**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 June 30, 2008**





**or**





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




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





**Commission
      file number: 333-113564**





**WLG
      INC.**


(Exact
      name of registrant as specified in its charter)




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




**920
      East Algonquin Road, Suite 120**


**Schaumburg,
      IL 60173**


(Address
      of principal executive offices with zip code)





**224-653-2800**


(Registrant's
      telephone number, including area code)





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





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





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





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





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





**WLG
      Inc.**





**TABLE
      OF CONTENTS**





Part
                I:
            Financial
                InformationItem
                1.
            Financial
                StatementsCondensed
                Consolidated Statements of Operations for the Three and Six Months
                Ended
                June 30, 2007 and 2008
            F-1Condensed
                Consolidated Balance Sheets as of December 31, 2007 and June 30,
                2008
            F-2Condensed
                Consolidated Statements of Cash Flows for the Six Months Ended June
                30,
                2007 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
            17Item
                4.
            Controls
                and Procedures
            17Part
                II:
            Other
                Information
            17Item
                1.
            Legal
                Proceedings
            17Item
                1A.
            Risk
                Factors
            17Item
                5.
            Other
                Information
            17Item
                6.
            Exhibits
            18Signatures
            19




**NOTE
      REGARDING FORWARD LOOKING STATEMENTS**




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




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


2


**WLG
      Inc.**




**Part
      I: Financial Information**





**Item
      1. Financial Statements**




**WLG
          Inc.**
 
 **Consolidated
        Statements of Operations and Other Comprehensive Income**
 3
        and 6
        months ended June 30, 2007 and 2008
 
 *(Dollars
        in thousands except share data and per share amounts)*


**3
                  months ended**
                **June
                  30,**
              
              **6
                  months ended**
                **June
                  30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***Notes*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$**(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)***Revenues:**Freight
              
              
              
              
              
              18,061
              
              
              35,095
              
              
              34,036
              
              
              67,359Agency
                  services
              
              
              
              
              
              1,096
              
              
              997
              
              
              2,157
              
              
              1,964Other
                  services
              
              
              
              
              
              12,724
              
              
              21,508
              
              
              24,998
              
              
              42,379**Total
                  revenues**
              
              
              
              
              
              31,881
              
              
              57,600
              
              
              61,191
              
              
              111,702**Operating
                  expenses**Cost
                  of forwarding/customs
              
              
              
              
              
              (26,857
              )
              
              (50,627
              )
              
              (51,418
              )
              
              (97,992
              )Selling
                  and administrative expenses
              
              
              
              
              
              (4,399
              )
              
              (6,036
              )
              
              (8,606
              )
              
              (12,087
              )Depreciation
                  and amortization
              
              
              
              
              
              (245
              )
              
              (321
              )
              
              (487
              )
              
              (639
              )Total
                  operating expenses
              
              
              
              
              
              (31,501
              )
              
              (56,984
              )
              
              (60,511
              )
              
              (110,718
              )**Income
                  from operations**
              
              
              
              
              
              380
              
              
              616
              
              
              680
              
              
              984**Other
                  income (expense)**Interest
                  income
              
              
              
              
              
              24
              
              
              7
              
              
              33
              
              
              22Interest
                  expense
              
              
              
              
              
              (86
              )
              
              (195
              )
              
              (205
              )
              
              (439
              )Other
                  income (expenses), net
              
              
              
              
              
              15
              
              
              (26
              )
              
              62
              
              
              (78
              )**Income
                  before income taxes**
              
              
              
              
              
              333
              
              
              402
              
              
              570
              
              
              489Provision
                  for income taxes
              
              
              
              
              
              (123
              )
              
              (146
              )
              
              (211
              )
              
              (227
              )**Net
                  income**
              
              
              
              
              
              210
              
              
              256
              
              
              359
              
              
              262Dividend
                  on preferred stock
              
              
              
              
              
              (23
              )
              
              (23
              )
              
              (45
              )
              
              (45
              )**Income
                  applicable to common stock**
              
              
              
              
              
              187
              
              
              233
              
              
              314
              
              
              217Other
                  comprehensive income, net of taxes:Foreign
                  currency translation adjustment
              
              
              
              
              
              67
              
              
              7
              
              
              95
              
              
              80**Total
                  comprehensive income**
              
              
              
              
              
              **254**
              
              
              **240**
              
              
              **409**
              
              
              **297**
  The
        financial statements should be read in conjunction with the accompanying
        notes.
 F-1
 **WLG
              Inc.**
 
 **Consolidated
              Statements of Operations and Other Comprehensive Income**
 3
              and 6
              months ended June 30, 2007 and 2008
 *(Dollars
              in thousands except share data and per share
              amounts)*
 
 **Net
                  Income per share:****Basic
                  earnings per share**
              
              
              ***2***
              
              
              **0.01**
              
              
              **0.01**
              
              
              **0.01**
              
              
              **0.01****Diluted
                  earnings per share**
              
              
              ***2***
              
              
              **0.01**
              
              
              **0.01**
              
              
              **0.01**
              
              
              **0.01****Weighted
                  average common shares outstanding**Basic
              
              
              
              
              
              26,690,080
              
              
              31,400,094
              
              
              26,690,080
              
              
              31,400,094Diluted
              
              
              
              
              
              26,748,446
              
              
              31,400,094
              
              
              26,789,047
              
              
              31,400,094
 The
          financial statements should be read in conjunction with the accompanying
          notes.
 F-2
 **WLG
                Inc.**
 
 **Consolidated
                Balance Sheets**
 At
                December 31, 2007 and June 30, 2008
 *(Dollars
                in thousands except share data and per share
                amounts)*
 
 
 **At**
                **December
                  31,**
                **2007**
              
              **At
                  June 30,**
                **2008***Notes*
              
              *US$*
              
              *US$**(unaudited)***ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              
              
              
              
              1,631
              
              
              2,787Restricted
                  cash
              
              
              
              
              
              649
              
              
              712Trade
                  receivables, net of allowance*(2007:
                  $798; 2008: $487)*
              
              
              
              
              
              22,198
              
              
              21,281Deposits,
                  prepayments and other current assets
              
              
              
              
              
              894
              
              
              1,112Tax
                  prepaid
              
              
              
              
              
              18
              
              
              12**Total
                  current assets**
              
              
              
              
              
              25,390
              
              
              25,904Property,
                  plant and equipment, net
              
              
              
              
              
              1,396
              
              
              1,425Deposits
                  and other non-current assets
              
              
              
              
              
              208
              
              
              57Deferred
                  tax assets
              
              
              
              
              
              246
              
              
              306Intangible
                  assets, net
              
              
              
              
              
              5,505
              
              
              5,071Goodwill
              
              
              
              
              
              9,328
              
              
              9,328**Total
                  assets**
              
              
              
              
              
              42,073
              
              
              42,091**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Bank
                  overdrafts
              
              
              *3*
              
              
              471
              
              
              648Trade
                  payables
              
              
              
              
              
              11,650
              
              
              12,065Other
                  accrued liabilities
              
              
              
              
              
              3,868
              
              
              3,681Bank
                  loans - maturing within one year
              
              
              *3*
              
              
              7,854
              
              
              5,822Current
                  portion of capital lease obligations
              
              
              
              
              
              102
              
              
              76Due
                  to directors
              
              
              *5*
              
              
              1,710
              
              
              1,379Income
                  tax payable
              
              
              
              
              
              314
              
              
              276**Total
                  current liabilities**
              
              
              
              
              
              25,969
              
              
              23,947**Non-current
                  liabilities**Non-current
                  portion of capital lease obligations
              
              
              
              
              
              163
              
              
              127Other
                  non-current liabilities
              
              
              
              
              
              232
              
              
              244Due
                  to a director
              
              
              *5*
              
              
              -
              
              
              63Deferred
                  tax liabilities
              
              
              
              
              
              9
              
              
              8404
              
              
              442Commitments
                  and contingencies
              
              
              *4*
              
              
              -
              
              
              -Series
                  B redeemable preferred stock (Redemption and liquidation value
                  $1,700)
              
              
              *9*
              
              
              -
              
              
              1,700
  The
        financial statements should be read in conjunction with the accompanying
        notes.
 F-3
  **WLG
              Inc.**
 
