of delay, lost profit and lost revenue.
                The Group
                intends to vigorously defend each of the foregoing actions. WCS has
                been advised
                by its legal counsel that it has been named as a third-party defendant
                for
                technical reasons and that the likelihood of any liability being
                assigned to WCS
                is minimal, but subject to the normal risks of litigation. Management
                believes
                that the disposition or ultimate resolution of this pending litigation
                will not
                have a material adverse effect on the financial position of the Group.  As
                part of the Agreement by which the Company acquired all of the Membership
                Interests of WCS, the Sellers provided an indemnity to the Company
                for all
                litigation that existed as of the Closing Date, which was July 31,
                2007. 
The Sellers' obligation to indemnify the Company is limited to the
                shares of WLG
                common stock received and receivable by the Sellers pursuant to the
                acquisition
                agreement.
 
 **5.**
                      **RELATED
                          PARTY TRANSACTIONS**
 
 **Name****and relationship of related parties**Name
                      
                      Relationship to the GroupChristopher
                          Wood (“CW”)
                      
                      Shareholder,
                          director and officer of WLGDavid
                          Koontz (“DK”)
                      
                      Director
                          and officer of WLGYip
                          King Lin, Paul (“PY”)
                      
                      Director
                          of the Group’s subsidiaries until April 2006Paul
                          Pomroy (“PP”)
                      
                      PP
                          is a director and officer of Asean and a director of WLG
                          (Aust)Wako
                          Logistic (Thailand) Co. Ltd (“WLT”)
                      
                      CW
                          is a shareholder and director of WLTJoin
                          Wing Properties Limited (“JWP”)
                      
                      CW
                          is a shareholder and director of JWPAngus
                          International Freight Pty Limited (“AIFP”)
                      
                      PP
                          was a director of AIFP until May 1, 2006Warehouse
                          Solutions International Pty Limited (“WSIP”)
                      
                      PP
                          was a director of WSIP until May 1, 2006Asean
                          Cargo Services (Qld) Pty Limited (“ACSQ”)
                      
                      PP
                          is a director of ACSQBettervale
                          Pty Limited (“BPL”)
                      
                      PP
                          was a director of BPL until May 1,
                          2006
 
 F-13
  **Wako
                  Logistics Group, Inc.**
 
 **Notes
                  to the Consolidated Financial Statements**
 For
                  the 3
                  and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                  in thousands except share data and per share
                  amounts)*
 **5.**
                      **RELATED
                          PARTY TRANSACTIONS
                          (CONTINUED)**
  **Details of related parties**OwnershipName
                        
                        Principal activities
                        
                        *Name of owner*
                        
                        *% held*WLT
                        
                        Provision
                            of sea and air freight forwarding services in Thailand
                            #
                        
                        CW
                          Others
                        
                        50%
                          50%JWP
                        
                        Leases
                            property to CW
                        
                        CW
                        
                        100%
  #:
                      In
                          the normal course of business, the Group enters into agency
                          agreements
                          with various overseas agents so that both the Group and
                          the overseas
                          agents can jointly handle customer shipments on behalf
                          of the other in
                          both the port of loading and the port of
                          destination.
  Under
                these agency agreements, the Group and the overseas agents perform
                their
                respective services at their own places of business and, in return,
                earn their
                respective service fees from the other party and either the shipper
                or the
                consignee.
 
 In
                addition to the above, under theses agency agreements, sometimes
                either the
                Group or the overseas agent is obliged to act as a “collection agent” to collect
                the freight revenue from customers (either the shipper or the consignee).
                Since
                the decision as to who is to pay the freight cost is determined by
                either the
                shipper and/or the consignee, both the Group and the overseas agent
                only act in
                accordance with the customers’ instructions in the collection process. In case
                the collecting party is not the party who pays the freight cost to
                the carrier,
                the collecting party has to reimburse the other party to enable it
                to settle the
                freight cost.
  In
                both
                cases, either the Group or the overseas agent has to issue an invoice
                to the
                other party for an amount attributable to it. The amounts include
                the service
                fees earned and may also include the freight cost collected by the
                other
                party.
 
 During
                the periods indicated, one overseas agent is a related party. In
                identifying the
                related party transactions for financial disclosure purposes, only the
                handling fee income earned by the Group from the related party overseas
                agent
                and the handling fees paid by the Group to the related party overseas
                agent are
                disclosed as related party transactions. The amounts that the Group
                billed to
                the related party overseas agent, who only acted as a collection
                agent, are not
                shown as related party transactions. Similarly, the amounts that
                the related
                party overseas agent billed to the Group, who only acted as a collection
                agent,
                are not shown as related party transactions.
  F-14
  **Wako
                  Logistics Group, Inc.**
 
 **Notes
                  to the Consolidated Financial Statements**
 For
                  the 3
                  and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                  in thousands except share data and per share amounts)*
 **5.**
                      **RELATED
                          PARTY TRANSACTIONS
                          (CONTINUED)**
 
 The
                following is a summary of the amounts included in the accompanying
                balance
                sheets:
 
 **At**
                        **December 31,**
                        **2006**
                      
                      **At**
                        **September 30,**
                        **2007***(unaudited)**US$*
                      
                      *US$***Due
                          from related parties (Note( i))**WLT
                      
                      
                      18
                      
                      
                      14ACSQ
                      
                      
                      169
                      
                      
                      191PP
                      
                      
                      11
                      
                      
                      34198
                      
                      
                      239**Due
                          to directors (Note (ii))**CW
                      
                      
                      439
                      
                      
                      1,078DK
                      
                      
                      -
                      
                      
                      750439
                      
                      
                      1,828
 
 Notes :
 
 (i)
                      The
                          amounts due from related parties are unsecured, interest-free
                          and
                          repayable on demand. Transactions in these accounts during
                          the periods
                          covered by these financial statements represented
                          mainly:
 
 a)
                      amounts
                          paid/collected on behalf of related
                          parties;
 
 b)
                      amounts
                          paid/payable to directors, including dividends;
                          and
 
 c)
                      handling
                          income receivable/handling fee payable/rental payable and
                          related
                          settlements.
 
 (ii)
                      Amounts
                          due to directors are unsecured, interest-free and repayable
                          on demand
                          except for the loans of $1,500 to the Company. The loans
                          carry an interest
                          rate of 12% per annum and have no fixed repayment
                          terms.
 
 F-15
  **Wako
                Logistics Group, Inc.**
 
 **Notes
                to the Consolidated Financial Statements**
 For
                the 3
                and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                in thousands except share data and per share amounts)*
 **5.**
                      **RELATED
                          PARTY TRANSACTIONS
                          (CONTINUED)**
 
 **Summary
                of transactions with related entities (unaudited):**
 
 **WSIP**
                      
                      **BPL**
                      
                      **PP**
                      
                      **ACSQ**
                      
                      **AIFP**
                      
                      **WLT**
                      
                      **Total***US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*January
                          1, 2006
                      
                      
                      124
                      
                      
                      7
                      
                      
                      7
                      
                      
                      156
                      
                      
                      189
                      
                      
                      13
                      
                      
                      496Trade
                          transactions
                      
                      
                      (27
                      )
                      
                      (71
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      41
                      
                      
                      (57
                      )Net
                          settlements
                      
                      
                      (2
                      )
                      
                      66
                      
                      
                      3
                      
                      
                      5
                      
                      
                      (189
                      )
                      
                      (36
                      )
                      
                      (153
                      )Reclassified
                          as non-related parties
                      
                      
                      (95
                      )
                      
                      (2
                      )
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (97
                      )September
                          30, 2006
                      
                      
                      -
                      
                      
                      -
                      
                      
                      10
                      
                      
                      161
                      
                      
                      -
                      
                      
                      18
                      
                      
                      189January
                          1, 2007
                      
                      
                      -
                      
                      
                      -
                      
                      
                      11
                      
                      
                      169
                      
                      
                      -
                      
                      
                      18
                      
                      
                      198Net
                          settlements
                      
                      
                      -
                      
                      
                      -
                      
                      
                      22
                      
                      
                      -
                      
                      
                      -
                      
                      
                      (4
                      )
                      
                      18Exchange
                          alignment
                      
                      
                      -
                      
                      
                      -
                      
                      
                      1
                      
                      
                      22
                      
                      
                      -
                      
                      
                      -
                      
                      
                      23September
                          30, 2007
                      
                      
                      -
                      
                      
                      -
                      
                      
                      34
                      
                      
                      191
                      
                      
                      -
                      
                      
                      14
                      
                      
                      239
  **Additional
                details of transactions:**
  **3 months ended**
                        **September 30,**
                      
                      **9 months ended**
                        **September 30,****2006**
                      
                      **2007**
                      
                      **2006**
                      
                      **2007***(unaudited)*
                      
                      *(unaudited)*
                      
                      *(unaudited)*
                      
                      *(unaudited)**US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$***Handling
                          fee paid/payable**WLT
                      
                      
                      -
                      
                      
                      -
                      
                      
                      2
                      
                      
                      -**Rental
                          paid/payable**JWP
                      
                      
                      27
                      
                      
                      27
                      
                      
                      81
                      
                      
                      81
  F-16
  **Wako
                  Logistics Group, Inc.**
 
 **Notes
                  to the Consolidated Financial Statements**
 For
                  the 3
                  and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
                  in thousands except share data and per share amounts)*
 **5.**
                      **RELATED
                          PARTY TRANSACTIONS
                          (CONTINUED)**
 
 **Summary
                of transactions during the periods with directors /
                shareholder:**
 
 **CW**
                      
                      **DK**
                      
                      **Total***(unaudited)*
                      
                      *(unaudited)*
                      
                      *(unaudited)**US$*
                      
                      *US$*
                      
                      *US$*January
                          1, 2006
                      
                      
                      (325
                      )
                      
                      -
                      
                      
                      (325
                      )Advance
                      
                      
                      (259
                      )
                      
                      -
                      
                      
                      (259
                      )Expenses
                          paid
                      
                      
                      125
                      
                      
                      -
                      
                      
                      125September
                          30, 2006
                      
                      
                      (459
                      )
                      
                      -
                      
                      
                      (459
                      )January
                          1, 2007
                      
                      
                      439
                      
                      
                      -
                      
                      
                      439Loans
                          from directors
                      
                      
                      750
                      
                      
                      750
                      
                      
                      1,500Interest
                          accrued
                      
                      
                      15
                      
                      
                      15
                      
                      
                      30Interest
                          paid
                      
                      
                      (15
                      )
                      
                      (15
                      )
                      
                      (30
                      )Expenses
                          paid
                      
                      
                      (111
                      )
                      
                      -
                      
                      
                      (111
                      )September
                          30, 2007
                      
                      
                      1,078
                      
                      
                      750
                      
                      
                      1,828
 
 Notes :
 
 Expenses/loan
                repayments include amounts that were paid either directly to or for
                the benefit
                of CW.
 
 **6.**
                      **SUPPLEMENTAL
                          DISCLOSURES OF CASH FLOW
                          INFORMATION**
  **9 months ended**
                          **September 30,****2006**
                        
                        **2007***(unaudited)*
                        
                        *(unaudited)**US$*
                        
                        *US$***Cash
                            paid for:**Interest
                            expense
                        
                        
                        273
                        
                        
                        404Income
                            taxes
                        
                        
                        190
                        
                        
                        315
  F-17
 **Wako
            Logistics Group, Inc.**
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **7.**
                    **STOCK
                        OPTIONS**
 
 In
              April
              2005, the board and stockholders of the Company approved the Wako Logistics
              Group, Inc. 2005 Stock Incentive Plan (the “Plan”). The Plan, which is effective
              until April 19, 2015, provides for awarding stock options, stock appreciation
              rights and restricted stock to our officers, employees, directors and
              consultants, as well as to officers, employees, directors and consultants
              who
              provide services to any of the Group’s subsidiaries or affiliates. The Plan is
              administered by our board, provided, that the board in the future may
              appoint a
              committee to administer the Plan. At the inception of the Plan, 4,000,000
              shares
              of the Company’s common stock were approved for the issuance of awards under the
              Plan, which amount shall be automatically increased (but not decreased)
              to 20%
              of the total number of the Company’s shares of common stock issued and
              outstanding on January 1st of each year beginning on January 1, 2006.
              Based on
              the shares of common stock outstanding as of January 1, 2007, the number
              of
              shares reserved under the Plan was increased to 5,078,016.
 
 In
              general, stock options awarded under the Plan vest over three years
              and expire
              in a maximum of ten years from their effective dates. However, the
              Plan permits
              the board significant latitude to grant options with varying terms, such as
              changing the vesting period, the term and exercise price. Once the
              board, under
              provisions of the Plan, grants an option, the Company will estimate
              the fair
              value of the option, and compensation expense will be recognized over
              the
              vesting period of the option.
 
 As
              of
              August 2005, the Company had committed to award 200,000 options to
              purchase
              common stock to one of its officers, and as of that date, all substantial
              terms
              and conditions for the option were communicated to, and agreed with,
              the
              officer. To date, the board has not yet formally approved the award,
              but it has
              approved the employment agreement containing the terms of the option
              commitment.
              As such, the Company views approval of this option to be a formality
              and has
              established August 2005 as the grant date for this option. Effective
              January 15,
              2007, the board approved and awarded stock options to three employees
              to
              purchase an aggregate of 20,000 shares of the Company’s common stock.
 
 The
              fair
              value of each option granted during the nine months ended September
              30, 2007,
              and the option granted in August 2005, was estimated as of the grant
              date for
              each option using the Black-Scholes option-pricing model. The assumptions
              used
              for the model were as follows: (1) expected life of 2 and 3 years for
              the August
              2005 and January 2007 options, respectively; (2) zero dividend yield;
              (3)
              volatilities of 45% and 57.7% for the August 2005 and January 2007
              options,
              respectively; (4) no post vesting terminations; and (5) a risk free
              interest
              rate of 4.6%. The weighted average grant-date fair value of the options
              granted
              in August 2005 and January 2007 was $0.28 and $1.22 per share,
              respectively.
 
