UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


WASHINGTON, D.C.
20549


FORM 10-Q





(Mark
One)




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




For the quarterly period ended March 31,
2009





or





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




For the transition period from
_____________ to _____________





Commission file number:
333-113564





WLG
INC.


(Exact name of registrant as specified
in its charter)




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




920 East Algonquin Road, Suite
120


Schaumburg, IL 60173


(Address of principal executive offices
with zip code)





224-653-2800


(Registrant's telephone number,
including area code)




Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. x YesoNo





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  oYesoNo




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





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





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.)oYesxNo





On May 12, 2009, the registrant had
31,400,094 shares of common stock, $0.001 par value per share, issued and
outstanding.










WLG Inc.





TABLE OF CONTENTS




Part I:
            Financial
      InformationItem 1.
            Financial
      StatementsCondensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008
            F-1Condensed Consolidated Balance
      Sheets as of March 31, 2009 and December 31, 2008
            F-2Condensed Consolidated Statements
      of Cash Flows for the Three Months Ended March 31, 2009 and
      2008
            F-4Notes to Condensed Consolidated
      Financial Statements
            F-5Item 2.
            Management's Discussion and
      Analysis of Financial Condition and Results of
      Operations
            3Item 3.
            Quantitative and Qualitative
      Disclosures About Market Risk
            13Item 4.
            Controls and
      Procedures.
            13Part II:
            Other
      Information
            14Item 1.
            Legal
      Proceedings
            14Item 1A.
            Risk
Factors
            14Item 6.
            Exhibits
            14Signatures
            
            15




NOTE REGARDING FORWARD LOOKING
STATEMENTS




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




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











Part I: Financial
Information





Item 1. Financial
Statements


WLG
Inc.
 
 Consolidated
Statements of Operations and other comprehensive income
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 Three
      months ended
                                March
      31,2009
                              
                              
                              2008US$
                              
                              
                              US$Note
                              
                              (unaudited)
                              
                              
                              (unaudited)Revenues:Freight
                              
                              
                              
                              
                              14,947
                              
                              
                              
                              32,264Other
      services
                              
                              
                              
                              
                              16,116
                              
                              
                              
                              21,838Total
      revenues
                              
                              
                              
                              
                              31,063
                              
                              
                              
                              54,102Operating
      expensesCost
      of forwarding/customs
                              
                              
                              
                              
                              (26,559
                              )
                              
                              
                              (47,365
                              )Selling
      and administrative
                              
                              
                              
                              
                              (5,352
                              )
                              
                              
                              (6,051
                              )Depreciation
      and amortization
                              
                              
                              
                              
                              (243
                              )
                              
                              
                              (318
                              )Total
      operating expenses
                              
                              
                              
                              
                              (32,154
                              )
                              
                              
                              (53,734
                              )(Loss)
      Income from operations
                              
                              
                              
                              
                              (1,091
                              )
                              
                              
                              368Other
      income (expense)Interest
      income
                              
                              
                              
                              
                              1
                              
                              
                              
                              15Interest
      expense
                              
                              
                              
                              
                              (160
                              )
                              
                              
                              (244
                              )Other
      income (expense), net
                              
                              
                              
                              
                              71
                              
                              
                              
                              (52
                              )(Loss)
      Income before income taxes
                              
                              
                              
                              
                              (1,179
                              )
                              
                              
                              87Income
      tax benefit (provision)
                              
                              
                              
                              
                              136
                              
                              
                              
                              (81
                              )Net
      (loss) income
                              
                              
                              
                              
                              (1,043
                              )
                              
                              
                              6Dividends
      on preferred stock
                              
                              
                              
                              
                              (23
                              )
                              
                              
                              (22
                              )Loss
      applicable to common stock
                              
                              
                              
                              
                              (1,066
                              )
                              
                              
                              (16
                              )Other
      comprehensive (loss) income, net of taxes:Foreign
      currency translation adjustment
                              
                              
                              
                              
                              (56
                              )
                              
                              
                              73Total
      comprehensive (loss) income
                              
                              
                              
                              
                              (1,122
                              )
                              
                              
                              57Net
      loss per share:Basic
      loss per share
                              
                              2
                              
                              
                              (0.03
                              )
                              
                              
                              (0.00
                              )Diluted
      loss per share
                              
                              2
                              
                              
                              (0.03
                              )
                              
                              
                              (0.00
                              )Weighted
      average common shares outstandingBasic
                              
                              
                              
                              
                              31,400,094
                              
                              
                              
                              31,400,094Diluted
                              
                              
                              
                              
                              31,400,094
                              
                              
                              
                              31,400,094
  The
financial statements should be read in conjunction with the accompanying notes. F-1
 WLG
Inc.
 
 Consolidated
Balance Sheets
 At March 31, 2009 and December
31, 2008
 (Dollars
in thousands except share data and per share amounts)
 
 At
                                  March
      31,
                                  2009
                                
                                
                                At
                                  December
      31,
                                  2008Note
                                
                                
                                US$
                                
                                
                                US$(unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                
                                
                                
                                
                                
                                2,292
                                
                                
                                
                                2,402Restricted
      cash
                                
                                
                                
                                
                                
                                601
                                
                                
                                
                                713Trade
      receivables, net of allowance (2009-$612; 2008-$499)
                                
                                
                                
                                
                                
                                11,199
                                
                                
                                
                                15,246Deposits,
      prepayments and other current assets
                                
                                
                                
                                
                                
                                899
                                
                                
                                
                                903Prepaid
      tax
                                
                                
                                
                                
                                
                                49
                                
                                
                                
                                50Total
      current assets
                                
                                
                                
                                
                                
                                15,040
                                
                                
                                
                                19,314Property,
      plant and equipment, net
                                
                                
                                
                                
                                
                                1,083
                                
                                
                                
                                1,115Deposits
      and other non-current assets
                                
                                
                                
                                
                                
                                142
                                
                                
                                
                                142Deferred
      tax assets
                                
                                
                                
                                
                                
                                375
                                
                                
                                
                                248Intangible
      assets, net
                                
                                
                                
                                
                                
                                3,771
                                
                                
                                
                                3,931Goodwill
                                
                                
                                
                                
                                
                                9,328
                                
                                
                                
                                9,328Total
      assets
                                
                                
                                
                                
                                
                                29,739
                                
                                
                                
                                34,078LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesBank
      overdrafts
                                
                                
                                3
                                
                                
                                
                                461
                                
                                
                                
                                466Trade
      payables
                                
                                
                                
                                
                                
                                
                                6,372
                                
                                
                                
                                8,092Other
      accrued liabilities
                                
                                
                                
                                
                                
                                
                                2,700
                                
                                
                                
                                2,702Bank
      loans - maturing within one year
                                
                                
                                3
                                
                                
                                
                                2,712
                                
                                
                                
                                3,896Current
      portion of capital lease obligations
                                
                                
                                
                                
                                
                                
                                73
                                
                                
                                
                                72Due
      to directors
                                
                                
                                5
                                
                                
                                
                                840
                                
                                
                                
                                990Income
      tax payable
                                
                                
                                
                                
                                
                                
                                51
                                
                                
                                
                                183Total
      current liabilities
                                
                                
                                
                                
                                
                                
                                13,209
                                
                                
                                
                                16,401Non-current
      liabilitiesNon-current
      portion of capital lease obligations
                                
                                
                                
                                
                                
                                
                                72
                                
                                
                                
                                91Other
      non-current liabilities
                                
                                
                                
                                
                                
                                
                                207
                                
                                
                                
                                216279
                                
                                
                                
                                307Commitments
      and contingencies
                                
                                
                                4
                                
                                
                                
                                -
                                
                                
                                
                                -Series
      B convertible redeemable preferred stock, $0.001 par value, 1.7 million
      shares authorized and issued (Redemption and liquidation value
      $1,700)
                                
                                
                                6
                                
                                
                                
                                1,700
                                
                                
                                
                                1,700
 The
financial statements should be read in conjunction with the accompanying notes. F-2
 WLG
Inc.
 
 Consolidated
Balance Sheets
 At March
31, 2009 and December 31, 2008
 (Dollars
in thousands except share data and per share amounts)
 
 At
                      March
      31,
                      2009
                    
                    
                    At
                      December
      31
                      2008Note
                    
                    
                    US$
                    
                    
                    US$(unaudited)Stockholders’
      equityPreferred
      stock, $0.001 par value, 5 million shares authorized and none
      issued
                    
                    
                    
                    
                    
                    -
                    
                    
                    
                    -Series
      A convertible redeemable preferred stock, $0.001 par value, 2.0 million
      shares authorized and issued (Redemption and liquidation value
      $1,500)
                    
                    
                    
                    
                    
                    2
                    
                    
                    
                    2Common
      stock, $0.001 par value, 55 million shares authorized, 31,400,094 (2008: 31,400,094)shares issued and outstanding
                    
                    
                    
                    
                    
                    31
                    
                    
                    
                    31Additional
      paid-in capital
                    
                    
                    
                    
                    
                    12,773
                    
                    
                    
                    12,770Statutory
      reserve
                    
                    
                    7
                    
                    
                    
                    124
                    
                    
                    
                    124Accumulated
      other comprehensive loss-
      Foreign currency translation adjustments
                    
                    
                    
                    
                    
                    
                    (279
                    )
                    
                    
                    (223
                    )Retained
      earnings
                    
                    
                    
                    
                    
                    
                    1,900
                    
                    
                    
                    2,966Total
      stockholders’ equity
                    
                    
                    
                    
                    
                    
                    14,551
                    
                    
                    
                    15,670Total
      liabilities and stockholders’ equity
                    
                    
                    
                    
                    
                    
                    29,739
                    
                    
                    
                    34,078
  The
financial statements should be read in conjunction with the accompanying notes. F-3
 
 WLG
Inc.
 