 **Consolidated
              Balance Sheets**
 At
              December 31, 2007 and June 30, 2008
 *(Dollars
              in thousands except share data and per share
              amounts)*
  
 **At**
                **December
                  31,**
                **2007**
              
              **At
                  June 30,**
                **2008***US$*
              
              *US$**(unaudited)***Stockholders'
                  equity**Preferred
                  stock, US$0.001 par value, 5 million sharesauthorized
                  and none issued
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock, $0.001 parvalue,
                  2.0 million shares authorized and issued (Redemption
                  and liquidation value $1,500)
              
              
              2
              
              
              2Common
                  stock, US$0.001 par value, 55 million sharesauthorized,
                  31,400,094 shares issued and outstanding
              
              
              31
              
              
              31Additional
                  paid-in capital
              
              
              12,760
              
              
              12,765Accumulated
                  other comprehensive income-
                  Foreign currency translation adjustments
              
              
              220
              
              
              300Retained
                  earnings
              
              
              2,687
              
              
              2,904**Total
                  stockholders' equity**
              
              
              15,700
              
              
              16,002**Total
                  liabilities and stockholders' equity**
              
              
              42,073
              
              
              42,091
 The
          financial statements should be read in conjunction with the accompanying
          notes.
 F-4
  **WLG
            Inc.**
 **Consolidated
                Statements of Cash Flows**
 6
                months
                ended June 30, 2007 and 2008
 *(Dollars
                in thousands except share data and per share
                amounts)*
 
 **6
                  months ended**
                **June
                  30,****2007**
              
              **2008***US$*
              
              *US$**(unaudited)*
              
              *(unaudited)***Cash
                  flows from****operating
                  activities:**Netincome
              
              
              359
              
              
              262**Adjustments
                  to reconcile net income to net cash provided by****operating activities**Depreciation
              
              
              161
              
              
              205Amortization
              
              
              326
              
              
              434Allowance
                  for doubtful debts
              
              
              12
              
              
              99Other
                  non-cash items
              
              
              33
              
              
              5**Changes
                  in working capital:**Trade
                  receivables
              
              
              1,177
              
              
              818Deposit,
                  prepayments and other current assets
              
              
              (203
              )
              
              (67
              )Due
                  from related parties
              
              
              4
              
              
              -Trade
                  payables
              
              
              220
              
              
              415Other
                  accrued liabilities
              
              
              401
              
              
              (165
              )Due
                  to directors
              
              
              (99
              )
              
              (205
              )Income
                  tax payable
              
              
              19
              
              
              (92
              )**Net
                  cash provided by operating activities**
              
              
              2,410
              
              
              1,709**Cash
                  flows from investing activities:**Acquisitions
                  of property, plant and equipment
              
              
              (271
              )
              
              (165
              )**Net
                  cash used in investing activities**
              
              
              (271
              )
              
              (165
              )**Cash
                  flows from financing activities:**Restricted
                  cash
              
              
              (122
              )
              
              (63
              )Bank
                  overdrafts
              
              
              (42
              )
              
              177Bank
                  loans repaid
              
              
              (964
              )
              
              (2,032
              )Capital
                  lease obligations paid
              
              
              (60
              )
              
              (62
              )Advance
                  from director
              
              
              -
              
              
              1,637Payment
                  of dividend on preferred stock
              
              
              (45
              )
              
              (45
              )**Net
                  cash****used
                  in financing activities**
              
              
              (1,233
              )
              
              (388
              )**Net
                  increase in cash and cash equivalents**
              
              
              906
              
              
              1,156**Cash
                  and cash equivalents at beginning of period**
              
              
              1,528
              
              
              1,631**Cash
                  and cash equivalents at end of period**
              
              
              2,434
              
              
              2,787
 The
          financial statements should be read in conjunction with the accompanying
          notes.
 F-5
 **WLG
                Inc.**
 
 **Notes
                to the Consolidated Financial Statements**
 3
                and 6
                months ended June 30, 2007 and 2008
 *(Dollars
                in thousands except share data and per share
                amounts)*
 
 **1.**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION**
 
 WLG
        Inc.
        (“WLG”, the “Company”, or the “Group”) (formerly known as Wako Logistics Group,
        Inc.) was incorporated on December 2, 2003 pursuant to the laws of Delaware
        in
        the United States of America, with authorized and outstanding share capital
        of
        100 million shares of common stock, par value of $0.001 per share. All
        outstanding common stock was issued to Mr. Christopher Wood (“Mr
        Wood”).
 
 On
        January 8, 2004, WLG changed its name to Wako Logistics Group, Inc. On the
        same
        date, its authorized number of shares was reduced to 60 million shares, of
        which
        55 million shares were common stock, and 5 million shares were preferred
        stock.
 
 Pursuant
        to the Share Exchange Agreements entered into between WLG and Mr. Wood (and
        his
        nominee) on January 18, 2004, WLG consummated a combination with Wako Express
        (H.K.) Company Limited (“WEHK”) and Wako Air Express (H.K.) Company Limited
        (“WAE”) (collectively, “Operating Subsidiaries”) by the issuance of 20,000,900
        shares of WLG common stock to Mr. Wood in exchange for 100% of the outstanding
        stock of WEHK and WAE.
 
 After
        the
        share exchanges, WLG became the parent and controlling company of the Operating
        Subsidiaries, and Mr. Wood became the controlling shareholder of
        WLG.
 
 The
        transfer of Mr. Wood’s interests in the Operating Subsidiaries to WLG was a
        reorganization of companies under common control and has been accounted for
        effectively as a pooling of interests, and the consolidated financial statements
        of the Group have been presented as if the Operating Subsidiaries had been
        owned
        by WLG since the earliest date covered by these financial
        statements.
 
 WEHK
        was
        incorporated in Hong Kong on June 4, 1982. Since its inception, WEHK’s principal
        activity has been the provision of sea freight forwarding services.
 
 WAE
        was
        incorporated in Hong Kong on February 24, 1989, and since that date, WAE’s
        principal activity has been the provision of air freight forwarding
        services.
 
 In
        July
        and November 2004, the Group established two 100% owned subsidiaries, Wako
        Express (China) Co. Ltd. (“WE China”) in the People’s Republic of China (“PRC”)
        and Wako Express (China) Co Limited (“WECCL”) in Hong Kong. WE China began
        business in China in February 2005 as a full-service freight forwarding company.
        WECCL had not commenced business as of June 30, 2008.
 
 On
        April
        1, 2005, WLG completed the acquisition of 100% of the voting interests in
        Kay
        O’Neill (USA) LLC (“KON”), an Illinois limited liability company based in
        Chicago, Illinois. KON changed its name to WLG (USA) LLC (“WLG (USA)”) in June
        2005, and, as of the end of 2006, had discontinued the use of the name KON.
        The
        total purchase price for KON consisted of a cash payment of $1,000 and a
        professional fee of $50. WLG (USA) is a non-asset based freight forwarding
        company and provides freight forwarding and logistics services to its
        customers.
  F-6
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **1.**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION
                  (CONTINUED)**
 
 Effective
        October 1, 2005, WLG acquired all of the issued and outstanding shares of
        common
        stock of Asean Logistics, Inc. (“ALI”), a California corporation, in exchange
        for 250,000 restricted shares of WLG’s common stock. Concurrent with the
        acquisition, WLG, by way of a contribution to capital, transferred all of
        the
        ALI shares to WLG (USA).
 
 ALI
        was a
        non-asset based freight forwarding company and provided freight forwarding
        services to its customers who ship products primarily between Asia and the
        United States. As of December 31, 2007, all administrative and accounting
        functions for ALI 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 state, provides freight
        forwarding and customs brokerage services to its customers. Sea Systems,
        incorporated on February 26, 1991 in Washington state, is a non-asset based
        freight forwarder and provided air and sea freight forwarding and related
        logistics services to its customers. As of June 30, 2008, all of Sea Systems
        operations had been combined with those of MSA. MSA mainly serves customers
        that
        ship products from Asia to the US.
 