 Effective
              January 1, 2006, the Company adopted the fair value recognition provisions
              of
              SFAS No. 123(R) using the modified prospective transition method. Under
              this
              method, the compensation expense related to the fair value of stock
              options
              charged to income for the three and nine months ended September 30,
              2007, was $7
              and $40, respectively. As of September 30, 2007, the compensation expense
              related to non-vested options totaled $18 and is expected to be recognized
              over
              27 months. The total intrinsic value of the options outstanding and
              options
              exercisable as of September 30, 2007, was $100. No tax benefit was
              recognized
              for the stock option expense recorded for the three and nine months
              ended
              September 30, 2007.
  F-18
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **7.**
                    **STOCK
                        OPTIONS (CONTINUED)**
 
 The
              following table shows the outstanding options granted under the
              Plan:
  Shares
                    
                    Weighted aver.
                      exercise price
                    
                    Weightedaver.remainingcontractualterm (years)Outstanding
                        at April 30, 2005 (inception of Plan)
                    
                    
                    -
                    
                    
                    -Granted
                        in 2005
                    
                    
                    200,000
                    
                    
                    1.00Outstanding
                        at December 31, 2005
                    
                    
                    200,000
                    
                    
                    1.00
                    
                    
                    9.58Granted
                        in 2006
                    
                    
                    -Outstanding
                        at December 31, 2006
                    
                    
                    200,000
                    
                    
                    
                    
                    
                    8.58Granted
                        during the nine months ended September 30, 2007
                    
                    
                    20,000
                    
                    
                    2.85Outstanding
                        at September 30, 2007
                    
                    
                    220,000
                    
                    
                    1.17
                    
                    
                    7.96Exercisable
                        at September 30, 2007
                    
                    
                    205,000
                    
                    
                    1.17
                    
                    
                    7.87
 
 The
              following schedule presents shares of common stock issued and outstanding
              and
              reserved for future issuance as of September 30, 2007:
 
 Shares
                        of common stock outstanding
                    
                    
                    31,400,094Reserved
                        for future issuance:Options
                        granted to employees and officer
                    
                    
                    220,000Warrants
                    
                    
                    100,000Total
                        shares reserved for future issuance
                    
                    
                    320,000Total
                        shares issued, outstanding and reserved for future issuance
                        at September
                        30, 2007
                    
                    
                    31,720,094
  F-19
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **8.**
                    **INCOME
                        TAX**
 
 In
              July
              2006, the Financial Accounting Standards Board (FASB) issued Interpretation
              No.
              48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
              Statement No. 109 (FIN 48), which clarifies the accounting and disclosure
              for
              uncertainty in tax positions, as defined, and prescribes the measurement
              process
              and a minimum recognition threshold for a tax position, taken or expected
              to be
              taken in a tax return, that is required to be met before being recognized
              in the
              financial statements. Under FIN 48, the Company must recognize the
              tax benefit
              from an uncertain position only if it is more likely than not the tax
              position
              will be sustained on examination by the taxing authority, based on
              the technical
              merits of the position. The tax benefits recognized in the financial
              statements
              attributable to such position are measured based on the largest benefit
              that has
              a greater than 50% likelihood of being realized upon the ultimate resolution
              of
              the tax position.
 
 As
              of
              January 1, 2007, the Company became subject to the provisions of FIN
              48, and has
              analyzed its filing positions in all of the federal, state and foreign
              jurisdictions where it is required to file income tax returns, as well
              as for
              all open years for those jurisdictions. As of December 31, 2006, and
              September
              30, 2007, the Company has identified the following jurisdictions as
“major” tax
              jurisdictions, as defined, in which it is required to file income tax
              returns:
              United States; United Kingdom; Hong Kong; Australia and China. Based
              on the
              evaluations noted above, the Company has concluded that there are no
              significant
              uncertain tax positions requiring recognition in its consolidated financial
              statements. The evaluations were performed for the tax years that remain
              open
              for examination which are the following: (1) United States – December 31,
              2003 through 2006; (2) United Kingdom – December 31, 2006; (3) Hong
              Kong – April 30, 2001 to December 31, 2006; (4) Australia – June 30,
              2001, through December 31, 2006 and (5) China – calendar years 2005 and
              2006. Based on a review of tax positions for all open years, the Company
              did not
              record a cumulative effect adjustment related to the adoption of FIN
              48. No
              reserves for uncertain income tax positions have been recorded pursuant
              to FIN
              48 during the nine months ended September 30, 2007, and the Company
              does not
              anticipate that it is reasonably possible that any material increase
              or decrease
              in its unrecognized tax benefits will occur within twelve months.
 
 Upon
              adoption of FIN 48 on January 1, 2007, and as of September 30, 2007,
              the Company
              had no unrecognized tax benefits or accruals for the potential payment
              of
              interest and penalties. The Company’s policy for recording interest and
              penalties associated with unrecognized tax benefits and tax audits
              is to record
              such items as a component of the provision for income tax expense.
              For the nine
              months ended September 30, 2007, no interest or penalties were recorded
              relating
              to the settlement of any income tax audits.
  F-20
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **9.**
                    **ACQUISITION
                        OF A SUBSIDIARY**
 
 On
              July
              31, 2007, (the “Closing Date”) WLG acquired all of the membership interests (the
“Membership Interests”) of WCS (the “Acquisition”) from the two holders of all
              of WCS's Membership Interests (“Sellers”).
 
 At
              closing, WLG issued 4,710,014 shares of its common stock (“Consideration
              Shares”) as initial consideration for the purchase of the Membership Interests,
              of which 2,943,759 Consideration Shares were delivered to the Sellers
              and
              1,766,255 Consideration Shares were placed in escrow to cover potential
              claims.
              WCS, under the terms of a financing agreement with certain lenders
              (the “Debt
              Holders”), was obligated to repay the balance of certain debt (the “Mezzanine
              Debt”) and to redeem all warrants (the “Warrants”) held by the Debt Holders. As
              of the closing date, the total amounts owed for the Mezzanine Debt
              and the
              Warrants were $2,700 and $263, respectively. In completing the Acquisition,
              WLG
              provided cash of $2,550 to WCS, and WCS used $413 of its funds to repay
              the Debt
              Holders in full for the Mezzanine Debt and to redeem all outstanding
              Warrants.
 
 The
              total consideration for the Acquisition was negotiated between WLG and
              the Sellers on an arm’s length basis, and gave effect to a number of factors,
              including the value of WCS, the lack of a meaningful daily trading
              volume and
              active market for WLG’s common stock (“WLG Shares”) and other acquisitions
              completed by WLG. During the three months preceding the Closing Date,
              there was
              minimal trading in WLG Shares. During this period, less than 1⁄4 percent of WLG
              Shares were traded daily, and the average price for the shares traded
              was about
              $1.35. On the three trading days preceding July 31, 2007, and the four
              trading
              days immediately thereafter, no WLG Shares were traded. Both WLG and
              the Sellers
              agreed that, in the absence of an active market for WLG Shares and
              given the
              value of WCS, the amount of $1.00 per share for the Consideration Shares
              issued
              to the Sellers represented a good faith effort to establish the fair
              market
              value of WLG Shares as of July 31, 2007, which was both the Closing
              Date and the
              date that the Acquisition was consummated.
 
 In
              addition to the Consideration Shares, WLG may be required to issue up to
              1,962,506 shares (“Earn-Out Shares”) of its common stock to the Sellers if
              certain financial results are achieved by WCS for the 24 months ending
              July 31,
              2009. The Earn-Out Shares are to be issued in increments to the Sellers
              based on
              the trailing 12 months earnings of WCS before depreciation, amortization,
              interest and taxes (“Rolling EBITDA) measured as of July 31, 2008, December 31,
              2008, and July 31, 2009. From each Earn-Out payment, WLG shall withhold
              25% of
              the Earn-Out Shares as security for the payment of potential claims.
              The Sellers
              also have the right to receive up to 500,000 shares (the “Conversion Shares”) of
              WLG Shares in the event that any shares of WLG Series A convertible
              redeemable
              preferred stock, outstanding as of the Closing Date, are later converted
              into
              WLG Shares. If the Sellers receive the maximum Earn-Out Shares and
              the full
              number of Conversion Shares, they will have received 7,172,520 WLG
              Shares. As of
              the Closing Date, it is not possible to determine if all, or any, of
              the
              Earn-Out Shares will be issued to the Sellers, or whether the Sellers
              will be
              entitled to receive any Conversion Shares. In computing the Purchase
              Price in
              accordance with SFAS No. 141, it was determined that the value of the
              Earn-Out
              Shares and/or the Conversion Shares should not be accrued as an element
              of the
              Purchase Price. Accordingly, the Purchase Price for the Membership
              Interests is
              $7,335, and such amount is stated in accordance with SFAS No. 141.
  F-21
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **9.**
                    **ACQUISITION
                        OF A SUBSIDIARY
                        (CONTINUED)**
 
 WLG,
              the
              Sellers and WCS provided representations, warranties and indemnities
              that are
              typical and consistent for a Transaction of this size and scope. In
              particular,
              the Sellers and WCS have warranted and provided an indemnity to WLG
              that 100% of
              WCS’s trade receivables on hand as of the Closing Date will be collected
              within
              six months of closing. In addition, the Sellers and WCS have provided
              an
              indemnity to WLG to cover all losses arising from litigation outstanding
              as of
              the Closing Date, or which may relate to events prior to the Closing
              Date. The
              Sellers’ maximum liability for warranty and indemnification claims is limited
              to
              the number of WLG shares received by them. WLG has the right to deliver
              its
              shares of common stock to the Sellers in satisfaction of obligations
              it may have
              because of a breach of any of its representations or warranties.
 
 The
              underlying assets of WCS consist of its work-in-process inventory,
              trade
              receivables, office furniture and equipment, computer hardware and
              software,
              certain minor prepaid assets and its customer list.
 
 WCS
              is
              based in Schaumburg, Illinois and has offices in New York, Atlanta,
              Los Angeles
              and San Francisco. It provides a full range of customs brokerage and
              freight
              forwarding services to its customers, specializing in import transactions
              from
              Asia, mostly by sea, and with an emphasis on imports from China. WCS
              does not
              own or lease any transportation assets or warehouse facilities, but
              contracts
              for space on ships and aircraft as well as for warehouse facilities
              to meet the
              needs of its customers. Prior to completion of the Transaction, WLG
              and WCS had
              not worked together.
 
 WLG’s
              acquisition of WCS achieved several objectives for the Group. These
              objectives
              include the following factors, and WLG believes that each factor contributed
              to
              the goodwill recorded in connection with the Acquisition:
 
 1.
                    Obtained
                        three “gateway city” offices in the US, namely in San Francisco,
                        California, Long Island, New York and Atlanta, Georgia. Adding
                        these
                        offices will allow WLG to provide a wider range of services
                        in key
                        locations in the US market.
 
 2.
                    Obtained
                        WCS’s expertise for import transactions. Prior to the acquisition,
                        much of
                        WLG’s US business was focused on export transactions. Adding
                        WCS’s
                        expertise and customer base is expected to help WLG increase the
                        import business of its US
                        companies.
 
 3.
                    Gained
                        additional freight customers with a majority of shipments
                        originating in
                        China, which WLG believes will allow greater utilization
                        of its offices in
                        China.
 
 4.
                    Added
                        increased freight volumes in the Asia-Pacific trade lanes,
                        which may help
                        WLG to become more competitive in this market by being able
                        to negotiate
                        better shipping rates.
 
 The
              acquisition of WCS has been recorded using the purchase method of accounting
              in
              accordance with SFAS No. 141. WLG has allocated the Purchase Price
              to the
              assets, liabilities, intangible assets and goodwill acquired, based
              on the fair
              value of the net assets at the effective date of the Acquisition. At
              July 31,
              2007, the fair value of identifiable assets, less the amount of liabilities
              of
              WCS, was approximately $1,895, which comprised gross assets of approximately
              $9,305, including an intangible asset for customer relationships of
              $2,835, less
              total liabilities of about $7,140. The intangible asset is being amortized
              over
              a period of nine years. Goodwill of approximately $5,440 was recorded
              as part of
              the Acquisition. This amount represented the excess of the Purchase
              Price over
              the net assets acquired. The goodwill is not being amortized, but will
              be tested
              annually for impairment in accordance with SFAS No. 142. The results
              of
              operations for WCS for the two months of August and September 2007
              have been
              included in the unaudited, consolidated results of operations of WLG
              for the
              three and nine months ended September 30, 2007.
  F-22
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **9.**
                    **ACQUISITION
                        OF A SUBSIDIARY
                        (CONTINUED)**
 
 **At**
                      **July
                        31, 2007**
                      ***US$***
                    ********
                    ***(unaudited)*****Net
                        assets acquired:**Trade
                          and other receivables
                    5,503Other
                        assets
                    354Trade
                          and other payables
                    (7,140)Property,
                          plant and equipment, net
                    343Intangible
                        asset - customer list
                    2,835**Net
                        assets**
                    1,895**Consideration:**Cash
                        - repayment of debt and redemption of warrants
                    2,550WLG
                        common stock
                    4,710Accrual
                        of transaction expenses
                    75Goodwill
                        arising from WCS acquisition
                    5,440
 
 The
              following unaudited, pro forma information assumes the acquisition
              of WCS
              occurred at the beginning of each period presented. The unaudited,
              pro forma
              information is provided for informational purposes only. It is based
              on
              historical information and does not necessarily reflect the actual
              results that
              would have occurred nor is it necessarily indicative of future results
              of the
              operations of WLG.
  **3
                            months ended**
                          **September
                            30**
                      
                      **9
                            months ended**
                          **September
                            30****2006**
                      
                      **2007**
                      
                      **2006**
                      
                      **2007***(Unaudited)*
                      
                      *(Unaudited)*
                      
                      *(Unaudited)*
                      
                      *(Unaudited)**US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*Revenue
                      
                      
                      46,129
                      
                      
                      61,331
                      
                      
                      123,376
                      
                      
                      159,525Net
                          income
                      
                      
                      775
                      
                      
                      733
                      
                      
                      22
                      
                      
                      951Net
                          income per share of common stock-
                          Basic and diluted earnings per share
                      
                      
                      0.03
                      
                      
                      0.02
                      
                      
                      0.00
                      
                      
                      0.03
  F-23
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **10.**
                    **SEGMENTS
                        OF THE BUSINESS**
 
 **(a)**
                    **Business
                        segments**
 
 The
              Group
              operates mainly in three business segments, being the provision of
              (i) air
              forwarding; (ii) sea forwarding; and (iii) customs brokerage services. The Group ’s
              operations by air, sea and customs brokerage are summarized in the
              following
              table:
 
 **(i)**  **For
              the 3 months ended September 30, 2006 and 2007 (unaudited)**
  **Air
                          forwarding**
                      
                      **Sea
                          forwarding**
                      
                      **Customs brokerage**
                      
                      **Total****2006**
                      
                      **2007**
                      
                      **2006**
                      
                      **2007**
                      
                      **2006**
                      
                      **2007**
                      
                      **2006**
                      
                      **2007***US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*
                      
                      *US$*Revenue
                      
                      
                      7,501
                      
                      
                      9,460
                      
                      
                      11,943
                      
                      
                      31,902
                      
                      
                      6,839
                      
                      
                      13,551
                      
                      
                      26,283
                      
                      
                      54,913Costs
                          of forwarding/customs
                      
                      
                      (6,465
                      )
                      
                      (8,047
                      )
                      
                      (9,469
                      )
                      
                      (28,042
                      )
                      
                      (6,337
                      )
                      
                      (12,111
                      )
                      