 Consolidated
Statements of Cash Flows
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 Three
      months ended
                          March
      31,2009
                        
                        
                        2008US$
                        
                        
                        US$(unaudited)
                        
                        
                        (unaudited)Cash
      flows from operating activities:Net
      (loss) income
                        
                        
                        (1,043
                        )
                        
                        
                        6Adjustments
      to reconcile net (loss) income to net cash provided by operating
      activitiesDepreciation
                        
                        
                        83
                        
                        
                        
                        101Amortization
                        
                        
                        160
                        
                        
                        
                        217Allowance
      for bad debts
                        
                        
                        174
                        
                        
                        
                        67Other
      non-cash items
                        
                        
                        3
                        
                        
                        
                        2Changes
      in working capital:Trade
      receivables
                        
                        
                        3,866
                        
                        
                        
                        1,024Deposits,
      prepayments and other current assets
                        
                        
                        4
                        
                        
                        
                        (26
                        )Trade
      payables
                        
                        
                        (1,720
                        )
                        
                        
                        325Other
      accrued liabilities
                        
                        
                        49
                        
                        
                        
                        (29
                        )Due
      to directors
                        
                        
                        (210
                        )
                        
                        
                        (61
                        )Income
      tax payable
                        
                        
                        (258
                        )
                        
                        
                        (35
                        )Net
      cash provided by operating activities
                        
                        
                        1,108
                        
                        
                        
                        1,591Cash
      flows from investing activities:Acquisitions
      of property, plant and equipment
                        
                        
                        (100
                        )
                        
                        
                        (125
                        )Net
      cash used in investing activities
                        
                        
                        (100
                        )
                        
                        
                        (125
                        )Cash
      flows from financing activities:Restricted
      cash
                        
                        
                        112
                        
                        
                        
                        123Bank
      overdrafts
                        
                        
                        (5
                        )
                        
                        
                        148Net
      decrease in short-term bank loans
                        
                        
                        (1,184
                        )
                        
                        
                        (1,587
                        )Loans
      from directors
                        
                        
                        -
                        
                        
                        
                        625Capital
      lease obligations paid
                        
                        
                        (18
                        )
                        
                        
                        (38
                        )Dividends
      paid on preferred stock
                        
                        
                        (23
                        )
                        
                        
                        (22
                        )Net
      cash used in financing activities
                        
                        
                        (1,118
                        )
                        
                        
                        (751
                        )Net
      (decrease) increase in cash and cash equivalents
                        
                        
                        (110
                        )
                        
                        
                        715Cash
      and cash equivalents at beginning of period
                        
                        
                        2,402
                        
                        
                        
                        1,631Cash
      and cash equivalents at end of period
                        
                        
                        2,292
                        
                        
                        
                        2,346
 The
financial statements should be read in conjunction with the accompanying notes. F-4
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 1.
                ORGANIZATION AND BASIS OF
      PRESENTATION
 
 WLG Inc.
(“WLG”, the “Company”, or the “Group”) (formerly known as Wako Logistics Group,
Inc.) was incorporated on December 2, 2003, pursuant to the laws of Delaware in
the United States of America, with authorized and outstanding share capital of
100 million shares of common stock, par value of $0.001 per
share.  All common stock was issued to Mr. Christopher Wood (“Mr.
Wood”).
 
 On
January 8, 2004, WLG changed its name to Wako Logistics Group,
Inc.  On the same date, its authorized number of shares was reduced to
60 million shares, of which 55 million shares were common stock, and 5 million
shares were preferred stock.
 
 Pursuant
to the Share Exchange Agreements entered into between WLG and Mr. Wood (and his
nominee) on January 18, 2004, WLG consummated a combination with Wako Express
(H.K.) Company Limited (“WEHK”) and Wako Air Express (H.K.) Company Limited
(“WAE”) (collectively, “Operating Subsidiaries”) by the issuance of 20,000,900
shares of WLG common stock to Mr. Wood in exchange for 100% of the outstanding
stock of WEHK and WAE.
 
 After the
share exchanges, WLG became the parent and controlling company of the Operating
Subsidiaries, and Mr. Wood became the controlling shareholder of
WLG.
 
 The
transfer of Mr. Wood’s interests in the Operating Subsidiaries to WLG was a
reorganization of companies under common control and has been accounted for
effectively as a pooling of interests, and the consolidated financial statements
of the Group have been presented as if the Operating Subsidiaries had been owned
by WLG since the earliest date covered by these financial
statements.
 
 WEHK was
incorporated in Hong Kong on June 4, 1982.  Since its inception,
WEHK’s principal activity has been the provision of sea freight forwarding
services.
 
 WAE was
incorporated in Hong Kong on February 24, 1989, and since that date, WAE’s
principal activity has been the provision of air freight forwarding
services.
 
 In July
and November 2004, the Group established two 100% owned subsidiaries, Wako
Express (China) Co. Ltd. (“WE China”) in the People’s Republic of China (“PRC”)
and Wako Express (China) Co. Limited (“WECCL”) in Hong Kong.  WE China
began business in China in February 2005 as a full-service freight forwarding
company.  WECCL had not commenced business as of March 31,
2009
 
 On April
1, 2005, WLG completed the acquisition of 100% of the voting interests in Kay
O’Neill (USA) LLC (“KON”), an Illinois limited liability company based in
Chicago, Illinois.  KON also had an office in Detroit, Michigan. KON
changed its name to WLG (USA) LLC (“WLG (USA)”) in June 2005, and, as of the end
of 2006, had discontinued the use of the name KON.  The purchase price
for KON consisted of a $1,000 cash payment and a professional fee of
$50.  WLG (USA) is a non-asset based freight forwarding company and
provides freight forwarding and logistics services to its
customers.
  F-5
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 1.
                ORGANIZATION
      AND BASIS OF PRESENTATION
(CONTINUED)
 
 Effective
October 1, 2005, WLG acquired all of the issued and outstanding shares of common
stock of Asean Logistics, Inc. (“ALI”), a California corporation, in exchange
for 250,000 restricted shares of WLG’s common stock.  Concurrent with
the acquisition, WLG, by way of a contribution to capital, transferred all of
the ALI shares to WLG (USA).
 
 ALI was a
non-asset based freight forwarding company and provided freight forwarding
services to its customers, which shipped products primarily between Asia and the
United States.  As of December 31, 2007, all of ALI’s administrative
and accounting functions had been assumed by WLG (USA), and by June 30, 2008,
all of the remaining operations of ALI had been combined with those of WLG
(USA).
 
 On
November 9, 2005, WLG (Australia) Pty Ltd. (“WLG (Aust)”), a wholly owned
Australian subsidiary of WLG, completed the acquisition of all of the issued and
outstanding common stock of Asean Cargo Services Pty Limited (“Asean”) in
exchange for 3.5 million restricted shares of WLG’s common stock.  An
additional 1.3 million shares of WLG’s restricted common stock was issued to the
sellers of Asean in 2007 in recognition of Asean achieving certain financial
goals during the fifteen-month period ended December 31, 2006.
 
 Founded
in 1984 and based in Sydney, Australia, Asean also has offices in Melbourne and
Brisbane and maintains relationships with cargo agents in all of Australia’s
mainland states.  Asean provides freight forwarding and logistics
services, as well as customs brokerage services, to its customers, most of whom
ship products primarily between Asia and Australia.
 
 In
February 2006, WLG formed two United Kingdom (“UK”) subsidiaries, WLG (UK)
Holdings Limited (“WLG (UK) Holdings”) as a first tier subsidiary and WLG (UK)
Limited (“WLG (UK)”) as a subsidiary of WLG (UK) Holdings.  Effective
September 15, 2006, WLG (UK) acquired for cash the operating assets and assumed
limited liabilities of a division (“UK Division”) of a UK
freight forwarding and logistics company (“UK Co.”).  This UK
Division, which operated in Manchester, UK, provided sea and air freight
forwarding, customs clearance and warehouse logistics services, mostly to UK
based customers.  These activities are now carried on by WLG
(UK).
 
 On
December 1, 2006, WLG (USA) acquired for cash all of the voting shares of
Mares-Shreve & Associates, Inc. (“MSA”) and its wholly owned subsidiary, Sea
Systems Ocean Line, Inc., (“Sea Systems”) (collectively, the “MSA
Group”).  MSA, which was incorporated on May 15, 1979, in Washington,
provides freight forwarding and customs brokerage services to its
customers.  Sea Systems, incorporated on February 26, 1991, in
Washington, is a non-asset based freight forwarder and provided air and
sea freight forwarding and related logistics services to its customers. As
of June 30, 2008, all of Sea Systems’ operations had been combined with those of
MSA. MSA mainly serves customers that ship products from Asia to the
US.
 
 On July
31, 2007, the Group acquired all of the membership interests in World Commerce
Services LLC.  WCS is based in Schaumburg, Illinois, and also has
offices in New York, Atlanta, Los Angeles and San Francisco.  It is a
non-asset based freight forwarding company and provides a full range of
logistics and customs brokerage services to its customers, specializing in
freight imports from Asia, mostly by sea, and with an emphasis on imports from
China.
  F-6
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 1.
                ORGANIZATION AND BASIS OF
      PRESENTATION (CONTINUED)
 
 On
December 7, 2007, the Company filed an amendment to the Company’s Restated
Certificate of Incorporation to change the Company’s name from Wako Logistics
Group, Inc. to WLG Inc., which became effective December 21, 2007.
 
 As of
March 31, 2009, all subsidiaries are wholly-owned and all material intercompany
balances and transactions have been eliminated in consolidation.
 
 The
accompanying financial data as of March 31, 2009, and for the three months ended
March 31, 2009 and 2008, have been prepared by the Company, without
audit.
 
 Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations. However, the Company believes that the disclosures herein are
adequate to make the information presented not misleading.  These
financial statements should be read in conjunction with the Company’s audited
consolidated financial statements and notes thereto for the year ended December
31, 2008.
 
 The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities.  Actual results could
differ from these estimates.
 
 The
unaudited, interim consolidated financial statements of the Company have been
prepared in accordance with U.S. generally accepted accounting
principles for interim financial information. In the opinion of management,
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position as of March 31, 2009, and results of
operations for the three months ended March 31, 2009 and 2008, and cash flows
for the three months ended March 31, 2009 and 2008, have been
made.  The results of operations for the three months ended March 31,
2009 and 2008, are not necessarily indicative of the operating results for the
full year.
  F-7
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 2.
                LOSS
      PER SHARE
 
 Loss per
share was computed as follows:
 
 Three
      months ended March 31, 2009Loss
                                              
                                              
                                              Weighted
                                                average
      number
                                                of
      shares
                                              
                                              
                                              Per
      share
                                                amountUS$
                                              
                                              
                                              
                                              
                                              
                                              US$(unaudited)
                                              
                                              
                                              
                                              
                                              
                                              (unaudited)Net
      loss
                                              
                                              
                                              (1,043
                                              )Dividends
      on Series A convertible redeemable preferred stock
                                              
                                              
                                              (23
                                              )
                                              
                                              
                                              2,000,000
                                              
                                              
                                              
                                              0.01Basic
      loss per shareNet
      loss applicable to common stockholders
                                              
                                              
                                              (1,066
                                              )
                                              
                                              
                                              31,400,094
                                              
                                              
                                              
                                              (0.03
                                              )Effect
      of dilutive securitiesEmployee
      stock options (Note #)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Warrants
      (Note #)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Series
      A convertible redeemable preferredstock  (Note
      #)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Series
      B convertible redeemable preferredstock
      (Note #)
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Diluted
      loss per shareNet
      loss applicable to common stockholders
                                              