 On
        July
        31, 2007, the Group acquired all of the membership interests in World Commerce
        Services LLC. WCS is based in Schaumburg, Illinois and also has offices in
        New
        York, Atlanta, Los Angeles and San Francisco. It is a non-asset based freight
        forwarding company and provides a full range of logistics and customs brokerage
        services to its customers, specializing in freight imports from Asia, mostly
        by
        sea, and with an emphasis on imports from China.
  F-7
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **1.**
              **ORGANIZATION
                  AND BASIS OF PRESENTATION
                  (CONTINUED)**
 
 On
        December 7, 2007, the Company filed an amendment to the Company’s Restated
        Certificate of Incorporation to change the Company’s name from Wako Logistics
        Group, Inc. to WLG Inc., which became effective December 21, 2007.
 
 As
        of
        June 30, 2008, all subsidiaries are wholly-owned and all material intercompany
        balances and transactions have been eliminated in consolidation.
 
 The
        accompanying financial data as of June 30, 2008, and for the 3 and 6 months
        ended June 30, 2007 and 2008 have been prepared by the Company without
        audit.
 
 Certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with accounting principles generally accepted in the
        United States of America have been condensed or omitted pursuant to such
        rules
        and regulations. However, the Company believes that the disclosures herein
        are
        adequate to make the information presented not misleading. These financial
        statements should be read in conjunction with the Company’s audited consolidated
        financial statements and notes thereto for the year ended December 31,
        2007.
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates that affect the reported amounts of assets, liabilities, revenues
        and
        expenses and the disclosure of contingent assets and liabilities. Actual
        results
        could differ from these estimates.
 
 The
        unaudited, interim consolidated financial statements of the Company have
        been
        prepared in accordance with accounting principles generally accepted in the
        United States for interim financial information. In the opinion of management,
        all adjustments (which include only normal recurring adjustments) necessary
        to
        present fairly the financial position as of June 30, 2008, and results of
        operations for the 3 and 6 months ended June 30, 2007 and 2008 and cash flows
        for the 6 months ended June 30, 2007 and 2008, have been made. The results
        of
        operations for the 3 and 6 months ended June 30, 2007 and 2008, are not
        necessarily indicative of the operating results for the full
        year.
  F-8
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **2.**
              **EARNINGS
                  PER SHARE**
 
 Earnings
        per share were computed as follows:
 **3
                  months ended June 30, 2007****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              210Dividends
                  on convertible redeemable preferred stock
              
              
              (23
              )
              
              2,000,000
              
              
              0.01Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              187
              
              
              25,390,080Additional
                  common stock to be issued as earn-out
                  payment
              
              
              --
              
              
              1,300,000187
              
              
              26,690,080
              
              
              0.01Effect
                  of dilutive securitiesEmployee
                  stock options
              
              
              -
              
              
              58,366Warrants*(Note
                  #)*
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              187
              
              
              26,748,446
              
              
              0.01
  F-9
 **WLG
              Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 3
              and 6
              months ended June 30, 2007 and 2008
 *(Dollars
              in thousands except share data and per share
              amounts)*
 
 **2.**
              **EARNINGS
                  PER SHARE (CONTINUED)**
 
 **6
                  months ended June 30, 2007****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              359Dividends
                  on convertible redeemable preferredstock
              
              
              (45
              )
              
              2,000,000
              
              
              0.02Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              314
              
              
              25,390,080Additional
                  common stock to be issued asearn-out
                  payment
              
              
              -
              
              
              1,300,000Income
                  available to common stockholders
              
              
              314
              
              
              26,690,080
              
              
              0.01Effect
                  of dilutive securitiesEmployee
                  stock options
              
              
              -
              
              
              98,967Warrants*(Note
                  #)*
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              314
              
              
              26,789,047
              
              
              0.01
  F-10
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **2.**
              **EARNINGS
                  PER SHARE (CONTINUED)**
 
  **3
                  months ended June 30, 2008****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              256Dividends
                  on convertible redeemable preferred stock
              
              
              (23
              )
              
              2,000,000
              
              
              0.01Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              233
              
              
              31,400,094
              
              
              0.01Effect
                  of dilutive securitiesEmployee
                  stock options*(Note
                  #)*
              
              
              -
              
              
              -Warrants*(Note
                  #)*
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              233
              
              
              31,400,094
              
              
              0.01
  F-11
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
  **2.**
              **EARNINGS
                  PER SHARE (CONTINUED)**
  
 **6
                  months ended June 30, 2008****Income**
              
              **Weighted
                  average number of shares**
              
              **Per
                  share amount***US$*
              
              
              
              *US$**(Unaudited)*
              
              
              
              *(Unaudited)*Net
                  income
              
              
              262Dividends
                  on convertible redeemable preferred
                stock
              
              
              (45
              )
              
              2,000,000
              
              
              0.02Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              217
              
              
              31,400,094
              
              
              0.01Effect
                  of dilutive securitiesEmployee
                  stock options*(Note
                  #)*
              
              
              -
              
              
              -Warrants*(Note
                  #)*
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock*(Note
                  #)*
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming
                  conversion of dilutive securities
              
              
              217
              
              
              31,400,094
              
              
              0.01
  
 *#:*
              For
                  2007, common stock was not increased by the 2,000,000 shares related
                  to
                  the Series A convertible preferred stock and the conversion of
                  the 100,000 outstanding warrants granted to a consultant in exchange
                  for
                  services rendered. For 2008, common stock is not increased by the
                  2,000,000 shares related to the Series A convertible preferred
                  stock, the
                  500,000 shares issuable to the sellers of WCS upon conversion of
                  the
                  Series A convertible preferred stock, the conversion of the 100,000
                  outstanding warrants granted to a consultant for services rendered,
                  or the
                  exercise of 245,000 outstanding options because the effect of increasing
                  the outstanding common stock by approximately 2.10 million and
                  2.84
                  million shares would be anti-dilutive for 2007 and 2008, respectively.
                  The
                  Series B convertible preferred stock was issued on June 30, 2008,
                  and it
                  had no material effect on the earnings per
                  share.
  F-12




**WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **3.**
              **BANKING
                  FACILITIES**
 
 The
                  Group has obtained bank facilities from creditworthy commercial
                  banks as
                  follows:
 
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **June
                  30,**
                **2008***US$*
              
              *US$**(Unaudited)***Facilities
                  granted**-
                  bank guarantees
              
              
              1,148
              
              
              1,275-
                  overdraft facilities
              
              
              591
              
              
              648-
                  bank loans and revolving credit lines
              
              
              12,778
              
              
              9,618-
                  foreign exchange facilities
              
              
              219
              
              
              240-
                  lease facilities
              
              
              235
              
              
              245Total
                  bank facilities
              
              
              14,971
              
              
              12,026
 
 The
        terms
        of the loan facilities, including the amounts and maturity dates, are agreed
        between the banks and the Group from time to time.
 
 Bank
        guarantees of $544 will expire within one year from June 30, 2008, but may
        be
        renewed, provided the Group makes available the cash required by the banks
        to
        collateralize each guarantee. A bank guarantee of $132 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 $599 has no fixed expiration date and is cancelable and/or
        renewable at the option of the bank.
 
 The
        bank
        loan facilities mature on various dates as follows: (i) $276 on October 17,
        2008, and (ii) $5,500 revolving credit facility in November 2008. The remaining
        loan facility of $3,842 is an on-going facility that is subject to review
        as of
        July 31, 2008, and, by its terms, may be terminated by either the bank or
        WLG
        giving 30 days notice to the other party.
 
 The
        bank
        loans and revolving credit facilities of $9,618 are secured as follows: (i)
        term
        loan of
        $276
        is unsecured and repayable within one year by monthly installments, (ii)
        $5,500
        is secured by all of WCS’s assets, including its accounts receivables as well as
        the accounts receivable of WLG (USA) and MSA and a guarantee provided by
        the
        Group’s parent company, and (iii) $3,842 is secured by Asean’s accounts
        receivable and a registered mortgage charge over the assets of
        Asean.
  F-13
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **3.**
              **BANKING
                  FACILITIES (CONTINUED)**
 
 Certain
        of the bank guarantees, totaling $544, are collateralized by cash of $544.
        In
        addition, a bank guarantee of $132 is secured by (i) a letter of support
        from
        the Group’s parent company, and (ii) a registered mortgage debenture over all of
        the assets of Asean. The remaining bank guarantee of $599 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 $648 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 $240, which at June 30, 2008, had not been
        utilized. Asean has a leasing facility of $245, and $9 was outstanding as
        of
        June 30, 2008, and this facility is secured by the assets under lease. In
        addition, both the foreign exchange and leasing facility are secured by a
        comfort letter from the Group’s parent company. As of June 30, 2008 and 2007,
        the weighted average interest rate of the Group’s short-term bank borrowings was
        8.01% and 8.94% per annum, respectively.
 