                      (22,271
                      )
                      
                      (48,200
                      )Depreciation
                      
                      
                      (17
                      )
                      
                      (21
                      )
                      
                      (35
                      )
                      
                      (63
                      )
                      
                      (6
                      )
                      
                      (25
                      )
                      
                      (58
                      )
                      
                      (109
                      )Interest
                          income
                      
                      
                      3
                      
                      
                      5
                      
                      
                      3
                      
                      
                      5
                      
                      
                      -
                      
                      
                      1
                      
                      
                      6
                      
                      
                      11Interest
                          expense
                      
                      
                      (17
                      )
                      
                      (26
                      )
                      
                      (47
                      )
                      
                      (98
                      )
                      
                      (27
                      )
                      
                      (45
                      )
                      
                      (91
                      )
                      
                      (169
                      )Other
                          segment income
                      
                      
                      1
                      
                      
                      5
                      
                      
                      4
                      
                      
                      12
                      
                      
                      -
                      
                      
                      5
                      
                      
                      5
                      
                      
                      22Other
                          segment expenses
                      
                      
                      (887
                      )
                      
                      (1,231
                      )
                      
                      (1,758
                      )
                      
                      (3,178
                      )
                      
                      (387
                      )
                      
                      (1,211
                      )
                      
                      (3,032
                      )
                      
                      (5,620
                      )Taxation
                      
                      
                      (55
                      )
                      
                      (39
                      )
                      
                      (144
                      )
                      
                      (147
                      )
                      
                      (26
                      )
                      
                      (30
                      )
                      
                      (225
                      )
                      
                      (216
                      )Segment
                          income
                      
                      
                      64
                      
                      
                      106
                      
                      
                      497
                      
                      
                      391
                      
                      
                      56
                      
                      
                      135
                      
                      
                      617
                      
                      
                      632Corporate
                          expenses
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (214
                      )
                      
                      (431
                      )Net
                          income
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      403
                      
                      
                      201Segment
                          assets
                      
                      
                      5,812
                      
                      
                      6,570
                      
                      
                      7,499
                      
                      
                      15,916
                      
                      
                      1,715
                      
                      
                      4,717
                      
                      
                      15,026
                      
                      
                      27,203Unallocated
                          assets
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      4,710
                      
                      
                      15,724Total
                          assets
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      19,736
                      
                      
                      42,927Property,
                          plant and equipment – additions
                      
                      
                      7
                      
                      
                      23
                      
                      
                      10
                      
                      
                      52
                      
                      
                      3
                      
                      
                      31
                      
                      
                      20
                      
                      
                      106
  F-24
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **10.**
                    **SEGMENTS
                        OF THE BUSINESS
                        (CONTINUED)**
 
 The
              Group
              operates mainly in three business segments, being the provision of
              (i) air
              forwarding; (ii) sea forwarding; and (iii) customs brokerage services. The Group ’s
              operations by air, sea and customs brokerage are summarized in the
              following
              table:
 
 **(ii)**  **For
              the 9 months ended September 30, 2006 and 2007 (unaudited)**
 
 **Air
                        forwarding**
                    
                    **Sea
                        forwarding**
                    
                    **Customs brokerage**
                    
                    **Total****2006**
                    
                    **2007**
                    
                    **2006**
                    
                    **2007**
                    
                    **2006**
                    
                    **2007**
                    
                    **2006**
                    
                    **2007***US$*
                    
                    *US$*
                    
                    *US$*
                    
                    *US$*
                    
                    *US$*
                    
                    *US$*
                    
                    *US$*
                    
                    *US$*Revenue
                    
                    
                    20,830
                    
                    
                    24,214
                    
                    
                    28,049
                    
                    
                    62,094
                    
                    
                    18,016
                    
                    
                    29,796
                    
                    
                    66,895
                    
                    
                    116,104Costs
                        of forwarding/customs
                    
                    
                    (17,691
                    )
                    
                    (20,134
                    )
                    
                    (21,791
                    )
                    
                    (52,427
                    )
                    
                    (16,821
                    )
                    
                    (27,058
                    )
                    
                    (56,303
                    )
                    
                    (99,619
                    )Depreciation
                    
                    
                    (54
                    )
                    
                    (58
                    )
                    
                    (103
                    )
                    
                    (169
                    )
                    
                    (19
                    )
                    
                    (43
                    )
                    
                    (176
                    )
                    
                    (270
                    )Interest
                        income
                    
                    
                    16
                    
                    
                    22
                    
                    
                    11
                    
                    
                    19
                    
                    
                    1
                    
                    
                    4
                    
                    
                    28
                    
                    
                    45Interest
                        expense
                    
                    
                    (64
                    )
                    
                    (70
                    )
                    
                    (131
                    )
                    
                    (215
                    )
                    
                    (78
                    )
                    
                    (89
                    )
                    
                    (273
                    )
                    
                    (374
                    )Other
                        segment income
                    
                    
                    15
                    
                    
                    23
                    
                    
                    56
                    
                    
                    44
                    
                    
                    1
                    
                    
                    18
                    
                    
                    72
                    
                    
                    85Other
                        segment expenses
                    
                    
                    (2,812
                    )
                    
                    (3,433
                    )
                    
                    (5,213
                    )
                    
                    (8,002
                    )
                    
                    (1,083
                    )
                    
                    (2,412
                    )
                    
                    (9,108
                    )
                    
                    (13,847
                    )Taxation
                    
                    
                    (67
                    )
                    
                    (81
                    )
                    
                    (230
                    )
                    
                    (300
                    )
                    
                    (16
                    )
                    
                    (46
                    )
                    
                    (313
                    )
                    
                    (427
                    )Segment
                        income
                    
                    
                    173
                    
                    
                    483
                    
                    
                    648
                    
                    
                    1,044
                    
                    
                    1
                    
                    
                    170
                    
                    
                    822
                    
                    
                    1,697Corporate
                        expenses
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    (671
                    )
                    
                    (1,136
                    )Net
                        Income
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    151
                    
                    
                    561Segment
                        assets
                    
                    
                    5,812
                    
                    
                    6,570
                    
                    
                    7,499
                    
                    
                    15,916
                    
                    
                    1,715
                    
                    
                    4,717
                    
                    
                    15,026
                    
                    
                    27,203Unallocated
                        assets
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    4,710
                    
                    
                    15,724Total
                        assets
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    19,736
                    
                    
                    42,927Property,
                        plant and equipment – additions
                    
                    
                    23
                    
                    
                    74
                    
                    
                    41
                    
                    
                    202
                    
                    
                    9
                    
                    
                    101
                    
                    
                    73
                    
                    
                    377
  F-25
  **Wako
              Logistics Group, Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 For
              the 3
              and 9 months ended September 30, 2006 and 2007
 *(Dollars
              in thousands except share data and per share amounts)*
 
 **10.**
                    **SEGMENTS
                        OF THE BUSINESS
                        (CONTINUED)**
 
 (b)
                    The
                        table below summarizes the percentage of the Group’s revenues during the
                        three months and nine months ended September 30, 2006, and
                        2007, based on
                        the country of origination of the shipments and analyzed
                        by geographical
                        locations:
  **3
                          months ended**
                        **September
                          30,**
                      
                      **9
                          months ended**
                        **September
                          30,****2006**
                      
                      **2007**
                      
                      **2006**
                      
                      **2007***(unaudited)*
                      
                      *(unaudited)*
                      
                      *(unaudited)*
                      
                      *(unaudited)*%
                      
                      %
                      
                      %
                      
                      %**Revenues**Americas
                      
                      
                      13
                      
                      
                      9
                      
                      
                      12
                      
                      
                      12Asia
                          and others
                      
                      
                      45
                      
                      
                      63
                      
                      
                      45
                      
                      
                      57Australia
                      
                      
                      28
                      
                      
                      16
                      
                      
                      28
                      
                      
                      18Europe
                      
                      
                      14
                      
                      
                      12
                      
                      
                      15
                      
                      
                      13100
                      
                      
                      100
                      
                      
                      100
                      
                      
                      100
 
 (c)
                    The
                        Group made no sales during the three months and nine months
                        ended
                        September 30, 2006 and 2007, which qualified as sales to
                        a major customer
                        (a major customer is defined as a customer for which sales
                        to it represent
                        10% or more of total revenues).
   F-26
  **Item
        2: Management's Discussion and Analysis of Financial Condition and Results
        of
        Operations**
 
 **General**
 
 Wako
        Logistics Group, Inc. (“WLG,” the “Company,” “we”,
        “our”or the “Group”) is an international, non-asset-based logistics
        company that provides air and ocean freight forwarding, contract logistics,
        customs brokerage and other supply chain management services to its customers
        from its offices in Hong Kong, the Peoples Republic of China (“PRC” or “China”),
        Australia, United States (“US”), United Kingdom(“UK”) and through a worldwide
        network of independent cargo agents.
 
 WLG's
        business is conducted by its operating subsidiaries, which, as of September
        30,
        2007, included the following entities: Wako Express (HK) Co. Ltd.(“WEHK”), Wako
        Air Express (HK) Co. Ltd. (“WAE”), Wako Express (China) Co. Ltd. (“WE China”),
        WLG (USA) LLC (“WLG (USA)”) (formerly dba “Kay O'Neill”), Mares-Shreve
&Associates, Inc. (“MSA”), Sea Systems Ocean Line, Inc. (“Sea Systems”),
        Asean Cargo Services Pty Limited (“Asean”), Asean Logistics, Inc. (“ALI”), WLG
        (UK) Limited (“WLG (UK)”), and World Commerce Services, LLC,
        (“WCS”).
 
 Wako
        Logistics Inc. was incorporated in Delaware on December 2, 2003, and, on
        January
        8, 2004, changed its name to Wako Logistics Group, Inc. Immediately following
        the formation of Wako Logistics Group, Inc., Mr. Christopher Wood (“Mr. Wood”)
        became its sole shareholder. Pursuant to certain Share Exchange Agreements
        entered into on January 18, 2004, between us and Mr. Wood (and his
        nominee), we consummated a combination with WEHK and WAE by issuing 20,000,900
        shares of our common stock to Mr. Wood in exchange for 100% of the outstanding
        shares of common stock of WEHK and WAE.
 
 WEHK, incorporated
        in Hong Kong on September 4, 1982, carries on the business of handling sea
        freight for its customers, both export and import, between Hong Kong and
        the
        rest of the world, with a particular concentration, historically, on the
        Asia-Australian trade lanes and, more recently, on the trade lanes running
        from
        Asia to the US and Europe. WAE was incorporated in Hong Kong on February
        24,
        1989. Its business is the handling of air freight, both export and import,
        between Hong Kong and the rest of the world, particularly to Australia, but
        also
        to the US and Europe.
  On
        April
        1, 2005, we completed the acquisition of all of the voting interests in Kay
        O'Neill (USA) LLC (“Kay O'Neill”), an Illinois limited liability company. Kay
        O'Neill was a US based logistics business, which primarily served US
        based customers by providing services similar to those offered by the Group
        in
        Asia and elsewhere. At the acquisition date, Kay O'Neill had only one office
        in
        the US, which was in Des Plaines, Illinois. As part of the process of creating
        brand identity for the Group in the United States, Kay O'Neill, on June 29,
        2005, changed its name to WLG (USA) LLC and began immediately to operate
        as WLG
        (USA). In June of 2005, WLG (USA) opened an office in Taylor, Michigan, and
        at
        the beginning of 2006, it registered to do business in Texas to provide services
        for contract logistics projects.
 
 Pursuant
        to the Closer Economic Partnership Agreement (“CEPA”) signed between Hong Kong
        and the PRC in September 2003, companies incorporated in Hong Kong were
        permitted to establish wholly-owned enterprises in China to provide a full-range
        of logistics services. In July 2004, WEHK, which qualified under the provisions
        of the CEPA, formed WE China, as a wholly-owned subsidiary in the PRC. WE
        China
        began operations in February 2005, and now provides freight forwarding services
        for exports and imports between China and the rest of the world. WE China
        has
        eight offices in China, including offices in what we believe are China's
        three
        most important commercial centers: Beijing; Shanghai and Guangzhou.
 
 Effective
        October 1, 2005, WLG acquired all of the voting stock of ALI, a company
        incorporated in California in September 1999. ALI, based in Torrance,
        California, is a non-asset based freight forwarding company and provides
        traditional freight forwarding services to its customers, most of which ship
        products primarily between Asia and the United States. Prior to the acquisition,
        WLG and ALI worked closely together pursuant to the terms of an agency
        agreement.
 
 On
        November 9, 2005, WLG, through a newly formed and wholly-owned Australian
        subsidiary, WLG (Australia) Pty. Ltd., completed the acquisition of all of
        the
        issued and outstanding common stock of Asean, a non-asset based freight
        forwarding and logistics company. Asean, incorporated in March 1984, and
        based
        in Sydney, Australia, also has offices in Melbourne and Brisbane and maintains
        agency relationships with other freight and logistics companies in all of
        Australia's mainland states. Asean provides a full range of transportation,
        logistics and customs brokerage services to its customers, with an emphasis
        on
        shipments in the Asia-Australian trade lanes. Prior to WLG's acquisition
        of
        Asean, both companies had worked closely with each other for over 20 years,
        providing transportation and logistics services to the customers of the other
        through an agency agreement.
 
 3
  On
        December 1, 2006, WLG acquired all of the voting shares of MSA and its wholly
        owned subsidiary, Sea Systems, (collectively, the "MSA Group”). MSA, which was
        incorporated on May 15, 1979, in Washington State, provides freight forwarding
        and customs brokerage services to its customers. Sea Systems, incorporated
        in
        Washington State on February 26, 1991, is a non-asset based freight forwarder
        and provides air and sea freight forwarding and related logistics services
        to
        its customers. The MSA Group mainly serves customers that ship products from
        Asia to the United States. Traditionally, the business of the MSA Group has
        been
        more focused on its customs brokerage practice than its freight forwarding
        operations. Prior to the acquisition, the MSA Group and WLG had not worked
        together.
 
 Effective
        July 31, 2007, WLG acquired all of the membership interests of WCS in exchange
        for its common stock and cash. WCS, incorporated in Illinois in January 2004,
        is
        the successor to a company of the same name, which began business in 1976.
        WCS
        is a non-asset based freight forwarding company and provides a full range
        of air
        and sea freight forwarding, logistics and customs brokerage services. It
        serves
        a wide range of customers that primarily import product by sea from Asia,
        with a
        heavy emphasis on shipments from China. In addition to its head office in
        Schaumburg Illinois, WCS has offices in Long Island, New York, Atlanta, Georgia
        and two offices in California located in Los Angeles and San Francisco. Prior
        to
        the acquisition, the Group and WCS had not worked together.
  With
        the
        exception of performing administrative, oversight and regulatory tasks, the
        Group's parent company, Wako Logistics Group, Inc. carries on no other business
        activities.
 