                                              
                                              (1,066
                                              )
                                              
                                              
                                              31,400,094
                                              
                                              
                                              
                                              (0.03
                                              )
  F-8
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 2.
                LOSS
      PER SHARE (CONTINUED)
 
 Three
      months ended March 31, 2008Income
      (Loss)
                                        
                                        
                                        Weighted
                                          average
      number
                                          of
      shares
                                        
                                        
                                        Per
      share
                                          amountUS$
                                        
                                        
                                        
                                        
                                        
                                        US$(unaudited)
                                        
                                        
                                        
                                        
                                        
                                        (unaudited)Net
      income
                                        
                                        
                                        6Dividends
      on Series A convertible redeemable preferred stock
                                        
                                        
                                        (22
                                        )
                                        
                                        
                                        2,000,000
                                        
                                        
                                        
                                        0.01Basic
      loss per shareNet
      loss applicable to common stockholders
                                        
                                        
                                        (16
                                        )
                                        
                                        
                                        31,400,094
                                        
                                        
                                        
                                        0.00Effect
      of dilutive securitiesEmployee
      stock options(Note
      #)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Warrants
      (Note
      #)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Series
      A convertible redeemable preferred stock (Note #)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Diluted
      loss per shareNet
      loss applicable to common stockholders
                                        
                                        
                                        (16
                                        )
                                        
                                        
                                        31,400,094
                                        
                                        
                                        
                                        0.00
 
 #:
                For
      the three months ended March 31, 2009, common stock was not increased by
      the 2,000,000 shares of Series A convertible redeemable preferred stock,
      the 500,000 shares of common stock issuable to the sellers of WCS upon the
      conversion of the Series A convertible redeemable preferred stock, the
      exercise of the 100,000 outstanding warrants granted to a consultant in
      exchange for services rendered, the exercise of 395,000 outstanding
      options, and the 2,428,571 shares related to the Series B convertible
      redeemable preferred stock. For the three months ended March 31, 2008,
      common stock was not increased by the 2,000,000 shares of Series A
      convertible redeemable preferred stock, the 500,000 shares of common stock
      issuable to the sellers of WCS upon the conversion of the Series A
      convertible redeemable preferred stock, the exercise of the 100,000
      outstanding warrants granted to a consultant in exchange for services
      rendered, the exercise of 245,000 outstanding options. Under an agreement
      with the sellers of WCS, the Company is potentially obligated to issue up
      to 1,962,506 shares of its common stock to them if certain earnings
      targets are achieved.  None of the earnings targets were
      achieved as of March 31, 2009 and 2008.  The effect of these
      conversions would be
anti-dilutive.
  F-9
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 3.
                BANKING
      FACILITIES
 
 The Group
has bank facilities from creditworthy commercial banks as
follows:
 
 At
                              March
      31,
                              2009
                            
                            
                            At
                              December
      31,
                              2008US$
                            
                            
                            US$(Unaudited)Facilities
      granted-
      bank guarantees
                            
                            
                            1,065
                            
                            
                            
                            1,074-
      overdraft facilities
                            
                            
                            461
                            
                            
                            
                            466-
      revolving credit lines
                            
                            
                            5,732
                            
                            
                            
                            7,261-
      foreign exchange facilities
                            
                            
                            171
                            
                            
                            
                            173-
      lease facilities
                            
                            
                            171
                            
                            
                            
                            173Total
      bank facilities
                            
                            
                            7,600
                            
                            
                            
                            9,147
 
 The terms
of the revolving loan facilities, including the amounts and maturity dates, are
agreed between the banks and the Group from time to time.
 
 Bank
guarantees of $545 will expire within one year from March 31, 2009, but may be
renewed, provided the Group makes available the cash required by the banks to
collateralize each guarantee. A bank guarantee of $94 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 $426 has no fixed expiration date and is cancelable and/or
renewable at the option of the bank.
 
 The
revolving loan facilities mature on various dates as follows: (i) a revolving
credit facility of $3,000 on September 30, 2009 and (ii) a revolving credit
facility of $2,732 is an on-going facility that is subject to review in 2009,
and, by its terms, may be terminated by either the bank or WLG giving 30 days
notice to the other party.
 
 The
revolving credit facilities of $5,732 are secured as follows: (i) $3,000 is
secured by all assets of WCS, WLG (USA) and MSA, including their accounts
receivables as well as a guarantee provided by the Group’s parent company, and
(ii) $2,732 is secured by Asean’s accounts receivable and a registered mortgage
charge over the assets of Asean.
 
 WCS’s
revolving credit facility in the face amount of $3,000 requires that WCS comply
with certain covenants, one of which is that WCS must at all times have excess
availability of at least $1,000, which was reduced to $750 in December
2008.  This facility, which by its terms expired on March 31, 2009,
was renewed and shall mature on September 30, 2009.  No amounts were
charged by the bank or any third parties in connection with the renewal of this
revolving credit facility.  Other than the following amendments, the
terms of the renewed facility are substantially the same as those of the
existing facility that expired on March 31, 2009:
 
 Ÿ
                Maximum
      amount of the credit line was reduced to $3,000 from
    $4,500.
 
 Ÿ
                Interest
      rate was increased to 2% over the prime rate of the bank from the previous
      interest rate which was the bank’s prime
rate.
  F-10
 
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 3.
                  BANKING
      FACILITIES (CONTINUED)
 
 Of the
total bank guarantees of $1,065, one in the amount of $545 is collateralized by
cash.   Another bank guarantee of $94 is secured by (i) a letter
of support from the Group’s parent company, and (ii) a registered mortgage
debenture over all of Asean’s assets.  The remaining bank guarantee of
$426 is secured by a fixed and floating charge on all of the assets of WLG (UK)
and by a guarantee of the Group’s parent company.
 
 Asean’s
overdraft facility of $461 is secured by (i) a comfort letter from the Group’s
parent company and (ii) a registered mortgage debenture over all of Asean’s
assets.
 
 Asean has
a foreign exchange facility of $171, which at March 31, 2009, had not been
utilized. Asean has a leasing facility of $171, with $1 outstanding as of March
31, 2009, and which is secured by the assets under lease.  In
addition, both the foreign exchange and leasing facility are secured by a
comfort letter from the Group’s parent company.  As of March 31, 2009,
the leasing facility carried an interest rate of 7.68% per annum.  As
of March 31, 2009 and December 31, 2008, the weighted average interest rates of
the Group’s short-term bank borrowings were 6.84% and 7.27% per annum,
respectively.
 
 At
                              March
      31,
                              2009
                            
                            
                            At
                              December
      31,
                              2008US$
                            
                            
                            US$(Unaudited)UtilizedCommitted
      lines-
      bank guarantees
                            
                            
                            1,065
                            
                            
                            
                            1,074-
      overdraft facilities
                            
                            
                            461
                            
                            
                            
                            466-
      revolving credit lines
                            
                            
                            2,712
                            
                            
                            
                            3,896-
      lease facilities
                            
                            
                            1
                            
                            
                            
                            2Total
      bank facilities utilized
                            
                            
                            4,239
                            
                            
                            
                            5,438
  F-11
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 4.
                COMMITMENTS
      AND CONTINGENCIES
 
 Commitments under operating
leases
 The Group
rents office space, staff quarters and certain office equipment under
non-cancellable operating leases. The following table summarizes the approximate
future, minimum lease payments for operating leases in effect as of March 31,
2009 and December 31, 2008:
 
 At
                              March
      31,
                              2009
                            
                            
                            At
                              December
                              31,
                              2008US$
                            
                            
                            US$(unaudited)Within
      one year
                            
                            
                            1,386
                            
                            
                            
                            1,365Over
      one year but not exceeding two years
                            
                            
                            899
                            
                            
                            
                            966Over
      two years but not exceeding three years
                            
                            
                            544
                            
                            
                            
                            567Over
      three years but not exceeding four years
                            
                            
                            285
                            
                            
                            
                            351Over
      four years but not exceeding five years
                            
                            
                            285
                            
                            
                            
                            290Over
      five years
                            
                            
                            1,091
                            
                            
                            
                            1,184Total
      operating lease commitments
                            
                            
                            4,490
                            
                            
                            
                            4,723
 
 The Group
has obligations under various operating lease agreements ranging from three
months to nine years.  Rent expense under operating leases for the
three months ended March 31, 2009 and 2008, was $402 and $472
respectively.
 
 Cargo
space commitments
 The Group
in the course of its business enters into agreements with various air and ocean
freight carriers pursuant to which the Group commits to utilize a minimum amount
of cargo space each year.  As of March 31, 2009 and December 31, 2008,
the obligation for the minimum amount of such cargo space to be utilized in the
coming 12 months is $1,790 and $2,420, respectively.
 
 Contingencies
– outstanding claims
 The Group
is subject to claims that arise primarily in the ordinary course of
business.  In general, such claims are covered by insurance policies
issued for the Group’s businesses.
 
 As of
March 31, 2009 and December 31, 2008, and subject to the legal proceeding as
described below, the aggregate, outstanding amount of claims was approximately
$40 and $40, respectively.  The Group believes that the ultimate
liability, if any, for all of these claims, both filed and potential, will not
have a material adverse effect on its financial position.
 
 In the
first quarter of 2008, three parties filed legal actions against the Group
totaling about $150. These claims are covered by insurance, except for amounts
equal to or less than the deductible payment required under these policies,
which total about $23, and for which a provision was made in 2008.  As
of March 31, 2009, all claims from these three parties had been settled, and the
Group paid $23 as its share of the settlements.
  F-12
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 4.
                COMMITMENTS
      AND CONTINGENCIES (CONTINUED)
 
 Contingencies
– outstanding claims (Continued)
 
 In
addition to the foregoing and during the three months ended March 31, 2009, the
Group was notified by several parties that they would file claims against the
Group, unless payment is made to them for certain cargoes that were allegedly
released by the Company without proper documentation and for which no payments
were made by the purchaser of the goods.  Pending a final outcome of
these potential claims, the Company has reserved about $305 for these
potential claims, which it believes is a reasonable estimate of the financial
exposure for them.
 WCS has
been named as a third-party defendant in pending proceedings filed in the United
States District Court for the Southern District of New York and the United
States District Court, Central District of California relating to claims arising
out of the derailment of a Union Pacific train at Tyrone, Oklahoma on April 21,
2005. The total amount of damages sought equals approximately $6,800, including
an unspecified amount for costs of delay, lost profit and lost revenue. The
Group intends to vigorously defend each of the foregoing actions. WCS has been
advised by its legal counsel that it has been named as a third-party defendant
for technical reasons and that the likelihood of any material liability being
assigned to WCS is minimal, but subject to the normal risks of litigation.
Management believes that the disposition or ultimate resolution of this pending
litigation will not have a material adverse effect on the financial position of
the Group.
 