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **June
                  30,**
                **2008***US$*
              
              *US$**(Unaudited)***Utilized**Committed
                  lines-
                  bank guarantees
              
              
              1,148
              
              
              1,275-
                  overdraft facilities
              
              
              471
              
              
              648-
                  bank loans and revolving credit lines
              
              
              7,854
              
              
              5,822-
                  lease facilities
              
              
              36
              
              
              9Total
                  bank facilities utilized
              
              
              9,509
              
              
              7,755
 
  F-14
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **4.**
              **COMMITMENTS
                  AND CONTINGENCIES**
 
 ***Commitments
        under operating leases***
 The
                  Group rents office space, staff quarters and certain office equipment
                  under non-cancellable operating leases. The following table summarizes
                  these future minimum lease payments for operating leases in effect
                  as of
                  December 31, 2007 and June 30,
                  2008:
 
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **June
                  30,**
                **2008***(unaudited)**US$*
              
              *US$*Within
                  one year
              
              
              1,358
              
              
              1,491Over
                  one year but not exceeding two years
              
              
              968
              
              
              1,069Over
                  two years but not exceeding three years
              
              
              466
              
              
              743Over
                  three years but not exceeding four years
              
              
              250
              
              
              585Over
                  four years but not exceeding five years
              
              
              60
              
              
              400Total
                  operating lease commitments
              
              
              3,102
              
              
              4,288
 
 Rent
                  expense under operating leases for the 6 months ended June 30,
                  2007 and
                  2008, was $449 and $965
                  respectively.
 ***Cargo
                  space commitments***
 The
                  Group in the course of its business enters into agreements with
                  various
                  air and ocean freight carriers pursuant to which the Group is committed
                  to
                  utilize a minimum amount of cargo space each year. As of June 30,
                  2008,
                  the obligation for the minimum amount of cargo space to be used
                  for the
                  following twelve months is $4,744.
  F-15
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **4.**
              **COMMITMENTS
                  AND CONTINGENCIES
                  (CONTINUED)**
 
 ***Contingencies
        - outstanding claims***
 The
                  Group is subject to claims that arise primarily in the ordinary
                  course of
                  business. In general, such claims are covered by insurance policies
                  issued
                  for the Group’s businesses.
 
 As
        of
        June 30, 2008, and subject to the legal proceedings as described below, the
        aggregate, outstanding amount of claims was approximately $20.
  Three
        parties have filed legal actions against the Group totaling about $150. These
        claims are covered by insurance, except for amounts equal to or less than
        the
        deductible payment required under these policies, which total about $35,
        and the
        Company has made a provision for this amount as of June 30, 2008. The Group
        has
        identified potential claims of approximately $48 that might be asserted by
        various parties. The Group believes that the ultimate liability, if any,
        for all
        of these claims, both filed and potential, will not have a material adverse
        effect on its financial position.
 
 WCS
                  has been named as a third-party defendant in pending proceedings
                  filed in
                  the United States District Court for the Southern District of New
                  York and
                  the United States District Court, Central District of California
                  relating
                  to claims arising out of the derailment of a Union Pacific train
                  at
                  Tyrone, Oklahoma on April 21, 2005. The total amount of damages
                  sought
                  equals approximately $6,800, including an unspecified amount for
                  costs of
                  delay, lost profit and lost revenue. The Group intends to vigorously
                  defend each of the foregoing actions. WCS has been advised by its
                  legal
                  counsel that it has been named as a third-party defendant for technical
                  reasons and that the likelihood of any liability being assigned
                  to WCS is
                  minimal, but subject to the normal risks of litigation. Management
                  believes that the disposition or ultimate resolution of this pending
                  litigation will not have a material adverse effect on the financial
                  position of the Group.
 
 
 **5.**
              **RELATED
                  PARTY TRANSACTIONS**
 
 **Name
                  and relationship of related parties**Name
              Relationship
                  with the GroupChristopher
                  Wood (“CW”)
              Shareholder,
                  director and officer of WLGDavid
                  Koontz (“DK”)
              Director
                  and officer of WLG and a director of Asean and WLG
                  (Aust)Join
                  Wing Properties Limited (“JWP”)
              CW
                  is a shareholder and director of
                  JWP
 
 
 **Details
                  of related parties**Name
              
              Principal
                  activities
              
              Ownership*Name
                  of owner*
              
              *%
                  held*JWP
              
              Leases
                  property to CW
              
              CW
              
              100%
  F-16
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **5.**
              **RELATED
                  PARTY TRANSACTIONS
                  (CONTINUED)**
 
 The
        following is a summary of the amounts included in the accompanying balance
        sheets:
 **At**
                **December
                  31,**
                **2007**
              
              **At**
                **June
                  30,**
                **2008***US$*
              
              *US$**(unaudited)***Due
                  to directors (Notes)**CW
              
              
              960
              
              
              692DK
              
              
              750
              
              
              7501,710
              
              
              1,442
 
 Notes :
 (i)
              Amounts
                  due to directors are unsecured, interest-free and repayable on
                  demand
                  except for the director loans of $692 and $750 due to CW and DK
                  respectively, which were used as part of the consideration for
                  the
                  acquisition of the membership interests of WCS, repayment of bank
                  loans
                  and working capital. The loans carry an interest rate of 12% per
                  annum. As
                  of June 30, 2008, the director loan of $750 is to be repaid by
                  12 equal
                  installments beginning on August 1, 2008, and the director loan
                  of $692
                  has no fixed repayment terms.
  (ii)
                On
                    July 1, 2008, the Group issued to CW a $600 promissory note,
                    dated July 1,
                    2008 (the “Note”) to set forth, among other things, the interest rate and
                    repayment terms for $600 in loans that CW previously made to
                    it. The Note
                    bears interest at the rate of 12% per annum and is payable in
                    twelve
                    monthly installments of $50 each, with the first installment
                    due on
                    January 31, 2009. The Note is secured by the Group’s assets and will
                    become immediately due and payable upon the earlier to occur
                    of: (i) and
                    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, or
                    (iv) the termination of CW’s
                    employment.
  **Additional
        details of transactions**
 **3
                  months ended**
                **June
                  30,**
              
              **6
                  months ended**
                **June
                  30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)**US$*
              
              *US$*
              
              *US$*
              
              *US$***Rental
                  paid/payable**JWP
              
              
              27
              
              
              27
              
              
              54
              
              
              54
 
  F-17
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **5.**
              **RELATED
                  PARTY TRANSACTIONS
                  (CONTINUED)**
 
 Summary
        of transactions for the period ended June 30, 2007 and 2008, with directors
        /
        stockholders (unaudited):
 
 **CW**
              
              **DK**
              
              **Total***US$*
              
              *US$*
              
              *US$*January
                  1, 2007
              
              
              439
              
              
              -
              
              
              439Expenses/draws*(Note)*
              
              
              (99
              )
              
              -
              
              
              (99
              )June
                  30, 2007
              
              
              340
              
              
              -
              
              
              340January
                  1, 2008
              
              
              960
              
              
              750
              
              
              1,710Loan
                  from director
              
              
              1,637
              
              
              -
              
              
              1,637Interest
                  accrued
              
              
              82
              
              
              45
              
              
              127Interest
                  paid
              
              
              (23
              )
              
              (45
              )
              
              (68
              )Expenses/draws*(Note)*
              
              
              (264
              )
              
              -
              
              
              (264
              )Converted
                  to redeemable preferred stock
              
              
              (1,700
              )
              
              -
              
              
              (1,700
              )June
                  30, 2008
              
              
              **692**
              
              
              **750**
              
              
              **1,442**
 
 Note :
  ·
            Expenses
                include amounts that were either paid directly to or for the benefit
                of
                CW. 
 