 **Overview**
 
 WLG
        is an
        international, non-asset-based logistics company that provides air and ocean
        freight forwarding, contract logistics, customs clearances and other supply
        chain management services to its customers throughout the world. We do not
        own
        or operate any transportation assets such as aircraft, ships, trucks, river
        barges or railroads. Instead, we contract with companies that own
        and operate commercial transportation assets of all types as a means of
        providing both regional and international freight forwarding services to
        our
        customers. Our revenues are generated from the air, sea and local freight
        transportation services that we arrange, customs brokerage services we perform
        and other valued added services such as price ticketing and warehousing provided
        by us. We believe that our customers benefit from the extensive experience
        we
        have in arranging the transportation of freight and performing customs clearance
        services in the many countries in which we operate and in which we maintain
        agency relationships. For our freight forwarding business, our experience
        allows
        us to focus on large cargo shipments, because these types of shipments normally
        require access to sophisticated logistical networks in many
        countries.
 
 **Freight
        Forwarding and Related Services**
 
 Due
        to
        the volume of shipments we arrange, we are generally able to negotiate
        buy rates that are lower than the rates our customers could negotiate
        directly with transportation providers. Often, the shipping rates we negotiate
        may be reduced due to the amount of freight volumes that we arrange to have
        shipped. As a result, our customers, by having us arrange their freight
        shipments, may benefit from lower rates, and we, in turn, may benefit by
        increasing our revenues and operating profits.
 
 A
        significant portion of the expenses for our freight business is variable
        and
        relate directly to the amount and volume of shipments we book. Direct
        transportation costs are our largest variable expense. Personnel costs represent
        the second largest expense for our freight operations. Over time, we have
        gained
        the experience necessary to be able to project our staffing needs based on
        the number of customer orders we fulfill. Nonetheless, staff costs are less
        flexible than other variable costs, and, in the short term, we may not be
        able
        to alter our staff levels to adjust for unexpected peaks and downturns in
        our
        business.
 
 We
        derive
        a significant portion of our air freight revenues from the consolidation
        of
        cargo from a number of customers. In this part of our business, we always
        seek
        to combine a mix of light and heavy cargo in order to optimize the ratios
        of
        weight and cubic capacity for all airfreight shipments. In general, this
        improves our profitability on these shipments.
 
 A
        substantial portion of our direct freight costs are incurred pursuant to
        contracts for the advance purchase of cargo space from air carriers for which
        we
        guarantee we will make a minimum volume of shipments. Under these contracts,
        we
        are required to pay for the minimum amount of space we guarantee, even if
        we do
        not use the guaranteed amount. In the normal course of business, we seek
        to
        minimize our risk of loss by carefully gauging customer demand, and by entering
        into arrangements with other freight forwarders whereby they take and pay
        for
        the excess cargo space that we are unable to fill. However, we do not have
        the
        ability to require our customers to ship minimum amounts, and, as such, we
        are
        not able to pass this risk on to our customers.
 
 4
  As
        part
        of our freight forwarding business, we often provide related logistics services
        to our customers. Within our industry, such services are known as Value Added
        Services (“VAS”). The provision of VAS is becoming a necessary and important
        part of our business and may cover a wide range of supply chain services.
        As an
        example, we may provide some or all of the following VAS to our customers:
        pick
        and scan; pick and pack; co-packing; bar code printing; labeling and price
        tagging at both the carton and item levels. At the carton level, each carton
        remains unopened, which makes this a simpler service. At the item level,
        each
        individual item may, as in the case of apparel, be processed by size and
        color, which requires advanced information technology capabilities.
 
 The
        VAS
        that we provide may also involve receiving goods from one or multiple factories
        on behalf of the customer - often an overseas retail buyer - and warehousing
        such goods prior to packing the goods in individual containers for shipment
        to
        the customer's distribution centers or retail outlets. Goods are often shipped
        “store ready”, meaning they are sorted and price-tagged, ready for sale in each
        retail location. We see the demand for VAS increasing because a large portion
        of
        the retailer's higher labor and storage costs may be “exported” to lower cost
        locations, such as China, thus bypassing costly de-consolidation and
        distribution centers in the customer's home country. In addition, performing
        these services at the point of shipment often leads to a more efficient way
        for
        a customer to distribute its products. Performance of VAS relies on the
        application of a wide range of information technologies, and requires an
        ability
        to receive, process and provide shipping and inventory information from and
        to
        our customers on a time sensitive basis. Our billings for VAS vary with the
        type
        of services performed, but they are often based on a per piece count measured
        by
        the actual number of units we store and prepare for shipment.
 
 **Customs
        Brokerage Operations**
 
 We
        have
        customs brokerage practices in our offices in Sydney, Australia, Manchester,
        England, Seattle, Washington, Long Beach and San Francisco, California and
        in Chicago, Illinois. In each location, we acquired an existing business.
        The
        revenue and expense streams for this segment of our business tend to be more
        predictable than those of our freight forwarding operations. However, customs
        brokerage is a commodity type business and pricing is very competitive.
        Consequently, operating margins in this business are often small, and are
        generally less than those in our freight operations. In some cases, we accept
        low margin brokerage business as a strategic decision to obtain freight
        forwarding customers or to retain the ones we have. Also, due to competitive
        factors, we often advance funds on behalf of our brokerage customers to pay
        the
        customs duty on their freight imports, and, as a result, we do incur credit
        risk, which may be substantial, particularly as measured against the profit
        from
        a specific job or customer. Because the return on an individual customs account
        may be small and the credit risk large, we exercise a heightened degree of
        oversight in accepting and retaining customs brokerage clients.
 
 Generally,
        billings for customs services are based on the number of freight clearances
        for
        a particular customer and may often include the costs and mark-up for ancillary
        services such as arranging for the local delivery of goods and the
        preparation and pick-up of documentation for the shipments. The amounts we
        bill
        are normally similar to what other brokerage companies charge in a specific
        geographical area. Because this business tends to be stable and recurring,
        we
        are able to estimate with a degree of certainty what our personnel needs
        are for
        this segment of our business. Personnel costs are the largest expense for
        this
        segment of our business.
 
 **Global
        Agency Network**
 
 We
        work
        with approximately 525 independent cargo agents in overseas locations, many
        of
        which have offices in strategic cities in Europe, North and South America,
        Africa and the Middle East. As a result, we may be represented by more than
        one
        agent in some cities, so that we generally do not have to rely on a single
        agent
        in any one city.
 
 All
        of
        our arrangements with other cargo agents are on a non-exclusive basis. Under
        these arrangements, the agents are not authorized to make any commitments
        or to
        execute contracts on our behalf. The fees paid to and received from these
        agents
        are usually shared 50:50 and may include additional charges for specific
        services.
 
 By
        working with independent cargo agents, we may be able to expand our
        business without the costs typically associated with the ownership and
        maintenance of company-owned offices. Given the importance of overseas cargo
        agents to our business, we believe it is essential that senior management
        be
        involved on a regular basis to maintain and strengthen these working
        relationships. Our mutual goal is to provide and receive increased business
        through our network of cargo agents. However, it is also true that because
        we
        often have to split the revenue with these cargo agents, the profit we earn
        is
        less than what we may earn if our own offices handle both sides, import and
        export, of a shipping transaction. In addition, it is more difficult to ensure
        the same level of service to a customer when part of a shipment is handled
        by an
        independent agent.
 
 5
  **Results
        of Operations**
 
 THREE
        MONTHS ENDED SEPTEMBER 30, 2007 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
        30,
        2006.
 
 Total
        revenue for the three months ended September 30, 2007, increased about 109%,
        compared with total revenue for the three months ended September 30, 2006,
        growing from approximately $26.28 million to $54.91 million. Of this increase,
        revenues on a like-to-like basis grew by $5.32 million, while the two companies
        acquired in the fourth quarter of 2006 and the acquisition in the third quarter
        of 2007 added $23.31 million in revenues.
  In
        analyzing the revenue growth of $5.32 million for our existing business,
        approximately $1.63 million, or 31%, is from Asean in Australia. Our US
        operations, WLG (USA) and ALI, added revenues of approximately $1.70 million,
        or
        32% of the total increase. The operations in Hong Kong contributed new revenues
        of approximately $0.58 million, or 11% of the increase. Revenues from our
        operations in China grew by $1.41 million, adding approximately 26% to the
        total
        increase. The UK acquisition, which we completed in September 2006, added
        revenues of $4.27 million, the MSA Group, which we acquired on December 1,
        2006,
        reported revenues of $5.61 million and WCS, which become part of the Group
        effective July 31, 2007, added $13.43 million in revenues.
 
 Gross
        profit rose from $4.01 million in the three months ended September 30, 2006,
        to
        $6.71 million for the same period in 2007, for an increase of $2.70 million,
        or
        67%. Of this increase, our Hong Kong and China operations contributed $0.29
        million and Asean added $0.38 million. The gross profit in our US operations,
        WLG (USA) and ALI, decreased by $4,000. WLG (UK) and MSA, the two acquisitions
        completed in 2006, increased our gross profit by $0.71 million and $0.21
        million, respectively, and WCS, the acquisition that closed on July 31, 2007,
        added $1.11 million of gross profit to the Group.
 
 The
        Group's overall gross margin decreased from 15.3% for the three months ended
        September 30, 2006, to 12.2% for the three months ended September 30, 2007.
        The
        decrease in gross margin is due to a number of factors. Two of these are
        increased sea freight rates and special fuel surcharges levied by shipping
        lines, not all of which we were able to pass on to our customers. In most
        cases,
        we were able to pass on the fuel surcharges to our customers, but at no mark
        up,
        with the effect that this reduced our gross profit margin. In addition, in
        2007,
        a decision was made to accept lower margin customers for sea-freight shipments
        from Asia to the US as a means of gaining market share in this important
        trade
        lane. Accepting this business negatively impacted the gross margins of MSA
        and
        WLG (USA).
 
 During
        the three months ended September 30, 2007, the Group’s operating expenses
        increased to about $6.13 million, as compared to approximately $3.30 million
        for
        the same period in 2006, for an increase of $2.83 million, or 86%. Of this
        increase, salaries and related personnel costs increased nearly 77% from
        $2.22
        million to $3.93 million. Other selling and administrative expenses doubled
        from
        $0.94 million to $1.88 million, which, together with the increase in personnel
        costs, resulted in a total increase in our operating expenses of almost $2.65
        million. Amortization and depreciation expense increased from $0.14 million
        to
        $0.32 million, or 129%. Almost all of this increase is for amortization expense,
        which increased as a result of the intangible assets booked in connection
        with
        the two acquisitions in 2006 and the one in 2007. Of the total increase in
        operating costs of $2.83 million, approximately $0.96 million is attributable
        to
        WLG (UK) and MSA, the two acquisitions completed in 2006. Included in the
        operating expense of WLG (USA) for the three months ended September 30, 2007,
        is
        an addition of $190,000 to its allowance for bad debts. WCS, acquired on
        July
        31, 2007, added $0.92 million of operating expenses for August and September
        2007. The remaining increase of about $0.95 million represents a
        quarter-to-quarter increase of 29% and is attributable to our existing business.
        See *discussion of Operating Expenses* below.
 
 After
        the
        provision for income taxes, the Group's net income for the three months ended
        September 30, 2007, is $201,000 and compares to net income of $403,000 for
        the
        same period in 2006. Our subsidiaries, WAE, WEHK, WE China and Asean reported
        a
        combined net profit of $707,000, representing an increase of $162,000, when
        compared to the net income of $545,000 from these entities for the same period
        in 2006. The improvement in their net incomes is mainly due to an increase
        in
        revenues and to a slower growth in overhead expenses. WLG (UK), and WCS posted
        net incomes of $31,000 and $131,000, for the three and two months ended
        September 30, 2007, respectively. In addition, WLG (USA) reported a net loss
        of
        $304,000 for the three months ended September 30, 2007, compared to a net
        income
        of $101,000 for the same period in 2006. WLG (USA)’s loss is attributable to
        several factors including an increase of about $190,000 in its provision
        for bad
        debts and a decrease in its gross margin percentage by about one-third. MSA
        reported a net loss of $66,800 for the third quarter of 2007. None of the
        operating results for MSA, WLG (UK) and WCS were included in the Group’s results
        of operations for the three months ended September 30, 2006.
 
 6
  **Segment
        Information**
 
 ***Air
        freight operations*** :
        Revenue
        from air freight operations for the three months ended September 30, 2007,
        increased to approximately $9.46 million from about $7.50 million, or
        approximately 26%, when compared to the same period in 2006. WE China, WLG
        (USA)
        and Asean all reported a growth in their air-freight business, adding revenues
        of $0.73 million, $0.31 million and $0.04 million, respectively. In general,
        air
        freight revenues increased because of a growth in shipments from China to
        the US
        and Australia. Hong Kong’s air-freight operations reported a decrease in
        revenues of about $0.16 million. WLG (UK) and MSA added revenues of $0.48
        million and $0.02 million, respectively, to the Group for the three months
        ended
        September 30, 2007. WCS, which we acquired in the third quarter of 2007,
        contributed revenues of $0.54 million for the months of August and September
        2007.
  Cost
        of
        sales for our air freight operations increased by 24% from about $6.47 million
        for the third quarter of 2006 to $8.05 million for the same period in 2007.
        In
        general, this increase in costs is due to higher volumes of air freight
        shipments for the third quarter of 2007, compared to 2006. The 24% increase
        in
        cost of sales for the three months ended September 30, 2007, is slightly
        less
        than the increase in air-freight revenues for the third quarter of 2007,
        which
        grew by 26%. Also, part of the increase in cost of sales is due to the acquired
        operations of WLG (UK), MSA and WCS, which added costs of $1.13
        million.
 
 The
        Group’s gross profit margin for this segment increased from 13.8% for the three
        months ended September 30, 2006, to 14.9% for the same period in 2007. In
        2007,
        we paid lower shipping rates to co-loaders for air-freight shipments in certain
        markets, compared to the rates we paid during the same period in 2006. Most
        of
        the increase in our gross profit margin is attributable to improvements in
        the
        gross profit margins of WAE and Asean.
 
 Total
        overhead attributable to our air freight operations increased by approximately
        $0.34 million, or 35%, from approximately $0.97 million for the three months
        ended September 30, 2006, to $1.31 million for the same period in 2007. Of
        this
        increase, approximately $0.10 million is attributable to the overhead costs
        of
        WLG (UK) and MSA, which were acquired in the last quarter of 2006. WCS, which
        joined the Group as of July 31, 2007, added $0.04 million of overhead expenses
        to our air freight operations. The overhead incurred by our other subsidiaries
        in this segment for the three months ended September 30, 2007, increased
        by
        approximately $0.20 million, compared to the same period in 2006.
  Net
        segment income for our air freight operations for the three months ended
        September 30, 2007, is approximately $106,000, which compares to net income
        of
        $64,000 for the same period in 2006, for an increase of $42,000. This growth
        is
        mainly due to improvements in Hong Kong's air freight operations, which reported
        a net income of $25,000 for this period, compared to a net loss of approximately
        $95,000 for the three months ended September 30, 2006. The combined air freight
        operations of WE China, ALI and WLG (USA) reported a combined net loss of
        approximately $35,000, which represented a decrease of about $95,000 in net
        income, when compared to the same period in 2006. The remaining companies
        reported an increase in income for this segment of about $17,000 for this
        period
        in 2007.
 