 5.
                RELATED
      PARTY TRANSACTIONS
 
 Name
      and relationship of related partiesName
                        
                        Relationship with the
  GroupChristopher
      Wood (“CW”)
                        
                        Shareholder,
      director and officer of WLGDavid
      Koontz (“DK”)
                        
                        Director
      and officer of WLG and a director of Asean and WLG
  (Aust)Join
      Wing Properties Limited (“JWP”)
                        
                        CW
      is a shareholder and director of
JWP
 
 Details
      of related partiesName
                                  
                                  Principal activities
                                  
                                  OwnershipName
      of owner
                                  
                                  %
      heldJWP
                                  
                                  Leases
      property to CW
                                  
                                  CW
                                  
                                  100%
  F-13
 
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 5.
                RELATED
      PARTY TRANSACTIONS (CONTINUED)
 
 The
following is a summary of the amounts included in the accompanying balance
sheets:
  At
                                March
      31,
                                2009
                              
                              
                              At
                                December
      31,
                                2008US$
                              
                              
                              US$(unaudited)Due
      to directors (Notes)CW
                              
                              
                              653
                              
                              
                              
                              615DK
                              
                              
                              187
                              
                              
                              
                              375840
                              
                              
                              
                              990
 
 Notes:
 (i)
                Amounts
      due to directors are unsecured and interest-free, except for the director
      loans of $600 (see note (ii) below) and $187 due to CW and DK,
      respectively, which were used as part of the consideration to acquire the
      membership interests of WCS, repayment of certain bank loans and working
      capital.  The directors’ loans carry an interest rate of 12% per
      annum. As of March 31, 2009, the director loan of $187 is to be repaid by
      3 equal installments and the director loan of $600 is to be repaid by 12
      equal installments which were to begin on January 31, 2009.  The
      remaining balance of $53 has no fixed repayment
  term.
 
 (ii)
                On
      July 1, 2008, the Group issued a $600 promissory note to CW, dated July 1,
      2008, (the “Note”) to set forth, among other things, the interest rate and
      repayment terms for $600 that CW had previously loaned to the
      Group.  The Note bears interest at the rate of 12% per annum and
      is repayable in twelve monthly installments of $50 each, with the first
      installment due on January 31, 2009.  CW has agreed that
      payments due under this note may be deferred on a month to month basis,
      and no principal payments had been made to CW as of March 31,
      2009.  The Note is secured by the Group’s assets and will become
      immediately due and payable upon the earlier to occur of (i) an event of
      default as defined in the Note, (ii) a change in control as defined in the
      Note, (iii) raising not less than $3,000 in new capital, and/or (iv) the
      termination of CW’s employment.
 
 Additional
details of transactions
 Three
      months ended
                                          March
      31,2009
                                        
                                        
                                        2008US$
                                        
                                        
                                        US$(unaudited)
                                        
                                        
                                        (unaudited)Rental
      paid/payableJWP
                                        
                                        
                                        27
                                        
                                        
                                        
                                        27
  F-14
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 5.
                RELATED
      PARTY TRANSACTIONS (CONTINUED)
 
 Summary
of transactions for the three months ended March 31, 2009 and 2008, with
directors / stockholders (unaudited):
 
 CW
                          
                          
                          DK
                          
                          
                          TotalUS$
                          
                          
                          US$
                          
                          
                          US$At
      January 1, 2009
                          
                          
                          615
                          
                          
                          
                          375
                          
                          
                          
                          990Reclassified
      from accrued liabilities
                          
                          
                          60
                          
                          
                          
                          -
                          
                          
                          
                          60Interest
      accrued
                          
                          
                          69
                          
                          
                          
                          9
                          
                          
                          
                          78Interest
      paid
                          
                          
                          (69
                          )
                          
                          
                          (9
                          )
                          
                          
                          (78
                          )Repayment
      of loan
                          
                          
                          -
                          
                          
                          
                          (188
                          )
                          
                          
                          (188
                          )Repayment
      of advances
                          
                          
                          (22
                          )
                          
                          
                          -
                          
                          
                          
                          (22
                          )At
      March 31, 2009
                          
                          
                          653
                          
                          
                          
                          187
                          
                          
                          
                          840
 
 CW
                            
                            
                            DK
                            
                            
                            TotalUS$
                            
                            
                            US$
                            
                            
                            US$At
      January 1, 2008
                            
                            
                            960
                            
                            
                            
                            750
                            
                            
                            
                            1,710Loans
      from directors
                            
                            
                            625
                            
                            
                            
                            -
                            
                            
                            
                            625Interest
      accrued
                            
                            
                            23
                            
                            
                            
                            23
                            
                            
                            
                            46Interest
      paid
                            
                            
                            (23
                            )
                            
                            
                            (23
                            )
                            
                            
                            (46
                            )Expenses
      paid
                            
                            
                            (61
                            )
                            
                            
                            -
                            
                            
                            
                            (61
                            )At
      March 31, 2008
                            
                            
                            1,524
                            
                            
                            
                            750
                            
                            
                            
                            2,274
 
 Note:
  ·
                Expenses
      include amounts that were either paid directly to or for the benefit of
      CW.
 
 6.
                SERIES
      B CONVERTIBLE REDEEMABLE PREFERRED
STOCK
 
 On June
30, 2008, the Company entered into a conversion agreement with Christopher Wood,
the Company’s Chief Executive Officer, director and controlling shareholder,
pursuant to which Mr. Wood and the Company agreed to convert $1,700 of
outstanding loans that Mr. Wood had made to the Company into 1.7 million shares
of the Company’s Series B Convertible Redeemable Preferred Stock (“Series B
Preferred Stock”).  In connection therewith, in June 2008, the
Company’s Board of Directors approved the designation of a new series of
preferred stock consisting of 1.7 million shares of authorized, but
unissued, shares of preferred stock designated as Series B Preferred Stock, par
value $0.001.  The Series B Preferred Stock was issued on June 30,
2008.  The Series B Preferred Stock may be converted by the holder at
any time into shares of the Company’s common stock at a conversion price of
$0.70 per share.  The Series B Preferred Stock has a stated,
redemption and liquidation value of $1.00 per share, and shall pay an annual
cumulative dividend equal to 12% of the stated value per share.
  F-15
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 
 6.
              SERIES
      B CONVERTIBLE REDEEMABLE PREFERRED STOCK
  (CONTINUED)
 
 The
Company may require a conversion in the event of a change in control of the
Company. Commencing 24 months after the date of issuance of the Series B
Preferred Stock, the Company has the right to redeem all or a portion of the
then outstanding shares of Series B Preferred Stock at a price of $1.00 per
share, subject to adjustment.  In addition, commencing on the earlier
to occur of 24 months after the issuance date, Mr. Wood’s retirement or his
holding less than 50.1% of the outstanding common stock of the Company, Mr. Wood
may cause the Company to redeem any or all of his outstanding shares of Series B
Preferred Stock, at a price of $1.00 per share, subject to
adjustment.
 
 For the
three months ended March 31, 2009, dividends of $51 on the Series B Preferred
Stock were included in interest expense.
 
 7.           STATUTORY
RESERVE
 
 WE China
(“the PRC subsidiary”) is a wholly-owned foreign investment enterprise (“WOFIE”)
registered in the PRC.  Under the laws and regulations applicable to a
WOFIE, such enterprises are required to maintain certain statutory reserves for
specific purposes, which include a general reserve, an enterprise development
fund and a staff welfare and bonus fund.  The board of directors of
the PRC subsidiary shall determine on an annual basis the amount to be
transferred to statutory reserves.
 
 Minimum
annual transfers to statutory reserves shall be at least 10% of a WOFIE’s after
tax profit and shall be determined in accordance with the PRC accounting rules
and regulations.  Annual transfers to the general reserve shall
continue until such reserve balance reaches 50% of a WOFIE’s registered
capital.  The general reserve can only be utilized to offset prior
years' losses or as additional paid-in capital.  No distribution of
the remaining general reserve shall be made other than upon liquidation of the
PRC subsidiary.
 
 During
the three months ended March 31, 2009 and 2008, no after tax profit has been
appropriated to the general reserve, as the transfers shall be made at the end
of 2009 and 2008.
 
 8.           SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
 
 Three months ended
                          March 31,2009
                        
                        
                        2008US$
                        
                        
                        US$(unaudited)
                        
                        
                        (unaudited)Cash
      paid for:Interest
      expense
                        
                        
                        160
                        
                        
                        
                        244Income
      taxes
                        
                        
                        122
                        
                        
                        
                        116
  F-16
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
  9.           SHARE-BASED
PAYMENT
 
 In April
2005, the board and stockholders of the Company approved the Wako Logistics
Group, Inc. 2005 Stock Incentive Plan (the “Plan”).  The Plan, which
is effective until April 19, 2015, provides for awarding stock options, stock
appreciation rights and restricted stock to its officers, employees, directors
and consultants, as well as to officers, employees, directors and consultants
who provide services to any of the Group’s subsidiaries or
affiliates.  The Plan is administered by the board, provided, that the
board may appoint a committee to administer the Plan.  At the
inception of the Plan, 4,000,000 shares of common stock were approved for the
issuance of awards under the Plan, which amount shall be automatically increased
(but not decreased) to 20% of the total number of the Company’s shares of common
stock issued and outstanding on January 1st of each year beginning on January 1,
2006.  Based on shares outstanding as of January 1, 2009, the number
of shares reserved under the Plan is 6,280,019.
 
 In
general, stock options awarded under the Plan vest over three years and expire
in a maximum of ten years from their effective dates.  However, the
Plan permits the board to grant options with varying terms, such as changing the
vesting period, the term and/or exercise price.  Once the board, under
provisions of the Plan, grants an option, the Company will estimate the fair
value of the option, and compensation expense will be recognized over the
vesting period of the option.
 
 As of
August 2005, the Company committed to award 200,000 options to purchase common
stock to one of its officers, and, as of that date, all substantial terms and
conditions for the option were communicated to, and agreed with, the
officer. As such, the Company established August 2005 as the grant date for
this option. The board has formally approved the award and this option is fully
vested.
 
 Effective
January 15, 2007, the board approved and awarded stock options to three
employees permitting them to purchase an aggregate of 20,000 shares of the
Company’s common stock.  The vesting period for the January 2007
options is 3 years.
 
 Effective
January 8, 2008, the board approved and awarded stock options to an employee for
the purchase of 25,000 shares of the Company’s common stock.  The
vesting period for the January 2008 options is 3 years.
 
 Effective
December 1, 2008, the board approved and awarded stock options to an employee
for the purchase of 150,000 shares of Company’s common stock. The vesting period
for December 2008 options is 2 years.
 