 **6.**
              **SUPPLEMENTAL
                  DISCLOSURES OF CASH FLOW
                  INFORMATION**
 
 **6
                  months ended**
                **June
                  30,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**US$*
              
              *US$***Cash
                  paid for:**Interest
                  expense
              
              
              205
              
              
              380Income
                  taxes
              
              
              192
              
              
              319
 
  F-18
  **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **7.**
              **S****HARE-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 our officers, employees, directors and
        consultants, as well as to officers, employees, directors and consultants
        who
        provide services to any of the Group’s subsidiaries or affiliates. The Plan is
        administered by our board, provided, that the board in the future may appoint
        a
        committee to administer the Plan. At the inception of the Plan, 4,000,000
        shares
        of common stock were approved for the issuance of awards under the Plan,
        which
        amount shall be automatically increased (but not decreased) to 20% of the
        total
        number of the Company’s shares of common stock issued and outstanding on January
        1st of each year beginning on January 1, 2006. Based on shares outstanding
        as of
        January 1, 2008, the number of shares reserved under the Plan was increased
        to
        6,280,019.
 
 In
        general, stock options awarded under the Plan vest over three years and expire
        in a maximum of ten years from their effective dates. However, the Plan permits
        significant latitude to allow the board to grant options with varying terms,
        such as changing the vesting period, the term and exercise price. Once the
        board, under provisions of the Plan, grants an option, the Company will estimate
        the fair value of the option, and compensation expense will be recognized
        over
        the vesting period of the option.
 
 As
        of
        August 2005, the Company had committed to award 200,000 options to purchase
        common stock to one of its officers, and, as of that date, all substantial
        terms
        and conditions for the option were communicated to, and agreed with, the
        officer. As such, the Company established August 2005 as the grant date for
        this
        option. The vesting period for this option is 2 years. The board has now
        formally approved the award.
 
 Effective
        January 15, 2007, the board approved and awarded stock options to three
        employees permitting them to purchase an aggregate of 20,000 shares of the
        Company’s common stock. The vesting period for the January 2007 options is 3
        years.
 
 Effective
        January 8, 2008, the board approved and awarded stock options to an employee
        for
        the purchase of 25,000 shares of the Company’s common stock. The vesting period
        for the January 2008 options is 3 years.
 
 The
        Company accounts for stock-based compensation in accordance with SFAS No.
        123(R), Share-Based Payment (revised 2004). Under this method, the compensation
        expense related to the fair value of stock options charged to the unaudited
        consolidated statement of operations for the six months ended June 30, 2007
        and
        2008, was $33 and $5, respectively. As of June 30, 2008, the compensation
        expense related to non-vested options totaled $18 and is expected to be
        recognized over 27 months. The total intrinsic value of the options outstanding
        and options exercisable as of June 30, 2008 was Nil and $1, respectively.
        No tax
        benefit was recognized for the stock option expense recorded for the six
        months
        ended June 30, 2007 and 2008.
  F-19
  **WLG
        Inc.**
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **7.**
              **S****HARE-BASED
                  PAYMENT (CONTINUED)**
 
 The
        Company estimates the fair value of stock options using the Black-Scholes
        option
        pricing model, with the following assumptions:
 
 **Options
                  granted on****August
                  1,**
                **2005**
              
              **January
                  15,**
                **2007**
              
              **January
                  8,**
                **2008**Risk-free
                  interest rate per annum
              
              
              4.60
              %
              
              4.60
              %
              
              3.59
              %Expected
                  life
              
              
              2
                  years
              
              
              3
                  years
              
              
              3
                  yearsExpected
                  volatility(Note #)
              
              
              45.00
              %
              
              57.79
              %
              
              46.00
              %Expected
                  dividend yield
              
              
              0.00
              %
              
              0.00
              %
              
              0.00
              %Post
                  vesting terminations
              
              
              No
              
              
              No
              
              
              NoWeighted
                  average grant-date fair
                value(per
                  share)
              
              $
              0.28
              
              $
              1.22
              
              $
              0.23
 
 #:
              The
                  expected volatility is based on the underlying share price of WLG’s shares
                  and a comparison to the volatility of the share price of peer
                  companies.
 
 The
        following table shows the outstanding options granted under the
        Plan:
 **Shares**
              
              **Weighted
                  ave. exercise price**
              
              **Weighted
                  ave. remaining contractual term (years)**Outstanding
                  at April 30, 2005 (inception of Plan)
              
              
              -
              
              
              -Granted
                  in 2005
              
              
              200,000
              
              
              1.00Outstanding
                  at December 31, 2005
              
              
              200,000
              
              
              1.00
              
              
              9.58Granted
                  in 2006
              
              
              -
              
              
              -Outstanding
                  at December 31, 2006
              
              
              200,000
              
              
              1.00
              
              
              8.58Granted
                  in 2007
              
              
              20,000
              
              
              2.85Outstanding
                  at December 31, 2007
              
              
              220,000
              
              
              1.17
              
              
              7.71Granted
                  in 2008
              
              
              25,000Outstanding
                  at June 30, 2008
              
              
              245,000
              
              
              1.12
              
              
              7.45Exercisable
                  at June 30, 2008
              
              
              210,000
              
              
              1.09
              
              
              7.15
 
 F-20
 **WLG
              Inc.**
 
 **Notes
              to the Consolidated Financial Statements**
 3
              and 6
              months ended June 30, 2007 and 2008
 *(Dollars
              in thousands except share data and per share
              amounts)*
 **8.**
              **SEGMENTS
                  OF THE BUSINESS**
 
 **(a)**
              **Business
                  segments**
 
 The
        Group
        operates mainly in three business segments, being the provision of (i) air
        forwarding; (ii) sea forwarding; and (iii) customs brokerage services. The Group ’s
        operations by air, sea and customs brokerage services are summarized in the
        following table:
 
 **(i)**  **For
        the 3 months ended June 30, 2007 and 2008 (unaudited)**
 
 **Air
                  forwarding**
              
              **Sea
                  forwarding**
              
              **Customs
                  brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Revenue
              
              
              7,506
              
              
              11,510
              
              
              16,163
              
              
              27,679
              
              
              8,212
              
              
              18,411
              
              
              31,881
              
              
              57,600Costs
                  of forwarding/customs
              
              
              (6,072
              )
              
              (9,752
              )
              
              (13,257
              )
              
              (23,647
              )
              
              (7,528
              )
              
              (17,228
              )
              
              (26,857
              )
              
              (50,627
              )Depreciation
              
              
              (30
              )
              
              (18
              )
              
              (127
              )
              
              (63
              )
              
              (42
              )
              
              (23
              )
              
              (199
              )
              
              (104
              )Interest
                  income
              
              
              13
              
              
              2
              
              
              10
              
              
              4
              
              
              1
              
              
              1
              
              
              24
              
              
              7Interest
                  expense
              
              
              (18
              )
              
              (20
              )
              
              (51
              )
              
              (55
              )
              
              (17
              )
              
              (38
              )
              
              (86
              )
              
              (113
              )Other
                  segment income
              
              
              7
              
              
              (18
              )
              
              8
              
              
              (11
              )
              
              1
              
              
              3
              
              
              16
              
              
              (26
              )Other
                  segment expenses
              
              
              (1,101
              )
              
              (1,307
              )
              
              (2,439
              )
              
              (3,388
              )
              
              (645
              )
              
              (1,177
              )
              
              (4,185
              )
              
              (5,872
              )Taxation
              
              
              (43
              )
              
              (48
              )
              
              (72
              )
              
              (111
              )
              
              (8
              )
              
              (7
              )
              
              (123
              )
              
              (166
              )Segment
                  income (loss)
              
              
              262
              
              
              349
              
              
              235
              
              
              408
              
              
              (26
              )
              
              (58
              )
              
              471
              
              
              699Unallocated
                  parent company expenses
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (261
              )
              