 ***Sea
        freight operations:*** Revenues
        from sea freight operations for the three months ended September 30, 2007,
        increased by about 167%, when compared to the same period in 2006, growing
        from
        approximately $11.94 million to $31.90 million. Much of this improvement
        is a
        result of the growth in our existing operations, which showed an increase
        in
        revenues of nearly 35% over last year. WLG (USA) and ALI, our US subsidiaries,
        contributed revenues of $1.39 million to the overall growth. Revenues from
        Asean’s sea freight business added $1.36 million in new revenues. In addition,
        our Hong Kong business accounted for $0.74 million of the increase in revenues,
        and WE China's operations contributed revenues of $0.67 million to the growth
        of
        our existing business. The two acquisitions completed in 2006 and the one
        added
        in 2007 accounted for the remaining increase in revenues of approximately
        $15.8
        million. Of this increase, the MSA Group, WLG (UK) and WCS contributed revenues
        of $4.68 million, $1.60 million and $9.52 million, respectively.
  Cost
        of
        sales for our sea freight operations increased 196% from $9.47 million for
        the
        three months ended September 30, 2006, to $28.04 million for the same period
        in
        2007. This increase, which is greater than our increase in revenues for this
        period, is attributable to a corresponding increase in sea freight revenues,
        increased ocean rates, fuel surcharges and to the acquired operations of
        WLG
        (UK), MSA and WCS, which increased the Group’s cost of sales by $14.87
        million ***.***
 
 The
        gross
        profit margin for this segment decreased from approximately 20.7% for the
        three
        months ended September 30, 2006, to 12.1% for the same period in 2007. The
        decrease is due to increasing freight rates and fuel surcharges charged by
        the
        shipping lines. Most of the increases in fuel surcharges, but not all of
        the
        increases in freight rates, were passed on to the customer. However, the
        effect
        of increased costs, which are often re-charged to customers at no mark-up,
        is to
        lower our gross margin. In addition, the gross profit margins attributable
        to
        MSA and WLG (USA), which recorded gross margins of (1.2%) and 8.5%,
        respectively, for the three months ended September 30, 2007, caused the overall
        gross margin of this segment to decline. The lower margins attributable to
        WLG
        (USA) and MSA are due, in part, to a decision to grow their import business
        from
        Asia to the US. Previously, WLG (USA) had focused more on its business for
        exports rather than on imports. In addition, WCS posted a gross profit margin
        of
        7.5% for the months of August and September 2007, which also contributed
        to the
        decrease in the gross profit margin for our sea freight business.
 
 7
  Total
        segment overhead attributable to our sea freight business increased by about
        $1.49 million, or 75%, from approximately $1.98 million for the three months
        ended September 30, 2006, to $3.47 million for the same period in 2007. The
        increase is partially attributable to the acquisitions of WLG (UK), MSA and
        WCS,
        which together, added overhead expenses of $0.94 million during the three
        months
        ended September 30, 2007. The remaining increase of $0.55 million, or about
        28%,
        in overhead expense is attributable to our existing subsidiaries and was
        incurred by them to cope with increases in their sea freight business, in
        which
        revenues grew by 35%, when compared to the same period last year.
  Sea
        freight net segment income is approximately $391,000 for the three months
        ended
        September 30, 2007, compared to net income of $497,000 for the same period
        in
        2006. WEHK and Asean’s net income for the three months ended September 30, 2007,
        improved by an aggregate of about $85,000 compared to the same period last
        year.
        In addition, WLG (UK) and WCS reported net incomes of $42,000 and $118,000
        for
        the three and two months ended September 30, 2007, respectively. These increases
        were offset by reductions in the net incomes of WE China and WLG (USA). For
        the
        three months ended September 30, 2007, WE China reported a net income of
        $45,000, compared to $64,000 for the same period in 2006. WLG (USA) posted
        a
        loss of $239,000 in this segment for the third quarter of 2007, against a
        net
        profit of $80,000 reported for the same period in 2006. ALI reported a
        $12,000 improvement in its net income due to its administrative operations
        being combined with those of WLG (USA). In addition, MSA reported a net loss
        of
        $25,000 for this period. MSA, WLG (UK) and WCS were not part of the Group
        for
        the three months ended September 30, 2006. For the three months ended September
        30, 2007, their combined net income for this segment totaled about
        $135,000.
 
 ***Customs
        brokerage services:*** Asean,
        MSA, WLG (UK) and WCS each have a division that provides customs brokerage
        services. For the three months ended September 30, 2007, revenue from customs
        brokerage services totaled approximately $13.55 million, compared with $6.84
        million for the same period in 2006, for an increase of about $6.71 million.
        The
        increase is mostly attributable to revenues of $2.19 million, $0.91 million
        and
        $3.37 million, respectively, from WLG (UK), MSA and WCS. None of the customs
        revenues from these three companies were included the Group’s results for the
        three months ended September 30, 2006. Asean's customs revenues grew by about
        $0.24 million in the third quarter of 2007, when compared to the same period
        in
        2006, for an increase of about 4%. Direct and administrative costs for this
        business segment totaled about $13.42 million, producing a net income of
        $135,000 for the three months ended September 30, 2007. This compares to
        a net
        income of $56,000 for the third quarter of 2006, which only included Asean's
        customs brokerage business. WLG (UK) contributed net income of $20,000, which
        offset a net loss of $3,000 reported by MSA. WCS, which we acquired in July
        2007, contributed net income of $58,000 for the months of August and September
        2007.
  **Other
        Operating Expenses**
 
 *Salaries
        and allowances*
  Salaries
        and related allowances increased by $1.71 million, from $2.22 million for
        the
        three months ended September 30, 2006, to $3.93 million for the same period
        in
        2007, or 77%. This increase is attributable to several factors, including
        normal
        increments in employee salaries given at the beginning of 2007, increases
        in
        operational staff and management personnel during the period, and the
        acquisitions of MSA and WLG (UK) in the last quarter of 2006 and WCS in the
        third quarter of 2007. Taken together, WLG (UK), MSA and WCS increased our
        employee count by 91 and added personnel costs of $1.19 million in the third
        quarter of 2007. The remaining growth in salaries of $0.52 million is
        attributable to salary increases in our existing operations, compensation
        expense for stock options and to an increase in headcount of 8 personnel.
        As of
        September 30, 2007, the Group's employee headcount was 322, compared to 223
        employees at September 30, 2006.
  *Rent*
  Rent
        expense for our facilities increased by 189% from $145,000 for the three
        months
        ended September 30, 2006, to $419,000 for the same period in 2007, for an
        overall increase of $274,000. Asean added rent expense of $110,000, mainly
        attributable to an increase in its office rent and to the rental of a new
        warehouse facility in Melbourne, Australia. In addition, WLG (UK) and MSA,
        the
        two acquisitions completed in the fourth quarter of 2006, added rent expense
        to
        the Group of $94,000 and $13,000, respectively. WCS’s rent expense for its four
        offices accounts for $51,000 of the increase in rent. WCS was not part of
        the
        Group in 2006.
 
 *Other
        selling and administrative expenses*
 
 Other
        SG&A expense for the three months ended September 30, 2007, totaled about
        $1.46 million compared to $0.77 million for the same period in 2006, for
        an
        increase of $0.69 million. Just over one-half of the increase is attributable
        to
        the acquisitions of WLG (UK), MSA and WCS, which added other SG&A costs to
        the Group of $128,000, $47,000 and $193,000, respectively, for the three
        months
        ended September 30, 2007. In addition, WLG (USA) recorded a provision for
        bad
        debts of approximately $190,000 during the period. The remaining increase
        of
        approximately $132,000 is to cope with the growth in our existing business.
 
 8
  *Depreciation
        and Amortization*
  Depreciation
        expense for property, plant and equipment increased from $58,000 for the
        three
        months ended September 30, 2006, to $109,000 for the same period in 2007.
        This
        increase of $51,000 is partially due to the aggregate depreciation expense
        of
        $31,000 for WLG (UK), MSA and WCS. The remaining increase of $20,000 is
        attributable to the depreciation expense for additions of office furniture,
        computer equipment and leasehold improvements.
 
 Amortization
        expense is attributable to the customer lists acquired in the acquisitions
        of
        WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with
        the
        acquisition of WLG (USA), we recorded a customer list asset of $512,000,
        which
        is being amortized on a straight-line basis over 5 years. Asean's customer
        list
        was valued at $1.56 million and is being amortized on a straight-line basis
        over
        8 years. A five-year life and a value of $164,000 were assigned to ALI's
        customer list, which, due to an impairment write-down in 2006, will be fully
        amortized by the end of 2007. WLG (UK)'s customer list was valued at $833,268
        and is being amortized over five years. A cost of $1.55 million was assigned
        to
        the customer lists of the MSA Group, which are being amortized over a 10-year
        life. WCS’s customer list was valued at $2.84 million and is being amortized
        over nine years. During the three months ended September 30, 2007, amortization
        expense totaled $215,166. This sum is attributable to WLG (USA), Asean, ALI,
        WLG
        (UK), the MSA Group and WCS in the amounts of $25,614, $48,832, $7,796, $41,663,
        $38,753 and $52,508, respectively. Amortization expense in 2006 was $82,653
        and
        related to WLG (USA), Asean and ALI in the amounts of $25,614, $48,832 and
        $8,207, respectively. The MSA Group and the UK business of WLG (UK) were
        acquired in the fourth quarter of 2006, and no amortization expense was recorded
        for the customer lists of these companies until the end of 2006. WCS was
        not
        part of the Group until July 31, 2007 and, as such, no amortization
        expense for WCS’s customer list was recorded in 2006.
 
 *Interest
        Expense*
  Interest
        expense increased from $91,000 for the three months ended September 30, 2006,
        to
        $199,000 for the same period in 2007. WLG (USA) added interest expense of
        approximately $23,000 in the third quarter of 2007, which results from borrowing
        more under its line of credit and from a five-year, $1.0 million term loan
        incurred to acquire the MSA Group. WCS, the acquisition completed on July
        31,
        2007, recorded interest expense of $59,000 for the trade facilities granted
        by
        its bank. The Group also incurred additional interest expense of $30,000
        for two
        director loans each of $0.75 million. The directors’ loans carry an interest at
        12% per annum.
  *Provision
        for Income Taxes*
 
 The
        provision for income taxes decreased from $225,000 for the three months ended
        September 30, 2006, to $217,000 for the same period in 2007. Income tax of
        $217,000 was provided on the combined net income of $924,275 attributable
        to our
        operations in Hong Kong, China and Australia, for an effective tax rate of
        23%.
        The US operations of ALI, WLG (USA) and WCS are included in a US consolidated
        income tax return with the Group's parent company, and, together, these
        companies reported a consolidated loss of $463,000. As such, no provision
        for US
        federal or state income taxes is required for these companies for the three
        months ended September 30, 2007, and no income tax benefit was taken for
        their
        losses. After consideration of all losses and amortization expense, for which
        no
        income tax benefit is provided, the effective tax rate on the Group's income
        of
        $418,000 is approximately 52% for the three months ended September 30,
        2007.
 
 NINE
        MONTHS ENDED SEPTEMBER 30, 2007, COMPARED WITH NINE MONTHS ENDED SEPTEMBER
        30,
        2006.
 
 Total
        revenue for the nine months ended September 30, 2007, increased by about
        $49.20
        million, or 74%, compared with total revenue for the nine months ended September
        30, 2006, growing from approximately $66.90 million to $116.10 million. Of
        this
        increase, revenues from our existing business grew by $14.05 million, for
        an
        increase of 21%. The two companies acquired in the fourth quarter of 2006
        added
        $21.72 million, and WCS, which we acquired in the third quarter of 2007,
        added
        revenues of $13.43 million.
 
 From
        our
        existing operations, Asean contributed revenues of approximately $4.64 million,
        or about 33% of the increase in our 2007 revenues. Our Hong Kong operations
        added about $2.24 million in new revenues, or 16% of the increase. Revenues
        from
        our operations in China grew by $2.63 million over the same period last year,
        adding approximately 19% to the total increase. The US operations of WLG
        (USA)
        and ALI added revenues of approximately $4.54 million, or 32% of the overall
        increase. Our two acquisitions in 2006 generated revenues of $21.72 million
        for
        the first nine months of 2007. The UK acquisition, which was completed in
        September 2006, added revenues of $10.63 million, and the MSA Group, which
        we
        acquired on December 1, 2006, contributed revenues of $11.09 million. WCS,
        the
        acquisition we completed on July 31, 2007, reported revenues of $13.43 million
        for the months of August and September 2007.
 
 9
  Gross
        profit rose from $10.59 million for the nine months ended September 30, 2006,
        to
        $16.49 million for the same period in 2007, for an increase of $5.90 million,
        or
        56%. Of this increase, our Hong Kong and China operations contributed $0.85
        million. Our existing US operations, WLG (USA) and ALI, added $0.30 million
        and
        Asean added $1.01 million. WLG (UK) and MSA, the acquisitions completed in
        2006,
        added $1.98 million and $0.65 million in gross profit, respectively. The
        remaining increase in gross profit of $1.11 million is from WCS, and is
        attributable to the two months ended September 30, 2007.
 