 The
Company accounts for stock-based compensation in accordance with SFAS No.
123(R), Share-Based Payment (revised 2004).  Under SFAS No. 123(R),
the compensation expense related to the fair value of stock options charged to
the unaudited consolidated statement of operations for the three months ended
March 31, 2009 and 2008, was $3 and $2, respectively.  As of March 31,
2009 and December 31, 2008, the compensation expense related to non-vested
options totaled $17 and $20 and was expected to be recognized over 21 months and
24 months, respectively.  The total intrinsic value of the options
outstanding and options exercisable as of March 31, 2009 and December 31, 2008
was nil.  No tax benefit was recognized for the stock option expense
recorded for the three months ended March 31, 2009 and 2008.
  F-17
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 (Dollars
in thousands except share data and per share amounts)
 9.           SHARE-BASED
PAYMENT (CONTINUED)
 
 The
      Company estimates the fair value of stock options using the Black-Scholes
      option pricing model, with the following
  assumptions:
 
 Options granted
      onAugust
      1,
                        2005
                      
                      
                      January
      15,
                        2007
                      
                      
                      January
      8,
                        2008
                      
                      
                      December
      1,
                        2008Risk-free
      interest rate per annum
                      
                      
                      4.60
                      %
                      
                      
                      4.60
                      %
                      
                      
                      3.59
                      %
                      
                      
                      0.63
                      %Expected
      life
                      
                      2
      years
                      
                      
                      3
      years
                      
                      
                      3
      years
                      
                      
                      2
      yearsExpected
      volatility(Note #)
                      
                      
                      45.00
                      %
                      
                      
                      57.79
                      %
                      
                      
                      46.00
                      %
                      
                      
                      5.03
                      %Expected
      dividend yield
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %Post
      vesting terminations
                      
                      No
                      
                      
                      No
                      
                      
                      No
                      
                      
                      NoWeighted
      average grant-date fairvalue(per
      share)
                      
                      $
                      0.28
                      
                      
                      $
                      1.22
                      
                      
                      $
                      0.23
                      
                      
                      $
                      0.06
 
 #:
              The
      expected volatility is based on the underlying share price of WLG’s shares
      and to a comparison of the volatility of the share prices of peer
      companies.
 
 The following table sets forth the
outstanding options granted under the Plan:
 
 Shares
                        
                        
                        Weighted
                          ave.
                          exercise
                          price
                        
                        
                        Weighted ave.
                          remaining
                          contractual
                          term (years)Outstanding
      at April 30, 2005 (inception of Plan)
                        
                        
                        -
                        
                        
                        
                        -Granted
      in 2005
                        
                        
                        200,000
                        
                        
                        
                        1.00Outstanding
      at December 31, 2005
                        
                        
                        200,000
                        
                        
                        
                        1.00
                        
                        
                        
                        9.58Granted
      in 2007
                        
                        
                        20,000
                        
                        
                        
                        2.85Outstanding
      at December 31, 2007
                        
                        
                        220,000
                        
                        
                        
                        1.17
                        
                        
                        
                        7.71Granted
      in 2008
                        
                        
                        175,000
                        
                        
                        
                        0.61Outstanding
      at March 31, 2009
                        
                        
                        395,000
                        
                        
                        
                        0.92
                        
                        
                        
                        7.82Exercisable
      at March 31, 2009
                        
                        
                        223,333
                        
                        
                        
                        1.11
                        
                        
                        
                        6.52
  F-18
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 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
services are summarized in the following table:
 
 (i)
              During
      the three months ended March 31, 2009 and 2008
  (unaudited)
 
 Air forwarding
                              
                              
                              Sea forwarding
                              
                              
                              Customs brokerage
                              
                              
                              TotalThree months ended
                                  March 31
                              
                              
                              Three months ended
                                  March 31
                              
                              
                              Three months ended
                                  March 31
                              
                              
                              Three months ended
                                  March 312009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008
                              
                              
                              2009
                              
                              
                              2008US$
                              
                              
                              US$
                              
                              
                              US$
                              
                              
                              US$
                              
                              
                              US$
                              
                              
                              US$
                              
                              
                              US$
                              
                              
                              US$Revenue
                              
                              
                              4,532
                              
                              
                              
                              9,492
                              
                              
                              
                              14,476
                              
                              
                              
                              29,061
                              
                              
                              
                              12,055
                              
                              
                              
                              15,549
                              
                              
                              
                              31,063
                              
                              
                              
                              54,102Cost
      of forwarding/customs
                              
                              
                              (3,559
                              )
                              
                              
                              (7,973
                              )
                              
                              
                              (11,633
                              )
                              
                              
                              (25,068
                              )
                              
                              
                              (11,367
                              )
                              
                              
                              (14,324
                              )
                              
                              
                              (26,559
                              )
                              
                              
                              (47,365
                              )Depreciation
                              
                              
                              (12
                              )
                              
                              
                              (16
                              )
                              
                              
                              (52
                              )
                              
                              
                              (63
                              )
                              
                              
                              (19
                              )
                              
                              
                              (22
                              )
                              
                              
                              (83
                              )
                              
                              
                              (101
                              )Interest
      income
                              
                              
                              -
                              
                              
                              
                              5
                              
                              
                              
                              -
                              
                              
                              
                              7
                              
                              
                              
                              -
                              
                              
                              
                              3
                              
                              
                              
                              -
                              
                              
                              
                              15Interest
      expense
                              
                              
                              (14
                              )
                              
                              
                              (29
                              )
                              
                              
                              (42
                              )
                              
                              
                              (115
                              )
                              
                              
                              (26
                              )
                              
                              
                              (55
                              )
                              
                              
                              (82
                              )
                              
                              
                              (199
                              )Other
      segment income
                              
                              
                              13
                              
                              
                              
                              (5
                              )
                              
                              
                              60
                              
                              
                              
                              (38
                              )
                              
                              
                              (2
                              )
                              
                              
                              (9
                              )
                              
                              
                              71
                              
                              
                              
                              (52
                              )Other
      segment expenses
                              
                              
                              (919
                              )
                              
                              
                              (1,199
                              )
                              
                              
                              (3,113
                              )
                              
                              
                              (3,521
                              )
                              
                              
                              (962
                              )
                              
                              
                              (1,186
                              )
                              
                              
                              (4,994
                              )
                              
                              
                              (5,906
                              )Taxation
                              
                              
                              36
                              
                              
                              
                              (27
                              )
                              
                              
                              51
                              
                              
                              
                              (63
                              )
                              
                              
                              49
                              
                              
                              
                              (4
                              )
                              
                              
                              136
                              
                              
                              
                              (94
                              )Segment
      income (loss)
                              
                              
                              77
                              
                              
                              
                              248
                              
                              
                              
                              (253
                              )
                              
                              
                              200
                              
                              
                              
                              (272
                              )
                              
                              
                              (48
                              )
                              
                              
                              (448
                              )
                              
                              
                              400Unallocated
      parent company expenses
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (595
                              )
                              
                              
                              (394
                              )Net
      (loss) income
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (1,043
                              )
                              
                              
                              6Property,
      plant and equipment – additions
                              
                              
                              29
                              
                              
                              
                              26
                              
                              
                              
                              60
                              
                              
                              
                              58
                              
                              
                              
                              11
                              
                              
                              
                              42
                              
                              
                              
                              100
                              
                              
                              
                              126
  F-19
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
  10.
              SEGMENTS
      OF THE BUSINESS (CONTINUED)
 
 (a)
              Business
      segments (continued)
 
 (ii)
              As
      of March 31, 2009 and December 31,
2008
 
 Air forwarding
                    
                    
                    Sea forwarding
                    
                    
                    Customs brokerage
                    
                    
                    TotalAt March 31,
                      2009
                    
                    
                    At December 31,
                      2008
                    
                    
                    At March 31,
                      2009
                    
                    
                    At December 31,
                      2008
                    
                    
                    At March 31,
                      2009
                    
                    
                    At December 31,
                      2008
                    
                    
                    At March 31,
                      2009
                    
                    
                    At December 31,
                      2008US$
                    
                    
                    US$
                    
                    
                    US$
                    
                    
                    US$
                    
                    
                    US$
                    
                    
                    US$
                    
                    
                    US$
                    
                    
                    US$(unaudited)
                    
                    
                    
                    
                    
                    (unaudited)
                    
                    
                    
                    
                    
                    (unaudited)
                    
                    
                    
                    
                    
                    (unaudited)Segment
      assets
                    
                    
                    4,080
                    
                    
                    
                    4,965
                    
                    
                    
                    8,487
                    
                    
                    
                    10,530
                    
                    
                    
                    4,068
                    
                    
                    
                    5,240
                    
                    
                    
                    16,635
                    
                    
                    
                    20,735Unallocated
      assets
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    13,104
                    
                    
                    
                    13,343Total
      assets
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    29,739
                    
                    
                    
                    34,078
  F-20
 WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
  10.
              SEGMENTS
      OF THE BUSINESS (CONTINUED)
 
 (b)
              The
      table below summarizes the percentage of the Group’s revenues during the
      three months ended March 31, 2009 and 2008, analyzed by geographical
      locations:
 
 Three months ended
                            March 31,2009
                          
                          
                          2008%
                          
                          
                          %(unaudited)
                          
                          
                          (unaudited)RevenuesAmerica
                          
                          
                          38
                          
                          
                          
                          47Asia
      and others
                          
                          
                          21
                          
                          
                          
                          22Australia
                          
                          
                          31
                          
                          
                          
                          24Europe
                          
                          
                          10
                          
                          
                          
                          7100
                          
                          
                          
                          100
 
 (c)
              The
      Group made no sales during the three months ended March 31, 2009 and 2008,
      which qualified as sales to a major customer (defined as a customer where
      sales to it represent 10% or more of total
  revenues).
 
 11.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
 
 In
December 2007, the FASB issued SFAS No. 141 (Revised), Business
Combinations.  SFAS No. 141(R) improves the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial reports about a business combination
and requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date.  This Statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008.  The adoption of this Statement is not
expected to have a material impact on the Company’s financial position or
results of operations. The Company will be required to expense costs related to
any acquisitions after December 31, 2008, if any.
 
 In
December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in
Consolidated Financial Statements.  SFAS No. 160 amends ARB 51 to
establish accounting and reporting standards for the non-controlling interest in
a subsidiary and for the deconsolidation of a subsidiary and clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This Statement is effective for fiscal years
beginning on or after December 15, 2008.  The adoption of this
Statement is not expected to have a material impact on the Company’s financial
position or results of operations.
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities, an Amendment of FASB Statement No. 133.  SFAS No.
161 amends SFAS No. 133 and requires entities to enhance their disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under SFAS No. 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entity’s financial position, financial performance, and
cash flows.  SFAS No. 161 is effective for fiscal years beginning on
or after November 15, 2008.  The adoption of SFAS No. 161 is not
expected to have a material impact on the Company’s financial position or
results of operations.
  F-21
  WLG
Inc.
 