              (443
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              210
              
              
              256Property,
                  plant and equipment - additions
              
              
              43
              
              
              8
              
              
              91
              
              
              24
              
              
              58
              
              
              7
              
              
              192
              
              
              39
 
   F-21
  **WLG
        Inc.**
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
 
 **8.**
              **SEGMENTS
                  OF THE BUSINESS
                  (CONTINUED)**
 
 **(ii)**  **For
        the 6 months ended June 30, 2007 and 2008 (unaudited)**
 
 **Air
                  forwarding**
              
              **Sea
                  forwarding**
              
              **Customs
                  brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Revenue
              
              
              14,754
              
              
              21,002
              
              
              30,191
              
              
              56,740
              
              
              16,246
              
              
              33,960
              
              
              61,191
              
              
              111,702Costs
                  of forwarding/customs
              
              
              (12,087
              )
              
              (17,725
              )
              
              (24,385
              )
              
              (48,715
              )
              
              (14,946
              )
              
              (31,552
              )
              
              (51,418
              )
              
              (97,992
              )Depreciation
              
              
              (54
              )
              
              (34
              )
              
              (234
              )
              
              (126
              )
              
              (50
              )
              
              (45
              )
              
              (338
              )
              
              (205
              )Interest
                  income
              
              
              17
              
              
              6
              
              
              14
              
              
              12
              
              
              2
              
              
              4
              
              
              33
              
              
              22Interest
                  expense
              
              
              (44
              )
              
              (49
              )
              
              (117
              )
              
              (170
              )
              
              (44
              )
              
              (93
              )
              
              (205
              )
              
              (312
              )Other
                  segment income
              
              
              18
              
              
              (24
              )
              
              33
              
              
              (49
              )
              
              12
              
              
              (6
              )
              
              63
              
              
              (79
              )Other
                  segment expenses
              
              
              (2,202
              )
              
              (2,505
              )
              
              (4,824
              )
              
              (6,908
              )
              
              (1,201
              )
              
              (2,364
              )
              
              (8,227
              )
              
              (11,777
              )Taxation
              
              
              (42
              )
              
              (75
              )
              
              (153
              )
              
              (175
              )
              
              (16
              )
              
              (11
              )
              
              (211
              )
              
              (261
              )Segment
                  income (loss)
              
              
              360
              
              
              596
              
              
              525
              
              
              609
              
              
              3
              
              
              (107
              )
              
              888
              
              
              1,098Unallocated
                  parent company expenses
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (529
              )
              
              (836
              )Net
                  (loss) income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              359
              
              
              262Property,
                  plant and equipment - additions
              
              
              51
              
              
              34
              
              
              150
              
              
              83
              
              
              70
              
              
              48
              
              
              271
              
              
              165
 
 **(** **iii)**  **As
        of December 31, 2007 and June 30, 2008 (unaudited)**
 
 **Air
                  forwarding**
              
              **Sea
                  forwarding**
              
              **Customs
                  brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Segment
                  assets
              
              
              6,765
              
              
              6,996
              
              
              15,472
              
              
              14,306
              
              
              4,997
              
              
              6,328
              
              
              27,234
              
              
              27,630Unallocated
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14,839
              
              
              14,461Total
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              42,073
              
              
              42,091
 
 F-22
 **WLG
            Inc.**
 
 **Notes
            to the Consolidated Financial Statements**
 3
            and 6
            months ended June 30, 2007 and 2008
 *(Dollars
            in thousands except share data and per share
            amounts)*
  **8.**
              **SEGMENTS
                  OF THE BUSINESS
                  (CONTINUED)**
  
 (b)
              The
                  table below summarizes the percentage of the Group’s revenues during the
                  three months and six months ended June 30, 2007, and 2008, analyzed
                  by
                  geographical locations:
  **3
                  months ended June 30,**
              
              **6
                  months ended June 30,****2007**
              
              **2008**
              
              **2007**
              
              **2008***(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)*
              
              *(unaudited)**%*
              
              *%*
              
              *%*
              
              *%***Revenues**Americas
              
              
              15
              
              
              47
              
              
              14
              
              
              47Asia
                  and others
              
              
              51
              
              
              23
              
              
              52
              
              
              22Australia
              
              
              19
              
              
              22
              
              
              20
              
              
              23Europe
              
              
              15
              
              
              8
              
              
              14
              
              
              8100
              
              
              100
              
              
              100
              
              
              100
 
 
 (c)
              The
                  Group made no sales during the three months and six months ended
                  June 30,
                  2008, which qualified as sales to a major customer (a major customer
                  is
                  defined as a customer for which sales to it represent 10% or more
                  of total
                  revenues).
  **9.**
              **SERIES
                  B 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 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 Convertible Preferred Stock, par value $0.001. 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 value, redemption value and liquidation value
        of
        $1.00 per share. The Series B Preferred Stock shall pay an annual cumulative
        dividend equal to 12% of the stated value per share. The Company may require
        a
        conversion in the event of a change in control of the Company. Commencing
        24
        months after the date of issuance of the Series B Preferred Stock, the Company
        has the right to redeem all or a portion of the then outstanding shares of
        Series B Preferred Stock at a price of $1.00 per share, subject to adjustment.
        In addition, commencing on the earlier to occur of 24 months after the issuance
        date, or Mr. Wood’s retirement or his holding less than 50.1% of the outstanding
        common stock of the Company, Mr. Wood may cause the Company to redeem any
        or all
        of his outstanding shares of Series B Preferred Stock, at a price of $1.00
        per
        share, subject to adjustment.
 
 F-23
 **WLG
          Inc.**
 **Notes
              to the Consolidated Financial Statements**
 3
              and 6
              months ended June 30, 2007 and 2008
 *(Dollars
              in thousands except share data and per share
              amounts)*
 
 **10.** **RECENT
        ACCOUNTING PRONOUNCEMENTS**
 
 In
        September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
        No.
        157 establishes a framework for measuring fair value within generally accepted
        accounting principles that clarifies the definition of fair value within
        that
        framework and expands disclosures about the use of fair value
        measurements.  SFAS No. 157 does not require any new fair value
        measurements in generally accepted accounting principles.  However,
        the definition of fair value in SFAS No. 157 may affect assumptions used
        by
        companies in determining fair value. On January 1, 2008, the Company
        adopted SFAS 157 with respect to its financial assets and liabilities that
        are
        measured at fair value; the adoption of these provisions did not have a material
        impact on the consolidated financial statements.
  In
        February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
        for Financial Assets and Financial Liabilities—Including an amendment of FASB
        Statement No. 115,” or SFAS 159. SFAS 159 permits entities to
        choose to measure many financial instruments and certain other items at fair
        value. Entities that elect the fair value option will report unrealized gains
        and losses in earnings at each subsequent reporting date. The fair value
        option
        may be elected on an instrument-by-instrument basis, with few exceptions.
        SFAS 159 also establishes presentation and disclosure requirements to
        facilitate comparisons between companies that choose different measurement
        attributes for similar assets and liabilities. Companies may elect the fair
        value option under SFAS 159 for fiscal years beginning after
        November 15, 2007. We elected not to adopt the fair value option of
        SFAS 159 at this time.
 
 In
        December 2007, the FASB issued SFAS No. 141 (Revised), Business
        Combinations.  SFAS No. 141(R) improves the relevance,
        representational faithfulness, and comparability of the information that
        a
        reporting entity provides in its financial reports about a business combination
        and requires an acquirer to recognize the assets acquired, the liabilities
        assumed, and any noncontrolling interest in the acquiree at the acquisition
        date, measured at their fair values as of that date.  This Statement
        applies prospectively to business combinations for which the acquisition
        date is
        on or after the beginning of the first annual reporting period beginning
        on or
        after December 15, 2008.  The adoption of this Statement is not
        expected to have a material impact on the Company’s financial position or
        results of operations. The Company will be required to expense costs related
        to
        any acquisitions after December 31, 2008, if any.
 
 In
        December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
        Consolidated Financial Statements.  SFAS No. 160 amends ARB 51 to
        establish accounting and reporting standards for the noncontrolling interest
        in
        a subsidiary and for the deconsolidation of a subsidiary and clarifies that
        a
        noncontrolling interest in a subsidiary is an ownership interest in the
        consolidated entity that should be reported as equity in the consolidated
        financial statements.  This Statement is effective for fiscal years
        beginning on or after December 15, 2008.  The adoption of this
        Statement is not expected to have a material impact on the Company’s financial
        position or results of operations.
 