 The
        Group's overall gross margin decreased from 15.8% for the nine months ended
        September 30, 2006, to 14.2% for the same period in 2007. This reduction
        in
        gross margin is due, in part, to higher sea freight rates and fuel surcharges
        levied by the various shipping lines. In most cases, we were able to pass
        on the
        fuel surcharges to our customers, but at no mark up, with the effect that
        this
        reduced our gross profit margin. We were not able to pass on all of the rate
        increases to our customers, and, to the extent that the higher rates could
        not
        be billed, this caused our gross margin to decline in the first nine months
        of
        2007, compared to the same period last year. In addition, in 2007, a strategic
        decision was made by MSA and WLG (USA) to accept lower margin customers for
        sea-freight shipments from Asia to the US. This decision was taken as a means
        of
        gaining market share in this important trade lane. Accepting this business
        did
        negatively impact the gross margins of MSA and WLG (USA) because each company
        accepted new business at margins lower than they normally earn.
  During
        the nine months ended September 30, 2007, total operating expenses increased
        to
        about $15.22 million, as compared to approximately $9.96 million for the
        same
        period in 2006, for an increase of $5.26 million, or 53%. Of the total increase
        in operating costs, approximately $3.73 million is attributable to WLG (UK)
        and
        MSA, which were acquired in the fourth quarter of 2006, and to WCS, which
        was
        acquired in July 2007. The remaining increase of about $1.53 million in
        operating expenses is attributable to our existing operations, and represents
        a
        15% increase in these expenses over the same period last year. This compares
        to
        a sales increase of 21% reported by our existing businesses for the first
        nine
        months of 2007 over this same period in 2006. For the nine months ended
        September 30, 2007, salaries and related personnel costs increased nearly
        57%
        from $6.30 million to $9.90 million. Other selling and administrative costs
        grew
        by approximately 40% from $3.23 million to $4.51 million, which, when combined
        with the increase in personnel costs, results in a total increase of almost
        $4.89 million. Amortization and depreciation expense increased from $0.43
        million to $0.81 million, or 88%. Almost all of this increase is for
        amortization expense, which increased as a result of recording certain
        intangible assets in connection with the two acquisitions in 2006 and one
        in
        2007. See *discussion of Operating Expenses* below.
 
 After
        the
        provision for income taxes, the Group's net income for the nine months ended
        September 30, 2007, is $561,000, compared to a net income of $151,000 for
        the
        same period in 2006. WAE, WEHK, and Asean reported a combined net income
        of
        $1,491,000, representing an increase of $905,000, compared with net income
        of
        $586,000 for these entities for the same period in 2006. The improvement
        in
        their net incomes is mainly due to an increase in revenues matched by a slower
        growth in their overhead expenses. WLG (USA), ALI, MSA and WLG (UK) incurred
        losses of $137,000, $35,000, $140,000 and $18,000, respectively, for the
        nine
        months ended September 30, 2007. These losses were offset by the growth in
        net
        income from our other operating subsidiaries. In addition, WCS, the acquisition
        we completed on July 31, 2007, reported a net income of $131,000 for the
        months
        of August and September 2007.
  **Segment
        Information**
 
 ***Air
        freight operations*** :
        Revenue
        from our air freight operations for the nine months ended September 30, 2007,
        increased to about $24.21 million from approximately $20.83 million, or about
        16%, when compared to the same period in 2006. Asean, WLG (USA) and WE China
        each reported increases in their air freight revenue, contributing $0.38
        million, $0.06 million and $1.13 million, respectively, to the overall growth
        in
        revenues. Hong Kong’s air freight operations reported a decrease in air freight
        revenues of $0.14 million. For the first nine months of 2007, MSA and WLG
        (UK)
        added revenues to the Group of $0.06 million and $1.35 million, respectively.
        WCS reported revenues of $0.54 million for the two months ended September
        30,
        2007.
 
 Cost
        of
        sales for our air freight operations increased by approximately 14%, from
        about
        $17.69 million for the nine months ended September 30, 2006, to $20.13 million
        for the same period in 2007. This increase is due to higher volumes of freight
        shipments arranged by us. The 14% increase in cost of sales is less than
        the 16%
        increase in revenues reported for this segment for the nine months ended
        September 30, 2007. In addition, part of the increase is due to the aggregate
        cost of sales of $1.98 million for the operations of WLG (UK) and MSA, which
        we
        acquired in the last quarter of 2006 and to WCS, which became a part of the
        Group on July 31, 2007.
 
 The
        Group’s gross profit margin for its air-freight business increased from 15.1%
        for the nine months ended September 30, 2006, to 16.8% for the same period
        in
        2007. In general, the rates we paid to co-loaders for shipments in the first
        nine months of 2007 were lower than the rates we paid for shipments in 2006,
        and
        this helped to improve our margins. This increase in our gross profit margin
        is
        primarily attributable to increases in the gross profit margins of WLG (UK)
        and
        WAE, which reported gross margins of 18.1% and 13.0%, respectively for the
        nine
        months ended September 30, 2007. WAE’s gross profit margin increased from 8.1%
        for the nine months ended September 30, 2006, to 13.0% for the same period
        in
        2007.
 
 10
  Segment
        overhead for our air freight operations increased by approximately $0.63
        million, or 22%, from about $2.97 million for the nine months ended September
        30, 2006, to $3.60 million, for the same period in 2007. Of this increase,
        approximately $0.30 million is attributable to the overhead expenses of WLG
        (UK)
        and MSA, which were added to the Group near the end of 2006, and to $0.04
        million of overhead expenses from WCS, which become part of the Group starting
        from July 31, 2007. Segment overhead incurred by our other subsidiaries for
        the
        nine months ended September 30, 2007, increased by approximately $0.29 million,
        compared to the same period in 2006, for an increase of about 9.7%.
  Net
        segment income for our air freight operations is approximately $483,000 for
        the
        nine months ended September 30, 2007, compared to net income of $173,000
        for the
        same period in 2006, for an increase of $310,000. Most of this growth is
        attributable to Hong Kong's air freight operations, which reported net income
        of
        approximately $265,000 for the first nine months of 2007, compared with a
        net
        loss of approximately $119,000 for the same period in 2006, for an overall
        increase of $384,000. This increase is due to an improvement in gross margin
        due
        to obtaining lower shipping rates from air carriers. In addition, Asean reported
        an increase of approximately $56,000 in net income for the nine months ended
        Sept 30, 2007. The increases in net income posted by Hong Kong and Asean
        offset
        decreases in income reported by WE China and WLG (USA) of about $76,000 and
        $55,000, respectively. WCS, which we acquired in July 2007, reported a net
        income of $7,000 for the two months ended September 30, 2007.
  ***Sea
        freight operations:*** Revenues
        from our sea freight operations for the nine months ended September 30, 2007,
        rose by about 121%, when compared to the same period in 2006, growing from
        approximately $28.05 million to $62.09 million, for an increase of $34.04
        million. Much of this improvement is a result of the growth in our existing
        operations, which generated an increase in revenues of nearly 41% over the
        same
        period last year. Our Hong Kong operations accounted for $2.38 million of
        the
        increase, and revenues generated by WE China accounted for $1.50 million
        of the
        growth in this segment. WLG (USA) and ALI, our US subsidiaries, added revenues
        accounting for $4.48 million of the growth. In addition, Asean's sea freight
        business contributed new revenues of $3.22 million to this segment. The two
        acquisitions completed in 2006 accounted for about $12.94 million in revenues.
        Of this increase, the MSA Group contributed revenues of $9.09 million, and
        WLG
        (UK) added revenues of about $3.85 million. WCS, acquired in the third quarter
        of 2007, contributed revenues of approximately $9.52 million for the two
        months
        ended September 30, 2007.
 
 Cost
        of
        sales for our sea freight operations increased 141% from $21.79 million for
        the
        nine months ended September 30, 2006, to $52.43 million for the same period
        in
        2007. This increase is mainly attributable to a corresponding increase in
        sea
        freight revenues, but also to higher shippings rates, fuel surcharges and
        to the
        acquired businesses of WLG (UK), MSA and WCS, which increased the Group’s cost
        of sales by $20.65 million for the nine months ended September 30, 2007.
 
 The
        Group’s gross profit margin decreased from approximately 22.3% for the nine
        months ended September 30, 2006, to 15.6% for the same period in 2007. The
        decrease is due to increasing freight rates and fuel surcharges levied by
        the
        shipping lines. We were able to pass on most of the fuel surcharges, but
        not all
        of the increases in freight rates, to our customers. Even in cases where
        we did
        bill our customers for the fuel surcharges, we still suffered a decline in
        our
        gross margins because the fuel surcharges are not marked up to yield any
        gross
        margin. A reduction in the gross profit margins attributable to MSA and WLG
        (USA), which recorded gross margins of 3.6% and 12.3%, respectively, for
        the
        nine months ended September 30, 2007, caused a decline in our overall gross
        profit margin. The lower gross profit margins attributable to WLG (USA) and
        MSA
        are due to a decision to grow their import business from Asia to the US as
        a
        means of gaining market share. Previously WLG (USA) had focused more on its
        business from exports rather than on imports. In addition, WCS, acquired
        in the
        third quarter of 2007, posted a gross profit margin of only 7.5% for August
        and
        September of 2007, and this served to reduce the Group’s overall gross margin.
 
 Total
        segment overhead attributable to our sea freight business increased by $3.01
        million, or 54%, from approximately $5.61 million for the nine months ended
        September 30, 2006, to $8.62 million for the same period in 2007. In part,
        this
        increase is attributable to the acquisitions of WLG (UK), MSA, which together,
        added overhead expenses of $1.39 million to the Group for the nine months ended
        September 30, 2007, and to WCS which reported overhead expenses of $0.60
        million, following its acquisition on July 31, 2007. The remaining increase
        of
        $1.02 million in overhead expenses, which is an increase of about 18% compared
        to last year, is attributable to our other operating subsidiaries and was
        incurred by them to cope with increases in their business.
 
 11
  Net
        segment income for our sea freight operations is approximately $1,044,000
        for
        the nine months ended September 30, 2007, which compares to net income of
        $648,000 for the same period in 2006. The improvement in net income is mainly
        attributable to increases in the net incomes of WEHK and Asean which reported
        increases of $254,000 and $141,000, respectively. A further improvement of
        about
        $138,000 in this segment was realized in the first nine months of 2007 compared
        to the same period in 2006 resulting from WLG (USA) taking over most of ALI’s
        administrative operations at the end of 2006. Against theses improvements,
        WE
        China's net income declined by $73,000, which is attributable to higher carrier
        costs, the inability to pass all of these costs on to our customers and to
        currency exchange losses caused by a strengthening of the Chinese Yuan against
        the US dollar. In addition, WLG (USA) reported a net loss of $105,000 for
        this
        period, as compared to a net income of $125,000 for the nine months ended
        September 30, 2007, mainly attributable to lower gross profit margins on
        imports
        and to an increase of about $190,000 in its provision for bad debts. WLG
        (UK)
        and MSA, which were not part of the Group during the first nine months of
        2006,
        reported a net income of $60,000 and a net loss of $12,000, respectively.
        WCS,
        acquired in the third quarter of 2007, reported a net income of $118,000
        for the
        two months ended September 30, 2007.
 
 ***Customs
        brokerage services:*** Asean,
        MSA, WLG (UK) and WCS's operations each include a division that provides
        customs
        brokerage services. For the nine months ended September 30, 2007, revenue
        from
        customs brokerage services totaled approximately $29.80 million, compared
        with
        $18.02 million for the same period in 2006, for an increase of about $11.78
        million. Most of this increase is attributable to revenues of $5.42 million
        and
        $1.94 million, respectively, from WLG (UK) and MSA, and to WCS’s customs
        revenues of $3.37 million for August and September 2007. Asean's customs
        revenues increased by about $1.05 million in the first nine months of 2007,
        compared to the same period in 2006, or about 6%. Direct and administrative
        costs for this segment totaled about $29.63 million, producing net income
        of
        $170,000 for the nine months ended September 30, 2007, compared to a net
        income
        of $1,000 for the same period in 2006. The results for 2006 included only
        Asean's customs brokerage business. For the nine months ended September 30,
        2007, WLG (UK) reported a net income of $30,000, and MSA reported a net loss
        of
        $11,000. WCS reported net income of $58,000 for the two months of August
        and
        September 2007.
  **Other
        Operating Expenses**
 
 *Salaries
        and allowances*
  Salaries
        and related allowances increased by $3.61 million, or 57%, from $6.30 million
        for the nine months ended September 30, 2006, to $9.91 million for the same
        period in 2007. This increase is attributable to several factors, including
        normal increments in employee salaries given at the beginning of 2007, additions
        of operational staff and management personnel during the period, the
        acquisitions of WLG (UK) and MSA in the last quarter of 2006, and to WCS,
        which
        we acquired in the third quarter of 2007. Taken together, the three acquisitions
        increased our employee count by 91 and added personnel costs of $2.31 million
        for the first nine months of 2007. The remaining increase of $1.30 million
        in
        salaries is attributable to salary increases in our existing operations,
        compensation expense for stock options and to an increase in headcount of
        8
        personnel. As of September 30, 2007, the Group's employee headcount was 322,
        compared to 223 employees at September 30, 2006.
  *Rent*
  Rent
        expense for our facilities increased by 102% from $516,000 for the nine months
        ended September 30, 2006, to $1,040,000 for the same period in 2007, for
        an
        overall increase of $524,000. The operations of WLG (UK), MSA and WCS added
        rent
        expense to the Group of $292,000, $37,000 and $51,000, respectively. These
        companies were not part of the Group in the first nine months of 2007. In
        addition, Asean added rent expense of $164,000, mainly attributable to an
        increase in its office rent and to the rental in May 2007 of a new warehouse
        facility in Melbourne, Australia.
 
 *Other
        selling and administrative expenses*
 
 Other
        SG&A expense for the nine months ended September 30, 2007, totaled about
        $3.47 million compared to $2.72 million for the same period in 2006, for
        an
        increase of about $0.75 million. The increase is primarily attributable to
        the
        acquisitions of WLG (UK), MSA and WCS, which added other SG&A expenses of
        $386,000, $104,000 and $193,000 to the Group. ALI and WLG (USA) merged their
        administrative operations at the end of 2006, which resulted in a savings
        of
        $121,000 in Other SG&A expenses for the first nine months of 2007, compared
        to the same period in 2006. During the first nine months of 2007, WLG (USA)
        increased its allowance for bad debts by about $190,000. Overall, the Other
        SG&A costs of ALI and WLG (USA) have increased by $136,000 when compared to
        same period last year. As a result of cost control measures and the reduction
        of
        consulting fees, there has been an overall decrease of $69,000 in the Other
        SG&A expenses of the remaining subsidiaries.
  *Depreciation
        and Amortization*
  Depreciation
        expense for property, plant and equipment increased to $270,000 for the nine
        months ended September 30, 2007, from $177,000 for the same period in 2006.
        This
        increase of $93,000 is partially due to the aggregate depreciation expense
        of
        $54,000 for WLG (UK), MSA and WCS. The remaining increase of $39,000 is
        attributable to the depreciation expense for additions of office and computer
        equipment and leasehold improvements.
 