 Notes
to the Consolidated Financial Statements
 Three
months ended March 31, 2009 and 2008
 11.
              RECENT
      ACCOUNTING PRONOUNCEMENTS
(CONTINUED)
 
 In
February 2008, the FASB issued FASB Staff Position (“FSP”) 157-2, Effective Date
of FASB Statement No. 157 (“FSP 157-2”), which delays the effective
date of SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), until 2009.
The Group is currently evaluating the inputs and techniques used in these
measurements, including items such as impairment assessments of goodwill and
intangible assets impairment testing. The Group adopted SFAS No. 157 for
non-financial assets and non-financial liabilities effective January 1, 2009.
The adoption of SFAS No. 157-2 does not have a material impact on the
Group’s results of operations, financial position, and cash flows.
 
 In June
2008, the FASB issued EITF Issue No. 08-4, "Transition Guidance for Conforming
Changes to Issue No. 98-5" ("EITF No. 08-4"). The objective of EITF No. 08-4 is
to provide transition guidance for conforming changes made to EITF No. 98-5,
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios", that result from EITF No. 00-27
"Application of Issue No. 98-5 to Certain Convertible Instruments", and SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity". This Issue is effective for financial statements issued
for fiscal years ending after December 15, 2008, with early application
permitted. The adoption of EITF No. 08-4 is not expected to have a material
impact on the Company’s financial position or results of
operations.
 
 In
June 2008, the FASB issued EITF Issue No. 07-5, “Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF
No. 07-5”). EITF No. 07-5 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and interim periods within those
fiscal years. Early application is not permitted. Paragraph 11(a) of SFAS No.
133, "Accounting for Derivatives and Hedging Activities" ("SFAS No. 133"),
specifies that a contract that would otherwise meet the definition of a
derivative but is both (a) indexed to the Company's own stock and (b) classified
in stockholders' equity in the statement of financial position would not be
considered a derivative financial instrument. EITF No.07-5 provides a new
two-step model to be applied in determining whether a financial instrument or an
embedded feature is indexed to an issuer's own stock and thus able to qualify
for the SFAS No. 133 paragraph 11(a) scope exception. The adoption of EITF
No.07-5 does not have a material impact on the Group’s results of
operations or financial position.
  F-22





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





General





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





WLG's business is conducted by its
operating subsidiaries, which, as of March 31, 2009, included the following
entities: Wako Express (HK) Co. Ltd. (“WEHK”), Wako Air Express (HK) Co. Ltd.
(“WAE”), Wako Express (China) Co. Ltd. (“WE China”), WLG (USA) LLC (“WLG (USA)”)
(formerly dba “Kay O'Neill”), Mares-Shreve & Associates, Inc.
(“MSA”),  Asean Cargo Services Pty Limited (“Asean”),  WLG
(UK) Limited (“WLG (UK)”) and World Commerce Services, LLC,
(“WCS”).





WLG was incorporated in Delaware on
December 2, 2003, under the name Wako Logistics, Inc.  In January
2004, we changed the Group’s name to Wako Logistics Group, Inc., and, in
December 2007, we changed its name to WLG Inc.  Under our certificate
of incorporation, we were initially authorized to issue 100 million shares of
common stock, par value $0.001 per share.  On the date of our first
name change, we reduced the number of authorized shares to 60 million, of which
55 million shares were designated as common stock, and 5 million shares were
designated as blank check preferred stock.  Immediately following the
formation of WLG, Mr. Christopher Wood (“Mr. Wood”) became 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 in exchange for 100% of the outstanding
shares of common stock of WEHK and WAE.  After these share exchanges,
WEHK and WAE became wholly-owned subsidiaries of WLG. Following this
transaction, Mr. Wood owned all 20,001,000 shares of our common stock then
issued and outstanding.





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




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





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




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





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




3




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




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





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





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





Effective July 31, 2007, WLG acquired
all of the membership interests of WCS in exchange for WLG common stock and
cash.  WCS, incorporated in Illinois in January 2004, is the successor
to a company of the same name, which began business in 1976.  Like its
predecessor, WCS is a non-asset based freight forwarding company and provides a
full range of air and sea freight forwarding, logistics and customs brokerage
services.  It serves a wide range of customers that primarily import
products by sea from Asia, with a heavy emphasis on shipments from
China.  In addition to its head office in Schaumburg, Illinois, WCS
has offices in Long Island, New York, 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, no other business activities are
carried on by the parent company, WLG Inc.




4




Overview





We are a global, non-asset based freight
forwarder providing supply chain logistics services, including freight
forwarding, customs brokerage and Value Added Services (“VAS”) to our
customers.  We do not own or operate any transportation assets such as
aircraft, ships, trucks, river barges or railroads.  Instead, we
contract with companies that own and operate commercial transportation
assets of all types as a means of providing both regional and international
freight forwarding services to our customers.





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





Our revenues are generated from the air,
sea and local freight transportation services that we arrange, customs brokerage
services we perform and the VAS we provide such as scanning, pick and pack,
price ticketing and warehousing of goods.  We believe that our
customers benefit from the extensive experience we have in arranging the
transportation of freight, performing customs clearance services and providing
VAS in the 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,
which we have established over the last 25 years.





Freight Forwarding and Value Added
Services





Due to the volume of shipments we
arrange, we are generally able to negotiate buy rates for transportation
services that are lower than the rates our customers could negotiate directly
with transportation providers.  Often, the shipping rates we negotiate
may reflect the volumes of freight that we arrange to have
shipped.  As a result, our customers, by having us arrange their
freight shipments, may benefit from lower rates, and we, in turn, 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 amounts and
volumes of shipments we book.  Direct transportation costs are our
largest variable expense.  Personnel costs represent the second
largest expense for our freight operations.  Over time, we have gained
the experience necessary to allow us to project our staffing needs based on the
number of customer orders we fulfill.  Nonetheless, staff costs are
less flexible than other variable costs so that, in the short term, we may not
be able to alter our staff levels to adjust for unexpected peaks and downturns
in our business.





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





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





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





As part of our freight forwarding
business, we often provide VAS services to our customers.  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.




5




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





Customs Brokerage
Operations





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





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





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





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




Global Agency
Network





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




6




We work with over 300 overseas agents
worldwide, many of whom that have offices in strategic cities in Europe, North
and South America, Africa and the Middle East.  As a result, we may be
represented by more than one agent in many cities, and we do not generally need
to rely on a single agent in any one city.




In addition to performing freight
forwarding support services for us, these agents are an important sales and
marketing resource.  By relying on these agents to help us obtain new
business and market our services, we may be able to expand our global activities
without the costs typically associated with the ownership and maintenance of
company-owned offices.  Given the importance of overseas cargo agents
to our business, we believe it is critical that senior management be involved on
a regular basis to maintain and strengthen these working
relationships.  Our mutual goal is to provide and receive increased
business through our network of cargo agents. Lastly, our costs to retain these
agency relationships are nominal, and mostly include only management time and
travel costs.  However, because we normally have to split the revenue
with these cargo agents, the profit we earn per job is less than what we may
earn if our own offices handled both the import and export sides of a shipping
transaction.  In addition, it is more difficult to ensure the same
level of service to a customer when part of a shipment is handled by an
independent agent.




Results of
Operations





THREE MONTHS
ENDED MARCH 31, 2009 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2008.




Results of
Operations





Our revenues for the first quarter of
2009 were adversely affected by the economic downturn that began in 2008 and
which has continued into 2009.  Not only did we book less business in
the first quarter of 2009 than we did in the same period of 2008, but we also
found that shipping rates worldwide fell by significant amounts.  Both
of these factors resulted in a decline in our revenues.  Falling rates
did not necessarily impact our profitability, but the declining volumes of
cargos shipped by our customers did have a material effect on
profitability.




Total revenues for the three months
ended March 31, 2009, decreased by about $23.04 million, or 43%, compared with
the same period in 2008, from approximately $54.10 million to $31.06
million.  Our Hong Kong operations reported decreased revenues of
$3.80 million.  Revenues from our China offices fell by $1.81
million.  Our US operations reported a combined decrease in revenues
of $13.53 million.  Of this total decrease, about $1.24 million is
from WLG (USA), $1.31 million is from MSA and $10.98 million is from
WCS.  Lastly, Asean’s revenues declined by $3.21 million, and WLG
(UK)’s revenues fell by $0.69 million.




Gross profit decreased from $6.74
million for the three months ended March 31, 2008, to $4.50 million for the same
period in 2009, for a decrease of $2.24 million, primarily due to a decline in
the volume of freight shipped by our customers.





The Group's gross margin increased from
12.5% for the three months ended March 31, 2008, to 14.5% for the same period in
2009.  The increase in our gross margin is due to several factors,
including reductions in fuel surcharges levied by the various airlines and
shipping lines and lower rates for cargo space.  Falling shipping
rates have the effect of reducing our gross revenues and increasing our gross
margin.  This occurs because the direct shipping charges, which are
passed on to the customer, result in lower gross revenues, but leave us in many
cases with the ability to bill the same amount for our services, regardless of
the rates charged by shipping lines and air carriers.




7




Total operating expenses decreased to
about $5.60 million for the three months ended March 31, 2009, as compared to
approximately $6.37 million incurred for the same period in 2008, for a decrease
of $0.77 million.  In light of reduced revenues, we did take
steps  to reduce our overhead costs, including freezing salaries and
making headcount reductions throughout the Group.  For the three
months ended March 31, 2009, salaries and related personnel costs decreased by
about $0.34 million, or 8%, from $4.09 million to $3.75
million.  Other selling and administrative costs decreased by
approximately 18% from $1.96 million to $1.61 million, which, when combined with
the decrease in personnel costs, resulted in a total reduction of approximately
$0.69 million in operating costs, not including amortization and
depreciation.  Amortization and depreciation expenses decreased from
$0.32 million to $0.24 million, or about 25%.  Most of this decrease
relates to amortization expense of intangible assets.  There was no
amortization for MSA for the three months ended March 31, 2009, because the cost
basis of MSA’s intangible assets was written down to zero.  In
addition, the amortization expense recorded by WLG (USA) and WLG (UK),
decreased because of an extension in the useful life of their intangible
assets.  SeeOther Operating
Expensesbelow.