 In
        March
        2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
        and
        Hedging Activities, an Amendment of FASB Statement No. 133.  SFAS
        No. 161 amends SFAS No. 133 and requires entities to enhance their disclosures
        about (a) how and why an entity uses derivative instruments, (b) how derivative
        instruments and related hedged items are accounted for under SFAS No. 133
        and
        its related interpretations, and (c) how derivative instruments and related
        hedged items affect an entity’s financial position, financial performance, and
        cash flows.  SFAS No. 161 is effective for fiscal years beginning on
        or after November 15, 2008.  The adoption of SFAS No. 161 is not
        expected to have a material impact on the Company’s financial position or
        results of operations.
 F-24
 **WLG
                Inc.**
 
 **Notes
                to the Consolidated Financial Statements**
 3
                and 6
                months ended June 30, 2007 and 2008
 *(Dollars
                in thousands except share data and per share
                amounts)*
 
 **10.**
            **RECENT
                ACCOUNTING PRONOUNCEMENTS
                (CONTINUED)** 
 On
        May 9,
        2008, the FASB issued SFAS 162, The Hierarchy of GAAP. Per the FASB, the
        GAAP
        hierarchy should be directed to entities because it is the entity (not its
        auditor) that is responsible for selecting accounting principles for financial
        statements that are presented in conformity with GAAP. Accordingly, the GAAP
        hierarchy should reside in the accounting literature established by the FASB.
        SFAS 162 will be effective 60 days after the SEC’s approval of the PCAOB’s
        amendments to AU Section 411. The adoption of this Statement is not expected
        to
        have a material impact on the Company’s financial position or results of
        operations.
 
 In
        May
        2008, the FASB issued SFAS 163, Accounting for Financial Guarantee Insurance
        Contracts, an interpretation of FASB Statement No. 60 to require that an
        insurance enterprise recognize a claim liability prior to an event of default
        (insured event) when there is evidence that credit deterioration has occurred
        in
        an insured financial obligation and clarifies how Statement 60 applies to
        financial guarantee insurance contracts. The adoption of this Statement is
        not
        expected to have a material impact on the Company’s financial position or
        results of operations.
 F-25


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





**General**





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





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





WLG
      was
      incorporated in Delaware on December 2, 2003, under the name Wako Logistics,
      Inc., which in January 2004, was changed to Wako Logistics Group, Inc. In
      December 2007, Wako Logistics Group, Inc. 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
      shares, of which 55 million shares were designated as common stock, and 5
      million shares were designated as blank check preferred stock. Immediately
      following the formation of WLG, Mr. Christopher Wood (“Mr. Wood”) became our
      sole shareholder.





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





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




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





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




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





Pursuant
      to the Closer Economic Partnership Agreement (“CEPA”) signed in September 2003
      between Hong Kong and the PRC, 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 and other logistics services for exports and imports
      between China and the rest of the world. WE China has eight offices in China,
      including offices in what we believe are four of China's most important
      commercial centers: Beijing; Shanghai; Shenzhen and Guangzhou.


3







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





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





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





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





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




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





**Overview**





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


4


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





**Freight
      Forwarding and Value Added Services**





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





A
      significant portion of the expenses for our freight forwarding business is
      variable and relates directly to the amounts and volumes of shipments we book.
      Direct transportation costs are our largest variable expense. Personnel costs
      represent the second largest expense for our freight operations. Over time,
      we
      have gained the experience necessary to 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 ratio
      of
      weight and cubic capacity for all of our air freight shipments. In general,
      this
      improves our profitability on these shipments.





In
      order
      to maintain an adequate “inventory” of space on air carriers, we frequently
      commit to use a minimum amount of space with the airlines prior to receiving
      orders from our customers. To the extent we do not use such space, we incur
      a
      liability to the airlines. We also have contracts with ocean shipping lines
      pursuant to which the shipping lines undertake to provide us a certain amount
      of
      container space at agreed rates. Under the normal operating practices of this
      industry, ocean lines often do not charge freight forwarders for space they
      are
      unable to utilize. However, if an ocean shipping line did choose to enforce
      the
      stated terms of these contracts, we would incur a liability to the extent we
      did
      not use the guaranteed space under a particular contract.





In
      the
      normal course of our business, we seek to minimize the risk of loss from these
      minimum volume contracts by carefully gauging customer demand, and by entering
      into arrangements with other freight forwarders whereby they take and pay for
      the excess cargo space that we are unable to fill. However, we do not have
      the
      ability to require our customers to ship minimum amounts, and, as such, we
      are
      not able to pass this risk on to our customers.





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





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


5


**Customs
      Brokerage Operations**





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





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





**Global
      Agency Network**





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





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





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





**Results
      of Operations**





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




**Results
      of Operations**





Total
      revenues for the three months ended June 30, 2008, increased by about $25.72
      million, or 80%, compared with total revenues for the three months ended June
      30, 2007, growing from approximately $31.88 million to $57.60 million. Of this
      increase, revenues from our existing business on a like-to-like basis grew
      by
      $3.84 million, for an increase of 15%. WCS, the US company we acquired in the
      third quarter of 2007, added revenues of $21.88 million.





For
      the
      increase in like-to-like revenues of $3.84 million, Asean contributed revenues
      of approximately $2.70 million, or about 44% of the total increase. Our Hong
      Kong and China operations added revenues of about $1.59 million, or 26%, and
      revenues in the UK grew by about $1.83 million, adding approximately 30% to
      the
      total increase. Our existing US operations, however, reported a decrease of
      $2.28 million in revenues, of which $2.18 million and $0.10 million is
      attributable to WLG (USA) and MSA, respectively. The decline in revenues for
      WLG
      (USA) is mainly attributable to the reduction in business from an independent,
      overseas agent that established its own office in the US and to the contraction
      of WLG (USA)’s customer base in connection with the integration of its
      operations with those of WCS.




Gross
      profit rose from $5.02 million in the three months ended June 30, 2007, to
      $6.97 million for the same period in 2008, for an increase of $1.95 million,
      or
      39%. Of this increase, our Hong Kong and China operations contributed $0.10
      million and Asean added $0.54 million. In addition, MSA and WLG (UK) reported
      an
      increase in gross profit of $105,000 and $139,000, respectively. The remaining
      increase in gross profit of $1.41 million is attributable to WCS, which was
      not
      part of the Group during the three months ended June 30, 2007. Lastly, WLG
      (USA)
      reported a decrease in gross profit of $0.35 million, and the drop in  its
      gross profit tracks with the decrease of its revenues.


6


The
      Group's overall gross margin decreased from 15.8% for the three months ended
      June 30, 2007, to 12.1% for the same period in 2008. WCS, which we acquired
      during the third quarter of 2007, posted a gross margin of 6.4% covering both
      its freight forwarding and customs brokerage operations for the three months
      ended June 30, 2008. Including WCS in the Group's results for this period
      in 2008 had the effect of reducing our overall margin by 3.4 percentage points,
      due, in part, to low margins for WCS’s freight
      forwarding business and the duty paid on behalf of its clients. As with the
      first quarter of 2008, a part of the reduction in gross margin is due to fuel
      surcharges levied by the various air and shipping lines. In general, we were
      able to bill the fuel surcharges to our customers, but at no mark up, with
      the
      effect that this reduced our gross profit margin, but not our gross profit.
      Even
      though the effect of including WCS’s results in the Group’s second quarter
      results and the imposition of higher fuel surcharges account for substantially
      all of the change in gross margin in the three months ended June 30, 2008,
      when
      compared to the same period in 2007, most of the gross margins of the other
      companies in the Group varied from the amounts reported in the same period
      last
      year, with the net effect that the increases offset the declines.