 12
  Amortization
        expense is attributable to the customer lists acquired in the acquisitions
        of
        WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with
        the
        acquisition of WLG (USA), we recorded a customer list asset of $512,000,
        which
        is being amortized on a straight-line basis over 5 years. Asean's customer
        list
        was valued at $1.56 million and is being amortized on a straight-line basis
        over
        8 years. A five-year life and a value of $164,000 were assigned to ALI's
        customer list, which, due to an impairment write-down in 2006, will be fully
        amortized by the end of 2007. WLG (UK)'s customer list was valued at $833,268
        and is being amortized over five years. A cost of $1.55 million was assigned
        to
        the customer lists of the MSA Group, which are being amortized over a 10-year
        life. WCS’s customer list was valued at $2.84 million and is being amortized
        over nine years. During the nine months ended September 30, 2007, amortization
        expense totaled $540,484. This sum is attributable to WLG (USA), Asean, ALI,
        WLG
        (UK), the MSA Group and WCS in the amounts of $76,842, $146,496, $23,389,
        $124,990, $116,259 and $52,508, respectively. Amortization expense in 2006
        was
        $247,958 and related to WLG (USA), Asean and ALI in the amounts of $76,842,
        $146,495 and $24,621, respectively. The MSA Group and the UK business of
        WLG
        (UK) were acquired in the fourth quarter of 2006, and no amortization expense
        was recorded for the customer lists of these two companies until the end
        of 2006. WCS was not part of the Group until July 31, 2007 and, as such,
        there was no amortization expense recognized in 2006 for WCS’s customer
        list.
  *Interest
        Expense*
  Interest
        expense increased from $273,000 for the nine months ended September 30, 2006,
        to
        $404,000 for the same period in 2007. This increase is partly attributable
        to
        additional interest expense of approximately $69,000 for WLG (USA), which
        results from an increase in borrowings under its revolving line of credit
        and from a five-year, $1.0 million term loan incurred to acquire the MSA
        Group. WCS, which we acquired on July 31, 2007, recorded interest expense
        of
        $59,000 for borrowings under its bank facilities. In addition, the Group
        incurred additional interest expense of $30,000 for two director loans each
        of
        $0.75 million, and which carry an interest rate of 12% per annum. Asean’s
        interest expense decreased by $20,000, mainly as a result of a reduction
        in the
        rate of interest charged for its receivables loan facility.
  *Provision
        for Income Taxes*
 
 The
        provision for income taxes increased from $313,000 for the nine months ended
        September 30, 2006, to $427,000 for the same period in 2007, mainly attributable
        to income reported by our operations in Hong Kong and Australia. Income tax
        of
        $405,000 was provided on the combined net income of $1,982,000 attributable
        to
        our Hong Kong and Australian operations. The income tax provision represents
        an
        effective tax rate of 20% and includes the use of an operating loss carry
        forward in Hong Kong. The US operations of ALI, WLG (USA) and WCS are included
        in a US consolidated income tax return with the Group's parent company, and,
        together, these companies reported a consolidated loss of $754,000. As such,
        no
        provision for US federal or state income taxes is required for these companies
        for the nine months ended September 30, 2007, but does include an income
        tax
        benefit of $22,000 taken for their losses. After consideration of all losses
        and
        amortization expense, for which no income tax benefit is provided, the effective
        tax rate on the Group's income of $988,000 is approximately 43% for the nine
        months ended September 30, 2007.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
  For
        the
        nine months ended September 30, 2007, our operations provided net cash of
        approximately $1.69 million, compared with cash of $0.23 million used by
        our
        operations for the same period in 2006. In 2007, cash was provided by the
        following sources: decrease in deposits and prepayments of $109,000; increase
        in
        trade payables of $853,000; increase in accrued charges of $699,000;
        amortization and depreciation expense of $810,000; provision for bad debts
        of
        $229,000; net income of $561,000; increase in taxes payable of $132,000 and
        other non-cash items of $40,000. Major components that used cash for operations
        in 2007 included: increase in trade receivables of $1.62 million; increase
        in
        due/from related parties of $18,000 and the repayment of $112,000 to a
        director.
  Net
        cash
        used by financing activities totaled about $1.62 million for the nine months
        ended September 30, 2007, compared to net cash of about $8,000 provided by
        financing activities during the first nine months of 2006. Cash provided
        by
        financing activities in 2006 included an increase in bank overdraft facilities
        of $338,000 and an advance from a director of $259,000. Cash used by financing
        activities in 2006 consisted primarily of the repayment of bank debt of
        $356,000, a repayment of capital lease obligations of $75,000, the payment
        of
        dividends on preferred stock of $68,000 and an increase in restricted cash
        of
        $90,000. Cash provided by financing activities for the nine months ended
        September 30, 2007, included an increase in bank overdraft facilities of
        $305,000, loans totaling $1.5 million from directors and a decrease of $8,000
        in
        restricted cash and pledged deposits for bank guarantees to support our
        airfreight business. Cash used by financing activities in 2007 consists of
        the
        net repayment of bank debts of $28,000 and the repayment of capital lease
        obligations totaling $101,000. In addition, for the nine months ended September
        30, 2007, we paid dividends of $68,000 on our preferred stock.
 
 13
  Effective
        July 31, 2007, the Group acquired all of the membership interests of WCS
        in
        consideration for cash of $2.6 million and the issuance of 4,710,014 shares
        of
        its common stock. In addition to the consideration paid at closing, the Group
        is
        obligated to issue an additional 1,962,506 shares of its common stock in
        increments to the sellers of WCS in the event that WCS achieves certain levels
        of profit during the 24 months period following the closing date of the
        transaction. Further, the sellers of WCS shall also be entitled to receive
        up to
        500,000 shares of WLG’s common stock if any of WLG’s Series A convertible
        redeemable preferred stock, which was outstanding as of July 31, 2007, is
        converted to WLG common stock. In July 2007, two directors loaned $1.5 million
        to the Group, which the Group used, in part, to complete the purchase of
        WCS.
        Each director loan is for $0.75 million and carries an interest rate of 12%
        per
        annum.
  As
        of
        September 30, 2007, certain banks in Hong Kong had issued bank guarantees
        of
        $590,000 on behalf of WAE to several airlines. By providing these guarantees
        to
        the airlines, the airlines, in turn, grant credit terms to WAE. In general,
        payment for air freight shipments must be made to the airlines prior to the
        time
        we receive payments from our customers. These guarantees are secured by cash
        of
        approximately $604,000 deposited in restricted bank accounts. We have also
        given
        a bank guarantee of about $122,000 in favor of the owner of the office premises
        occupied by Asean in Australia. In addition, a UK bank has provided a bank
        guarantee of $409,000 for the benefit of WLG UK to the Customs and Excise
        Department in the UK. In return for this guarantee, the UK Customs and Excise
        Department grants credit terms to WLG UK.
  In
        October 2004, WEHK and WAE (the “Hong Kong Subsidiaries”) obtained a bank loan
        of $449,000, which they used to pay income taxes and for general working
        capital
        needs. This loan was repayable in 24 equal monthly installments, with interest
        at the best rate charged by the lending bank, less one percent. The interest
        rate on this loan was 7% per annum and the loan was repaid in full by October
        2006. In October 2005, the Hong Kong Subsidiaries obtained an additional
        loan of
        approximately $129,000, and used the loan proceeds to pay income taxes and
        for
        general working capital purposes. This loan was repaid by November, 2006.
        During
        2006, the Hong Kong Subsidiaries borrowed approximately $114,000 to pay income
        taxes and for use as working capital. At September 30, 2007, the principal
        amount of this loan was approximately $10,000 and carried an interest rate
        of
        7.0%, which is indexed to the bank's prime rate.
  As
        of
        September 30, 2007, WLG (USA) owed $715,000 under a $1.0 million revolving
        line
        of credit and $849,997 on a five-year, $1.0 million term loan pursuant to
        loan
        facilities granted to it by a bank in the last quarter of 2006. The revolving
        line of credit, which expired in October 2007, was renewed in November 2007.
        The
        term loan matures in November 2011. In addition, during the third quarter
        of
        2007, WLG (USA) was granted an additional term loan of $250,000 from the
        same
        bank, which will expire in November 2007. All loans carry interest at LIBOR
        plus
        2.75%, which at September 30, 2007, was 8.4%. The $1.0 million term loan
        requires monthly principal payments of $16,667, plus accrued interest. Principal
        payments of $200,000 are due in 2007 and in each of the following four years
        until maturity at November 31, 2011. Total borrowings under the revolving
        line
        of credit and the term loan are limited to 75% of the eligible trade
        receivables, as defined in the loan agreement, of WLG (USA) and the MSA Group.
        All borrowings under these loan facilities are secured by a first position
        blanket lien on substantially all of the assets of WLG (USA) and the MSA
        Group
        and a guarantee provided by the Group's parent company. The loan agreement
        calls
        for the maintenance of certain financial covenant ratios, including minimum
        cash
        flow coverage and maximum funded debt to earnings before taxes, interest
        and
        non-cash items, each of which is to be applied on a rolling basis at the
        end of
        each calendar quarter. In addition, WLG (USA) may not pay dividends without
        approval from its bank. As of September 30, 2007, WLG (USA) was not in
        compliance with the financial covenants set out in its loan agreement. With
        respect to the financial covenant violations, the bank has agreed to reset
        the financial covenants and renewed the facility in November
        2007.
  Asean
        has
        a receivables loan facility in the face amount of approximately $3.55 million,
        which is secured by, and based on, 100% and 80% of its accounts receivable,
        respectively. It also has an overdraft facility with a limit of about $599,000.
        At September 30, 2007, Asean's bank debt under its receivables and overdraft
        facilities was $2.50 million and $599,000, respectively, with interest rates
        of
        approximately 10.30% for the receivables line and 9.40% for the overdraft
        facility. Asean's bank, in addition to having a charge over all of its accounts
        receivable, holds a first registered mortgage over all of Asean's assets.
        Asean’s overdraft facilities are also guaranteed by the Group’s parent
        company.
 
 WCS
        has a
        receivables loan facility from a bank in the face amount of $7.00 million.
        This
        facility, which is secured in part, by all of WCS’s trade receivables, allows
        borrowings equal to 85% of eligible receivables, as defined in the loan
        agreement. As of September 30, 2007, WCS owed approximately $3.77 million
        under
        this facility. This loan facility is also secured by all of the assets of
        WCS
        and by a guarantee from the Group’s parent company. The facilities will expire
        on May 31, 2008.
 
 14
  We
        continue to execute our business plan which calls for us to make strategic
        acquisitions to supplement our internal growth. In 2005, we completed three
        acquisitions of freight forwarding and logistics companies, one of which
        had a
        customs brokerage business. We followed this in 2006 by acquiring two freight
        forwarding and customs brokerage companies. As set forth in our Form 8K filed
        on
        August 3, 2007, we announced the acquisition of WCS, a freight forwarding
        and
        customs brokerage company, which we closed on July 31, 2007. We expect to
        make
        additional strategic acquisitions as a means to expand our ability to provide
        a
        full range of logistics services on a global scale. To the extent that we
        are
        unable to use our common stock in the acquisition of other companies, we
        will
        likely need to raise additional capital if we are to be successful in executing
        our business plan. At this point, we are not certain of the amount of capital
        we
        may need because the amount will vary with the size, type and nature of
        consideration required for the prospective acquisitions. However, there can
        be
        no assurance that we will be successful in identifying suitable acquisition
        targets, and, if we are, there can be no certainty that we will be able to
        complete the acquisitions. Nor can there be any assurance that we would be
        successful in our efforts to raise additional capital, either in the form
        of
        long-tem debt and/or equity.
  Our
        approximate contractual cash obligations as of September 30, 2007, are set
        forth
        in the table below, which includes all equipment lease and office and warehouse
        rental obligations, as well as payments due under our cargo space commitments.
        These cash obligations are expected to equal approximately $284,000 per month
        over the following twelve months.
  Payments
                    Due by Period (in thousands)Contractual
                    Obligations
                
                Total
                
                Less than
                  1year
                
                1-3 years
                
                4-5 years
                
                After 5yearsFacilities
                    rental and equipment lease obligations
                
                $
                3,321
                
                $
                1,339
                
                $
                1,860
                
                $
                122
                
                $
                —Cargo
                    space commitments
                
                $
                2,070
                
                $
                2,070
                
                
                —
                
                
                —
                
                
                —Total
                    contractual cash obligations
                
                $
                5,391
                
                $
                3,409
                
                $
                1,860
                
                $
                122
                
                $
                —
 ****
 During
        the nine months ended September 30, 2007 and 2006, we have not engaged in
        any:
 
 ·
              material
                  off-balance sheet activities, including the use of structured finance
                  or
                  special purpose entities;
  ·
              trading
                  activities in non-exchange traded
                  contracts.
  15
  **Item
        3 Quantitative and Qualitative Disclosures About Market
        Risk**
  The
        Company is exposed to market risk in the ordinary course of its business.
        These
        risks are primarily related to foreign exchange rate risk arising from making
        sales and incurring expenses in currencies other than the US dollar, incurring
        debt denominated in foreign currencies and to changes in short-term interest
        rates. The potential impact on the Company for these risks is presented
        below:
  **FOREIGN
        EXCHANGE RISK**
  We
        conduct business in many different countries and in many currencies. As such,
        we
        routinely issue invoices for our services in a currency different from the
        currency used to pay expenses related to the services. Billing in one currency
        and incurring expenses in a different currency results in a foreign exchange
        rate risk to us. In these cases, the market risk associated with doing business
        in foreign currencies may be quantified by a foreign exchange rate sensitivity
        analysis that estimates the impact of a hypothetical change in the value
        of our
        functional currency, the US Dollar (“USD”), relative to the other currencies in
        which we transact business. Our subsidiaries transact some of their business
        in
        the following foreign currencies: Hong Kong Dollars (“HKD”); British Pounds
        (“GBP”); Australian Dollars (“AUD”); and the Chinese Yuan (“CNY”). Two of our
        major subsidiaries use the HKD as their functional currency. The HKD has
        long
        been pegged to the USD at a rate of HKD 7.80 to USD 1.00. Because of the
        peg,
        there has been, and is no material change in the foreign exchange risk for
        transactions denominated in HKD's. All of the other currencies in which we
        transact business float freely against the USD, with the possible exception
        of
        the CNY. The value of the CNY is believed to be managed and controlled to
        some
        extent by the Chinese government.
  Assuming
        that the HKD peg to the USD was terminated and taking all other currencies
        in
        which we conduct business into consideration, an average, hypothetical 10%
        weakening of the USD against all other currencies for the nine months ended
        September 30, 2007, would have had the effect of decreasing our net income
        by
        approximately $436,000. An average, hypothetical 10% strengthening of the
        USD
        for the same period would have had the effect of increasing our net income
        by
        approximately$392,000. As of September 30, 2007, no techniques, such as
        derivative financial instruments or hedging transactions, were used as a
        means
        to limit our exposure to foreign currency exchange rate risks.
  We
        also
        incur funded debt that is denominated in foreign currencies, which,
        historically, has been in AUD and HKD. For Hong Kong funded debt, which is
        not
        material in amount, as long as the HKD remains linked to the USD, we will
        not
        incur any foreign exchange rate risk for this debt. We do incur foreign exchange
        rate risk for debt denominated in AUD. If there was an average, hypothetical
        10%
        weakening of the USD against the AUD, our financial position as of September
        30,
        2007, would have decreased by $304,000. If there was an average, hypothetical
        10% strengthening of the USD against the AUD, our financial position as of
        September 30, 2007, would have been improved by $249,000. To date, we have
        not
        utilized any type of derivative financial instruments to protect against
        our
        exposure to foreign currency exchange rate risks for funded debt.
  **INTEREST
        RATE RISK**
  As
        of
        September 30, 2007, the Company had cash and cash equivalents and restricted
        cash of $2.51 million and bank debt of approximately $9.02 million, all subject
        to variable interest rates tied to indexes such as Libor or to a bank's prime
        lending rate. An average, hypothetical change in interest rates of 10% would
        have had an insignificant impact on our earnings for the nine months ended
        September 30, 2007. We do not use derivative financial instruments of any
        type
        to hedge against changes in interest rates.
 