After the provision for income taxes,
the Group recorded a net loss of $1.04 million for the three months ended March
31, 2009, compared to net income of $6,000 for the same period in
2008.  Hong Kong and China’s operations reported a combined net income
of $0.34 million for the three months ended March 31, 2009, compared with net
income of $0.51 million for the same period in 2008, for a decrease of
approximately $0.17 million.  The net loss of our US operations
increased from $5,000 for the three months ended March 31, 2008, to $0.49
million for the same period in 2009.  WLG (USA), MSA and WCS reported
net income of $0.11 million, net loss of $77,000 and net loss of $0.52 million,
respectively for the three months ended March 31, 2009, compared to net loss of
$52,000, net income of $44,000 and net income of $3,000, respectively, for the
same period in 2008.  Asean reported a net loss of $0.33 million for
the three months ended March 31, 2009, compared to net income of $74,000 for the
same period in 2008.  Asean’s net loss is mainly due to provisions for
doubtful debts of approximately $0.1 million and $0.31 million for certain cargo
claims related to one of its customers that filed for bankruptcy late in the
first quarter of 2009.  WLG (UK) reported a net income of $42,000 in
this period, compared to a net loss of $0.18 million for the first quarter of
2008.  The parent company’s loss increased by about $0.20 million for
the three months ended March 31, 2009, compared to the same period last
year.  In 2008, all costs for two officers were charged to
operations.  In 2009, because of a realignment of responsibilities,
the salaries of these two officers, which totaled about $0.17 million, were
charged to Group overhead.




Segment Information





Air
freight operations:  Revenues from our air
freight operations decreased from $9.49 million for the three months ended March
31, 2008, to about $4.53 million for the same period in 2009, for a decrease of
$4.96 million.  Most of the decrease is attributable to our China and
Hong Kong operations, which experienced a decline in revenues of $2.33 million
and $1.38 million, respectively.  Revenues fell because of a lack of
demand for products and a reluctance of customers to incur the higher per unit
costs to ship their goods by air.  All of the remaining
subsidiaries  reported a decrease in their air freight revenues,
representing a total decrease of about $1.25 million.




Cost of sales for our air freight
operations decreased from $7.97 million for the three months ended March 31,
2008, to $3.56 million for the same period in 2009, mainly as a result of a
decline in the volumes of cargo shipped.





The Group’s gross profit margin for its
air freight business increased from 16.0% for the three months ended March 31,
2008, to 21.5% for the same period in 2009.  Most of this increase
is due to lower fuel surcharges and to a decline in cargo rates charged by
the airlines for the three months ended March 31, 2009, compared to the same
period in 2008.





Segment overhead for our air freight
operations decreased by approximately $0.37 million, from $1.27 million for the
three months ended March 31, 2008, to $0.90 million for the same period in
2009.




Net segment income for our air freight
operations is approximately $77,000 for the three months ended March 31, 2009,
compared to net income of $0.25 million for the same period in 2008, for a
decrease of $0.17 million.  Our Hong Kong and China air freight
operations reported net incomes of approximately $101,000 and $26,000 for the
three months ended March 31, 2009, respectively, compared to net incomes of
approximately $183,000 and $58,000, respectively, for the same period in 2008,
for a combined decrease of $114,000.  In addition, Asean and WCS
reported net losses of $32,000 and $26,000, respectively, compared to net
incomes of $22,000 and $1,000, respectively, for the same period in
2008.  WLG (USA) posted a net income of $12,000 for the three months
ended March 31, 2009, compared to a net loss of $13,000 for the same period in
2008.




8




Sea
freight operations:Revenues from our sea
freight operations decreased from approximately $29.06 million in the first
quarter of 2008 to $14.48 million for the same period in 2009, for a decrease of
$14.58 million.  All of our operating subsidiaries reported declines
in their sea freight revenues.  For the three months ended March 31,
2009, WEHK, WE China, WLG (USA), MSA, WCS, Asean and WLG (UK) reported revenues
of $1.53 million, $1.87 million, $0.94 million, $1.27 million, $5.31 million,
$2.36 million and $1.20 million, respectively, compared to $3.01 million, $2.30
million, $2.07 million, $2.43 million, $13.18 million, $4.64 million and $1.43
million, respectively, for the same period in 2008.  In all cases, the
decline in revenues suffered by our operating companies resulted from less cargo
shipped and falling shipping rates.





Cost of sales for our sea freight
operations decreased from $25.07 million for the three months ended March 31,
2008, to $11.63 million for the same period in 2009, as a result of the
decreases in cargo shipped and shipping rates.




The Group’s gross profit margin
increased from approximately 13.7% for the three months ended March 31, 2008, to
19.6% for the same period in 2009.  Gross margins tend to rise in
periods of falling shipping rates because we earn about the same amount per
shipment, but incur lower, direct shipping costs, which we recharge to our
customers.




Total segment overhead attributable to
our sea freight business decreased by $0.70 million, or 18%, from approximately
$3.79 million for the three months ended March 31, 2008, to $3.09 million for
the same period in 2009.  Most of this reduction is due to decreases
in legal and professional fees, travel and entertainment expenses and personnel
costs, which included the reallocation of certain payroll costs from this
segment to the parent company.




Net segment loss for our sea freight
operations is approximately $0.25 million for the three months ended March 31,
2009, compared to net income of $0.20 million for the same period in
2008.  Both WEHK and WE China reported net incomes of $173,000 and
$98,000, respectively, for the three months ended March 31, 2008, which compares
to $154,000 and $57,000 for the same period in 2009.  MSA and WCS
reported a net loss of $71,000 and $0.32 million, respectively, for the three
months ended March 31, 2009, compared to net incomes of $40,000 and $2,000 for
the same period in 2008.  WLG (USA) and WLG (UK) reported net incomes
of $94,000 and $97,000, respectively, for the three months ended March 31, 2009,
compared to net losses of $39,000 and $96,000 for the same period in
2008.  In addition, Asean posted a $0.26 million net loss for the
three months ended March 31, 2009, compared to net income of $22,000 for the
same period in 2008.  Asean’s loss is mainly due to a provision of
approximately $0.3 million it made to reserve for potential claims relating to
the shipments of cargo for a customer that became bankrupt in the first quarter
of 2009.





Customs
brokerage services:Asean,
MSA, WLG (UK) and WCS each have a division that provides customs brokerage
services.  For the three months ended March 31, 2009, revenues from
customs brokerage services totaled approximately $12.06 million, compared to
$15.55 million for the same period in 2008, for a decrease of about $3.49
million.  Some of the decline in revenues is due to the US companies
paying less duty on behalf of their customers and assisting them to use certain
procedures that allow direct payment to the government on credit
terms.  Direct and administrative costs for this segment totaled about
$12.33 million, producing a net loss of $0.27 million for the three months ended
March 31, 2009, compared to a net loss of $48,000 for the same period in
2008.  Most of the loss is attributable to Asean and WCS, which
reported net losses of $41,000 and $174,000, respectively, for the three months
ended March 31, 2009, compared to net incomes of $30,000 and $1,000 for the same
period in 2008.  MSA’s net loss in this segment is approximately
$5,000, which compares to a net income of about $4,000 for the three months
ended March 31, 2008.  WLG (UK) reduced its net loss by $32,000, from
$83,000 for the three months ended March 31, 2008, to a net loss of $51,000 for
the same period in 2009.




9





Other Operating
Expenses





Salaries and
allowances




Salaries and related expenses decreased
by $0.34 million, or 8%, from $4.09 million for the three months ended March 31,
2008, to $3.75 million for the same period in 2009.  Salary expense
decreased mainly due to reductions in staff in our Hong Kong, US and UK
operations.




Rent




Rent expense for our facilities
decreased by 9% from $0.47 million for the three months ended March 31, 2008, to
$0.43 million for the same period in 2009, for an overall decrease of $0.04
million.  Rent expense of WLG (USA) decreased by $15,000 because the
lease for WLG (USA)’s Chicago office expired at the end of September 2008, and
was not renewed.    Shortly after the acquisition of WCS,
all of WLG (USA)’s operations were  moved to WCS’s Chicago
office.  In addition, Asean and WLG (UK) reported a decrease in rental
expense of $20,000 and $26,000, respectively, because of a weakening in their
local currencies, and because WLG (UK) paid duplicate rent in the first quarter
of 2008 when it moved to its new office and warehouse facilities.  WE
China’s rent expense increased by $18,000 following its move to a larger
warehouse facility at the beginning of 2009.





Other selling and administrative
expenses





Other SG&A expense for the three
months ended March 31, 2009, totaled about $1.18 million, compared to $1.50
million for the same period in 2008, for a decrease of $0.32
million.  This decline is attributable to cost control measures taken
by the Group in 2008.  Late in 2008, we took steps to reduce and/or
limit our general overhead costs and these steps included reviewing all expenses
and then cutting back on many expenses, including overseas traveling,
entertainment, and legal and professional fees.





Depreciation and
Amortization




Depreciation expense for property, plant
and equipment decreased to $83,000 for the three months ended March 31, 2009,
compared to $101,000 for the same period in 2008, for a decrease of
$18,000.





Amortization expense is attributable to
the customer lists acquired in the acquisitions of WLG (USA), Asean, WLG (UK),
the MSA Group and WCS.  In connection with the acquisition of WLG
(USA), we recorded a customer list asset of $0.51 million, which is now being
amortized on a straight-line basis over 4 years.  Asean's customer
list was valued at $1.56 million and is being amortized on a straight-line basis
over 8 years.  WLG (UK)'s customer list was valued at $0.83 million
and is being amortized over 5 years.  A cost of $1.55 million was
assigned to the MSA Group customer list, which was being amortized over
10-years.  In 2007 and 2008, the carrying cost of MSA’s customer list
was reduced by $0.60 million and $0.80 million, respectively due to MSA not
achieving certain earnings targets, and pursuant to an agreement with MSA’s
former shareholders by which they gave up their rights to receive additional
proceeds for the sale of their shares.  As of the end of 2008, MSA's
customer list was fully amortized due to prior amortization and the reductions
of $0.60 million and $0.80 million described above.  WCS’s customer
list was valued at $2.84 million and is being amortized over 9
years.  It is the Group's policy to periodically review the estimated
useful lives of its intangible assets to ensure that the rate of amortization is
consistent with the expected pattern of economic benefits from the intangible
assets.  This review as of December 31, 2008, indicated that the
remaining useful lives for the intangible assets of WLG (USA) and WLG (UK) are 4
years and 5 years, respectively.  Due to this review,  the
remaining useful lives of the intangible assets of WLG (USA) and WLG (UK) were
extended from 1.25 years to 4 years and from 3 years to 5 years, respectively,
effective from January 1, 2009.  For the three months ended March 31,
2009, amortization expense totaled $0.16 million, and is attributable to WLG
(USA), Asean, WLG (UK) and WCS in the approximate amounts of $8,000, $49,000,
$24,000 and $79,000, respectively.  Amortization expense for the three
months ended March 31, 2008 was $0.22 million and related to WLG (USA), Asean,
WLG (UK), the MSA Group and WCS in the approximate amounts of $26,000, $49,000,
$42,000, $22,000 and $79,000, respectively.