 16
  **Item
        4 Controls and Procedures**
  Our
        Chief
        Executive Officer and Chief Financial Officer are responsible for establishing
        and maintaining “disclosure controls and procedures” as such term is defined in
        Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act
        of
        1934, as amended (the “Exchange Act”). Accordingly, our Company's Chief
        Executive Officer and Chief Financial Officer designed such disclosure controls
        and procedures, or caused such disclosure controls and procedures to be designed
        under their supervision, to ensure that material information relating to
        the
        Company, including its consolidated subsidiaries, is made known to them by
        others within those entities. Our Chief Executive Officer and our Chief
        Financial Officer have evaluated the effectiveness of our disclosure controls
        and procedures as of the end of the period covered by this Report on Form
        10-Q.
        Based on this evaluation and, subject to the deficiencies described below,
        they
        have concluded that the Company's disclosure controls and procedures were
        effective, as of the end of the period covered by this Report on Form 10-Q,
        in
        ensuring that material information relating to the Company required to be
        disclosed by the Company in reports that it files or submits under the Exchange
        Act is recorded, processed, summarized and reported on a timely basis.
        Notwithstanding the deficiencies described below, our management has concluded
        that the consolidated financial statements included in this Report on Form
        10-Q
        fairly state, in all material respects, our financial condition, results
        of
        operations and cash flows for the periods presented inconformity with generally
        accepted accounting principles.
 
 At
        the
        conclusion of the audit of the Group's consolidated financial statements
        for the
        year ended December 31, 2006, the Company's management and Board of Directors
        were notified by Blackman Kallick Bartelstein, LLP, (“BKB”), the auditor for the
        Company's subsidiary, WLG (USA) LLC and its subsidiaries (collectively “WLG
        (USA) Group”), that during the course of their audit of WLG (USA) Group's
        consolidated financial statements for the year ended December 31, 2006,
        they identified deficiencies in WLG (USA) Group's internal control over
        financial reporting (“internal control”) that they considered to be significant
        deficiencies. The deficiencies related to the following: (1) with respect
        to
        related party transactions with the Company and the Company's other
        subsidiaries, a lack of regular reconciliation of inter-company account
        balances; (2) a lack of regular review and reconciliation of WLG (USA) Group's
        general ledgers and financial statements and failure to maintain proper
        segregation of accounting duties; (3) WLG (USA) Group's year-end closing
        procedures did not include developing estimates to state accounts receivable
        at
        net realizable value or properly adjust revenues for subsequent adjustments
        to
        sales; and (4) WLG (USA)'s chief executive officer's ability to record
        transactions in the general ledger. In addition to the forgoing, BKB identified
        certain control deficiencies in WLG (USA) Group's IT security policies and
        procedures that they did not consider to be significant
        deficiencies.
 
 CHANGES
        IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
 
 The
        Company is working to address the deficiencies identified by BKB and will
        implement and test the necessary controls and procedures to remediate the
        deficiencies in the internal control of WLG (USA) Group. As part of this
        work, we intend to evaluate the internal control of WLG (USA) Group using
        the
        guidance provided by COSO in “Internal Control over Financial Reporting -
        Guidance for Smaller Public Companies” and “Enterprise Risk Management –
Integrated Framework.” The forgoing notwithstanding, there was no change in the
        Company's internal control identified in connection with the evaluation required
        by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act that occurred during
        the period covered by this Report on Form 10-Q and that has materially affected,
        or is reasonably likely to materially affect, the Company's internal control
        over financial reporting.
  The
        Company is continuing the process of reviewing and formalizing its internal
        control and procedures for financial reporting in accordance with the Securities
        and Exchange Commission's rules implementing the internal control reporting
        requirements included in Section 404 of the Sarbanes Oxley Act. The Company
        has
        not completed this process, and this process will require significant amounts
        of
        management time and resources. In the course of evaluation and testing,
        management may identify deficiencies that will need to be addressed and
        remediated
 
 17
  **Part
        II: Other Information**
  **Item
        1: Legal Proceedings:**
 
 As
        described in our Current Report on Form 8-K filed on August 3, 2007, the
        Group
        acquired all of the membership interests of WCS on July 31, 2007. WCS has
        been named as a third-party defendant in pending proceedings filed in the
        United
        States District Court for the Southern District of New York (the “New York
        Proceedings”) and the United States District Court, Central District of
        California (the “California Proceedings”) relating to claims arising out of the
        derailment on April 21, 2005, at Tyrone, Oklahoma, of three rail cars attached
        to a Union Pacific train.
 
 The
        New
        York Proceedings consist of the following actions: Indemnity Insurance Company
        of North America v. K-Line America, Inc. et al, Case Number 06 Civ. 0615,
        filed
        on January 25, 2006 (consolidated with Royal & Sun Alliance Insurance PLC v.
        K-Line America, Inc. et al, Case Number 06 Civ. 2557; Mitsui Sumitomo Insurance
        Co. Ltd et al v. “K” Line America, Inc. et al, Case Number 06 Civ. 2956; Philips
        PC Peripherals v. M/V Chang Jiang Bridge et al, Case Number 06 Civ. 2962;
        Federal Insurance Company v. “K” Line America, Inc. et al, Case Number 06 Civ.
        3038, ACK Controls, Inc. v. “K” Line America, Inc. et al, Case Number 06 Civ.
        3040; Navigators Management Company as Subrogee of American Shipping v. Union
        Pacific Railroad and “K” Line America, Inc., Case Number 06 Civ. 3042; and Tokio
        Marine & Nichido Fire Insurance Co. Ltd. et al v. Kawasaki Kisen Kaisha,
        Ltd. d/b/a “K” Line and Union Pacific Railroad Company, Case Number 06 Civ.
        5159) and Snap-On Logistics Company v. Kawasaki Kisen Kaisha, Ltd. d/b/a
“K”
Line and Union Pacific Railroad Company, Case Number 06 Civ. 3073, filed
        on
        April 21, 2006.
 
 The
        California Proceedings consist of the following actions: Regal Beloit
        Corporation v. Kawasaki Kisen, Case Number CV06-3016 DSF (FMOx) filed on
        May 17,
        2006; Victory Fireworks, Inc. v. Kawasaki Kisen Kaisha, Ltd., et al, Case
        Number
        CV 06-3017 AHM (MANx), filed on May 17, 2006; Royal & Sun Alliance, Etc. v.
        Kawasaki Kisen, et al, Case Number CV06-3019-SVW (CTx), filed on June 1,
        2006;
        and PICC Property & Casualty Company Limited Shanghai Branch v. Kawasaki
        Kisen Kaisha, Ltd., et al, Case Number CV 06-3018 R (RZx), filed on June
        2,
        2006.
 
 Plaintiffs
        in the foregoing proceedings are seeking an aggregate of approximately $6.8
        million in compensatory damages and unspecified damages for delays, lost
        profits
        and lost revenues.
 
 According
        to the complaints filed in the foregoing actions, the plaintiffs are seeking
        compensation for damages relating to the derailment on April 21, 2005, at
        Tyrone, Oklahoma, of three rail cars attached to a Union Pacific train. The
        foregoing complaints generally allege that a steel products mold, which
        was being shipped from China to Chicago, Illinois, in a 20 foot container,
        fell through the floor of the container while it was being transported in
        a rail
        car on a Union Pacific train, allegedly causing the derailment of the three
        rail
        cars. We and WCS have been advised by WCS’ legal counsel that WCS has been named
        as a third party defendant for technical reasons, as it had been hired by
        one of
        its customers to arrange the shipment of the steel products mold from China
        to
        Chicago and that the shipment was on WCS’s “House Bill”.
 
 We
        and
        WCS intend to vigorously defend each of the foregoing actions. In addition,
        we
        and WCS have been advised by WCS’s legal counsel that the likelihood of any
        liability being assigned to WCS is minimal, but subject to the normal risks
        of
        litigation. However, we cannot provide any assurance as to the outcomes of
        these
        actions individually or in the aggregate.
 
 
 **Items
        1A: Risk Factors:** There
        have been no material changes in the Risk Factors set forth in WLG's Annual
        Report on Form10-KSB for the year ended December 31, 2006 and its Report
        on Form
        10-Q for the three months ended September 30, 2007.
  **Item
        2: Unregistered Sales of Equity Securities and Use of
        Proceeds:**
 
 On
        September 28, 2007, WLG issued 1.3 million shares of its restricted common
        stock
        to the prior holders of common stock (the “Sellers”) of Asean in accordance with
        the terms of an acquisition agreement dated October 18, 2005, pursuant to
        which
        WLG acquired Asean. A copy of the acquisition agreement was filed as an exhibit
        to WLG’s Current Report on Form 8-K filed on October 21, 2005. The 1.3 million
        shares of restricted common stock were issued to the Sellers of Asean as
        the final payment in respect of an earn-out provision for the purchase of
        Asean.
        See WLG’s Current Report on Form 8-K filed on November 14, 2005, for details of
        the acquisition of Asean. The restricted shares of the WLG common stock were
        issued to the Sellers without registration under the Securities Act of 1933
        (the
“Act”), in reliance upon the exemptions from registration provided under Section
        4 (2) of the Act. The issuance did not involve any public offering; no general
        solicitation or general advertising was used in connection with such issuance;
        the Sellers represented that they were “accredited investors” within the meaning
        of Rule 501 of Regulation D of the Act and the shares of WLG Stock were issued
        with restrictive securities legends.
 
 18
  **Item
        3. Defaults Upon Senior Securities:** None
 
 **Item
        4. Submission of Matters to a Vote of Security Holders:** None
 
 **Item
        5. Other Information:** None
  **Item
        6. Exhibits.**
 
 Exhibits
 
 2.1
              Membership
                  Interest Purchase Agreement, dated as of July 31, 2007, by and
                  among Wako
                  Logistics Group, Inc., World Commerce Services, LLC, Remo Picchietti
                  and
                  Mary Picchietti (nonmaterial schedules and exhibits identified in the
                  agreement have been omitted pursuant to Item 601 b. 2 of Regulation
                  S-K.
                  Wako Logistics Group, Inc. agrees to furnish supplementally to
                  the
                  Commission upon request by the Commission a copy of any omitted
                  schedule
                  or exhibit.)(1)10.1
              Registration
                Rights Agreement, dated as of July 31, 2007, by and among Wako Logistics
                Group, Inc., Remo Picchietti and Mary
                Picchietti.(1)10.2
              Letter
                Agreement between Christopher Wood and Remo Picchietti.
                (1)10.3
              Escrow
                Agreement, dated as of July 31, 2007, by and among Wako Logistics
                Group,
                Inc., Remo Picchietti, Mary Picchietti and LaSalle
                Bank.(1)10.4
              Employment
                Agreement dated as of July 31, 2007, between Wako Logistics Group,
                Inc.,
                World Commerce Services, LLC and Remo
                Picchietti.(1)31.1
              Certification
                  of the Chief Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002 (Rule13a-4(a)).(2)
  31.2
              Certification
                  of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley
                  Act of
                  2002 (Rule 13a-4(a)).(2)
  32.1
              Certification
                  of the Chief Executive Officer and Chief Financial Officer pursuant
                  to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (Rule
                  13a-14(b)).(2)
  (1)Incoporated by reference to our Form 8-K filed on August 3,
        2007.
 (2)Filed
        herewith.
  19
  **SIGNATURES**
 
 In
        accordance with the requirements of the Exchange Act, the registrant caused this
        report be signed on its behalf by the undersigned, thereunto duly
        authorized.
 
 WAKO
                  LOGISTICS GROUP, INC.Date:
                  November 14, 2007
              By:
              /s/ Christopher
                  WoodChristopher
                  WoodChief
                  Executive Officer,
                (
                  Principal Executive Officer) and DirectorDate:
                  November 14, 2007
              By:
              /s/ David
                  L. KoontzDavid
                  L. KoontzChief
                  Financial Officer,
                (Principal
                  Financial Officer and Accounting Officer)
                and
                  Director
  20
  **EXHIBIT
        INDEX**
 **Exhibit**
                  **Number**
                
                **Description
                    of Exhibit**2.1
                
                Membership
                    Interest Purchase Agreement, dated as of July 31, 2007, by and
                    among Wako
                    Logistics Group, Inc., World Commerce Services, LLC, Remo Picchietti
                    and
                    Mary Picchietti (nonmaterial schedules and exhibits identified
                    in the
                    agreement have been omitted pursuant to Item 601 b. 2 of Regulation
                    S-K.
                    Wako Logistics Group, Inc. agrees to furnish supplementally to
                    the
                    Commission upon request by the Commission a copy of any omitted
                    schedule
                    or exhibit.)(1)10.1
                
                Registration
                  Rights Agreement, dated as of July 31, 2007, by and among Wako
                  Logistics
                  Group, Inc., Remo Picchietti and Mary Picchietti.
                  (1)10.2
                
                Letter
                  Agreement between Christopher Wood and Remo Picchietti.
                  (1)10.3
                
                Escrow
                  Agreement, dated as of July 31, 2007, by and among Wako Logistics
                  Group,
                  Inc., Remo Picchietti, Mary Picchietti and LaSalle
                  Bank.(1)10.4
                
                Employment
                  Agreement dated as of July 31, 2007, between Wako Logistics Group,
                  Inc.,
                  World Commerce Services, LLC and Remo
                  Picchietti.(1)31.1
                
                Certification
                      of the Chief Executive Officer pursuant to Section 302 of the
                      Sarbanes-Oxley Act of 2002(Rule
                      13a-4(a)).(2)
  31.2
                
                Certification
                      of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley
                      Act of
                      2002
                      (Rule13a-4(a)).(2)
  32.1
                
                Certification
                      of the Chief Executive Officer and Chief Financial Officer
                      pursuant to 18
                      U.S.C. Section1350, as adopted pursuant to Section 906 of the
                      Sarbanes-Oxley Act of 2002 (Rule
                      13a-14(b)).(2)
 (1)Incoporated by reference to our Form 8-K filed on August 3,
          2007.
 (2)Filed
          herewith.
 21