10





Interest Expense




Interest expense declined from $0.24
million for the three months ended March 31, 2008, to $0.16 million for this
same period in 2009, for a decrease of $0.08 million.  WLG (USA)
incurred no interest expense for the three months ended March 31, 2009, compared
to interest expense of $23,000 for the same period in 2008, due to the repayment
in full in 2008 of its bank debt.  Asean and WCS’s interest expense
fell by $35,000 and $57,000, respectively, mainly as a result of a decrease in
their bank borrowings.  In addition, the Group incurred interest
expense of about $69,000 for a director’s loan of $0.60 million and $1.7 million
of Series B Preferred Stock.  Under GAAP rules, the dividends on
the Series B Preferred Stock are reported as interest
expense.  Interest expense of $9,000 relates to a loan from another
director, which as of March 31, 2009, had an outstanding balance of $0.19
million.  All director loans and the Series B Preferred Stock carry an
interest rate of 12% per annum.




Other income/
expense





Other income for the three months ended
March 31, 2009, totaled $71,000, compared to other expense of $52,000 for the
same period in 2008, for an improvement of $0.12 million.  The change
from year to year is primarily due to foreign exchange losses during the first
quarter of 2008, and to miscellaneous items of other income in the first
quarter of 2009 and to the elimination of almost all foreign exchange
losses.




Provision for Income
Taxes





For the three months ended March 31,
2009, the Group recorded a net tax benefit of $136,000, compared to a provision
for income taxes of $81,000 for the same period last year.  Asean
incurred an operating loss of $0.62 million for the three months ended March 31,
2009, and recorded a tax benefit of $0.19, at the rate 30%, which is the
statutory rate of tax applicable to Asean’s income.  Income tax of
$40,000 was provided on the net income of $0.25 million attributable to our Hong
Kong operations, for an effective tax rate of 16.5%.  The US
operations of WLG (USA), MSA and WCS are included in a US consolidated federal
income tax return with the Group's parent company, and, together, these
companies reported a consolidated pre-tax loss of approximately $0.83
million.  No tax benefit was recorded for the US losses. State
income taxes of about $11,000 were provided for our US
operations.  After giving effect to all losses and to amortization and
other expenses for which no income tax deduction is allowed, the Group recorded
a net tax benefit of $136,000 on its pre-tax loss of $1.18
million.




LIQUIDITY AND CAPITAL
RESOURCES




For the three months ended March 31,
2009, our operations provided cash of approximately $1.10 million, compared with
cash of $1.59 million provided by operations for the same period in
2008.  For the three months ended March 31, 2009, cash was provided by
the following sources: amortization and depreciation expense of $0.24 million;
provision for bad debts of $0.17 million; other non-cash items of
$3,000;  decreases in trade receivables of $3.87 million; a decrease
in deposits and prepayments of $4,000 and aincrease in other accrued liabilities of
$49,000.  Major components that used cash for operations for the three
months ended March 31, 2009, include: net loss of $1.04 million; decreases in
trade payables of $1.72 million; repayment of $0.21 million for director’s loans
and a decrease in income tax payable of $0.26 million.




Net cash used for financing activities
totaled about $1.12 million for the three months ended March 31, 2009, compared
to net cash of about $0.75 million used by financing activities for the same
period in 2008.  Cash used by financing activities for the three
months ended March 31, 2008, included repayment of bank debt of $1.59 million;
repayment of capital leases of $38,000 and cash dividends of $22,500 paid on
preferred stock; while cash provided by financing activities for this period
included loans from a director of $0.63 million; a decrease in restricted cash
of $0.12 million and an increase in the bank overdraft facility of $0.15
million.  Cash used by financing activities for the three months ended
March 31, 2009, included repayment of bank loans totaling $1.18 million;
repayment of capital lease obligations of $18,000; cash dividends of $22,500
paid on our preferred stock and a decreases in bank overdrafts of
$5,000.  Cash provided by financing activities for the three months
ended March 31, 2009, included a decrease in restricted cash of $0.11
million.




As of March 31, 2009, certain banks in
Hong Kong and China had issued bank guarantees of $0.54 million to several
airlines on behalf of WAE and WE China.  With these guarantees, the
airlines, in turn, grant credit terms to WAE and WE China.  In
general, payments for air freight shipments must be made to the airlines prior
to the time we receive payments from our customers.  These guarantees
are secured by approximately $0.54 million cash held in restricted bank
accounts.  An Australian bank has provided a guarantee of about $0.09
million in favor of the owner of the office premises occupied by
Asean.  In addition, a UK bank has provided a guarantee of $0.43
million to the UK Customs and Excise Department for the benefit of WLG
(UK).  In return for this guarantee, the UK Customs and Excise
Department grants credit terms to WLG (UK).  A parent company
guarantee has been given to the bank.  A parent company guarantee has
also been given as support for the rental obligations related to WLG (UK)’s new
office and warehouse facilities.  This latter guarantee is limited to
an amount equal to three years rent at the date the guarantee is
enforced.  As of March 31, 2009, our obligation under this guarantee
was about $0.74 million.




11




In October 2007, WEHK borrowed $0.28
million to pay income taxes, and this loan, which was repayable in equal
installments over twelve months, was repaid by November 2008.  As of
March 31, 2009, WEHK had no bank debt.





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





Asean has a revolving loan facility in
the face amount of approximately $2.73 million, which is secured by, and based
on, 100% and 80% of its accounts receivable, respectively.  It also
has an overdraft facility with a limit of about $0.46 million.  At
March 31, 2009, Asean's bank debt under its revolving loan and overdraft
facilities was $1.34 million and $0.46 million, respectively, with interest
rates of approximately 9.03% for the receivables line and 8.13% for the
overdraft facility.  Asean's bank, in addition to having a charge over
all of its accounts receivable, holds a first registered mortgage over all of
its remaining assets.  Asean’s overdraft facilities are guaranteed by
the Group’s parent company.




WCS has a revolving loan facility from a
bank in the face amount of $3.0 million.  This facility, which is
secured in part by all of the trade receivables of WCS, MSA and WLG (USA),
allows borrowings equal to 80% of eligible receivables of all three
companies.  As of March 31, 2009, WCS owed approximately $1.37 million
under this facility, which carried an interest rate of 4.25% per
annum.  This loan facility is secured by all of the assets of WCS, WLG
(USA), MSA and by a guarantee from the Group’s parent
company.  The maturity date of this  loan facility is
September 30, 2009.




In the past few years, we expressed a
strong intent to continue executing our business plan, which among other things
calls for us to make strategic acquisitions to supplement our internal
growth.  In 2005, we completed the acquisitions of three freight
forwarding and logistics companies, one of which had a customs brokerage
business.  We followed this in 2006 by acquiring two freight
forwarding and customs brokerage companies.  In July of 2007, we
acquired WCS, which operates both a freight forwarding business and customs
brokerage practice.  Our long-term strategy to acquire companies
offering strong growth opportunities and to pursue aggressive internal growth
has not changed.  However due to the global downturn in business that
began in 2008, we have delayed any acquisition plans that we might have until
there is greater visibility and certainty in the global
markets.




12





Our approximate contractual cash
obligations as of March 31, 2009, are set forth in the table below and are
expected to equal approximately $0.33 million per month over the following
twelve months.





Payments Due by Period (in thousands)Contractual Obligations
            
            Total
            
            
            Less than
              1year
            
            
            1-3 years
            
            
            4-5 years
            
            
            After 5
              yearsLong-term debt
      obligations
            
            $
            787
            
            
            $
            787
            
            
            $
            —
            
            
            
            —
            
            
            
            —Facilities rental and equipment
      lease obligations
            
            $
            4,490
            
            
            $
            1,386
            
            
            $
            1,443
            
            
            $
            570
            
            
            $
            1,091Cargo space commitments
            
            $
            1,790
            
            
            $
            1,790
            
            
            
            —
            
            
            
            —
            
            
            
            —Redeemable preferred
      stock
            
            $
            1,700
            
            
            
            —
            
            
            $
            1,700
            
            
            
            —
            
            
            
            —Total contractual cash obligations
            
            $
            8,767
            
            
            $
            3,964
            
            
            $
            3,143
            
            
            $
            570
            
            
            $
            1,091




During the three months ended March 31,
2009 and 2008, we have not engaged in any:





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




·
            trading activities in non-exchange
      traded contracts.





ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





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





ITEM 4.CONTROLS AND
PROCEDURES





Evaluation of Disclosure Controls and
Procedures





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




Changes in Internal Control Over
Financial Reporting





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




13




Part II: Other Information




Item 1: Legal
Proceedings:





During the three months ended March 31,
2009, the Group was notified by several manufacturers in China that they intend
to file claims against the Group unless payment is made to them for certain
cargoes that were allegedly released by the Company without having proper
documentation and for which the purchaser of the goods has not made
payment.  As of time of filling this Report on Form 10-Q, the Group’s
insurance companies have declined to accept responsibility for these potential
claims.  Pending a final outcome of this matter, the Company has fully
reserved an amount equal to what it believes to be the probable financial
exposure for these potential claims, which it estimates to be about
$305,000.





Except for the foregoing, during the
three months ended March 31, 2009, there have been no material changes to legal
proceedings from those discussed in our Annual Report on Form 10-K for the year
ended December 31, 2008.





Items 1A: Risk
Factors:There have been no
material changes in the Risk Factors set forth in WLG's Annual Report on
Form10-K for the year ended December 31, 2008.




Item 6. Exhibits.





Exhibits





31.1
            Certification of
      the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002 (Rule15d-14(a)).31.2
            Certification of the Chief
      Financial Officer to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
      15d-14(a)32.1
            Certification of
      the Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (Rule
  15d-14(b)).




14




SIGNATURES





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





WLG INC.Date: May 14,
      2009
            By:
            /s/ Christopher
      WoodChristopher
      WoodChief Executive
      Officer,
              ( Principal Executive Officer) and
      DirectorDate: May 14,
      2009
            By:
            /s/ David L.
      KoontzDavid L.
    KoontzChief Financial Officer,
              (Principal Financial Officer and Accounting Officer)
              and Director




15




EXHIBIT
INDEX





Exhibit
              Number
            
            Description of
      Exhibit31.1
            
            Certification of
      the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002(Rule 15d-14(a)).31.2
            
            Certification of the Chief
      Financial Officer to Section 302 of the Sarbanes-Oxley Act of 2002
      (Rule15d-14(a)).32.1
            
            Certification of
      the Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 (Rule
  15d-14(b)).





16