During
      the three months ended June 30, 2008, total operating expenses increased to
      about $6.36 million, as compared to approximately $4.65 million for the same
      period in 2007, for an increase of $1.71 million, or 37%. Most of the increase
      in operating costs in the second quarter of 2008 is attributable to $1.35
      million of operating expenses of WCS, which was acquired in the third quarter
      of
      2007. The remaining increase of $0.36 million in operating expenses is
      attributable to our existing operations, and represents an 8% increase in
      operating expenses over the same period in 2007. This compares to an increase
      in
      revenues of about 15% reported by our existing businesses for the three months
      ended June 30, 2008, when compared to same period in 2007. For the three months
      ended June 30, 2008, salaries and related personnel costs increased by about
      $1.12 million, or 37%, from $3.07 million to $4.19 million. Of this increase,
      $0.99 million is attributable to WCS. Other selling and administrative costs
      grew by approximately 39% from $1.33 million to $1.85 million, which, when
      combined with the increase in personnel costs, results in a total increase
      of
      almost $1.64 million for operating costs, not including amortization and
      depreciation. Of this $1.64 million increase, approximately $1.32 million
      relates to WCS, which was not part of the Group during the three months ended
      June 30, 2007. In part, our operating expenses are higher in 2008, when compared
      to 2007, because we opened two new warehouse facilities since the first quarter
      of 2007. Asean added a new warehouse in Melbourne, Australia, near the end
      of the second quarter of 2007, and the UK operations moved to a larger warehouse
      in Manchester, England in the first quarter of 2008. Amortization and
      depreciation expense increased from $0.25 million to $0.32 million, or about
      28%. Most of this increase is for amortization expense, which increased as
      a
      result of recording certain intangible assets in connection with the acquisition
      of WCS in 2007. See *discussion of Other Operating Expenses* below.





After
      the
      provision for income taxes, the Group recorded a net income of $256,000 for
      the
      three months ended June 30, 2008, compared to net income of $210,000 for the
      same period in 2007. Hong Kong and China’s operations reported a combined net
      income of $498,000 for the three months ended June 30, 2008, compared with
      net
      income of $464,000 for the same period in 2007, representing an increase of
      approximately $34,000. The improvement in their net incomes is mainly due to
      an
      increase in revenues .In addition, MSA’s net income improved by $150,000 to
      $95,000 for the three months ended June 30, 2008, compared to a loss of $55,000
      for the same period in 2007, mainly as a result of an increase in its gross
      margin. WCS, which we acquired in the third quarter of 2007, reported a net
      income of $34,000 for the three months ended June 30, 2008. Asean’s net income
      for the second quarter of 2008 is $32,000, compared to $58,000 for the same
      period in 2007, for a decrease of $26,000, with the decline being due to the
      operating expenses attributable to a new warehouse facility opened in 2007.
      WLG
      (UK) posted a net income of $7,000 for the three months ended June 30, 2008,
      compared to a net loss of $94,000, for the same period in 2007, with the
      increase being due to the improvement in its gross profit. WLG (USA) reported
      a
      decrease in its net income of $65,000 from $97,000 for the three months ended
      June 30, 2007, to $32,000 for the same period in 2008. The decrease is mainly
      attributable to a reduction in the customer base of WLG (USA). The parent
      company’s loss increased by about $182,000 for the three months ended June 30,
      2008, largely due to additional amortization of about $79,000 recorded for
      the
      intangible assets of WCS and interest expense of $82,000 for debt incurred
      for the acquisition of WCS and to refinance certain bank debt of WLG (USA).





**Segment
      Information**





***Air
      freight operations*** :
      Revenues from our air freight operations for the three months ended June 30,
      2008, increased to about $11.51 million from approximately $7.51 million, or
      about 53%, when compared to the same period in 2007. Our Hong Kong and China
      air
      freight operations reported an increase in their revenues of $0.63 million
      and
      $1.66 million, respectively, mainly as a result of increases in the volumes
      shipped to the US and to Australia. In addition, Asean, WLG (USA) and WLG (UK)
      contributed $0.73 million, $0.09 million and $0.12 million, respectively,
      to the overall growth in revenues. WCS, which was not part of the Group during
      the three months ended June 30, 2007, contributed air freight revenues of $0.77
      million.


7


Cost
      of
      sales for our air freight operations increased by approximately 61%, from $6.07
      million for the three months ended June 30, 2007, to $9.75 million for the
      same
      period in 2008. This increase is due to higher volumes of air freight shipments
      arranged by us, and is attributable to a growth in the business of our Hong
      Kong
      and China operations and new air freight revenues from WCS. Of the total
      increase in cost of sales of $3.68 million, approximately $0.70 million is
      attributable to WCS.





The
      Group’s gross profit margin for its air freight business decreased from 19.1%
      for the three months ended June 30, 2007, to 15.3% for the same period in 2008,
      and is the result of several factors. During the second quarter of 2008, all
      of
      our operations continued to experience increasing fuel surcharges. Although
      we
      have been able to bill our customers for the fuel surcharges, these additional
      charges had the effect of reducing our gross margin, but not our gross profit,
      because the surcharges are passed on to our customers without a mark-up. In
      addition, our Hong Kong and China operations increased their capacity to ship
      cargoes by air by signing larger cargo space commitments, and, in order to
      fill
      some of this cargo space, we have increased our business with co-loaders,
      which normally yields a lower profit margin.





Segment
      overhead for our air freight operations increased by approximately $0.24
      million, or 21%, from $1.17 million for the three months ended June 30, 2007,
      to
      $1.41 million for the same period in 2008. Of this increase, approximately
      $68,000 is attributable to the overhead expenses of WCS. The overhead incurred
      by our other subsidiaries in this segment increased by approximately $172,000,
      when compared to the same period in 2007, representing an increase of about
      15%.




Net
      segment income for our air freight operations is approximately $349,000 for
      the
      three months ended June 30, 2008, compared to net income of $262,000 for the
      same period in 2007, for an increase of $87,000. This growth is attributable
      to
      our Hong Kong and China air freight operations, which reported net incomes
      of
      approximately $291,000 and $39,000 for the three months ended June 30, 2008,
      respectively, compared with net incomes of approximately $225,000 and $6,000,
      respectively, for the same period in 2007, for a combined improvement of
      $99,000. These increases in net income results from a growth in the volume
      of
      shipments by our Hong Kong and China operations, especially to Australia
      and the US. WCS reported a net income of $1,000 for this segment.




***Sea
      freight operations:*** Revenues
      from our sea freight operations rose by about 71% for the three months ended
      June 30, 2008, when compared to the same period in 2007, growing from
      approximately $16.16 million to $27.68 million, for an increase of $11.52
      million. Substantially all of this increase is attributable to WCS, which was
      acquired during the third quarter of 2007, and which reported revenues of $12.03
      million for the three months ended June 30, 2008. Asean, WE China, WLG (UK)
      and
      MSA reported increases in their revenues of $1.41 million, $0.26 million, $0.64
      million and $0.41 million, respectively, compared to the same period in 2007.
      WLG (USA) experienced a decrease in revenues of $2.27 million as a result of
      a
      reduction in its customer base, due, in part, to the integration of its
      operations with WCS. Our Hong Kong sea freight operations reported a decrease
      in
      its revenues of $0.96 million, mainly because of a decrease in
      business to the UK and Australia.





Cost
      of
      sales for our sea freight operations increased by 78% from $13.26 million for
      the three months ended June 30, 2007, to $23.65 million for the same period
      in
      2008, for an increase of $10.39 million. This increase is mainly attributable
      to
      the acquisition of WCS, which increased the Group’s cost of sales by about
      $11.31 million for the three months ended June 30, 2008. There was a net decline
      in revenues from our other companies and this also accounts for the drop in
      cost
      of sales for these same companies.




The
      Group’s gross profit margin decreased from approximately 18.0% for the three
      months ended June 30, 2007, to 14.6% for the same period in 2008. As with our
      air freight business, increased fuel surcharges levied by the shipping lines
      contributed to the decrease in gross margin for this segment. Even though we
      were able to bill our customers for the increased fuel surcharges, we did suffer
      a decline in our gross margins, but not our gross profit, because the fuel
      surcharges were not marked up to yield any gross profit. WCS reported a gross
      profit margin of 7.1% for this segment, which caused a decline in the overall
      gross margin for this part of our business.





Total
      segment overhead attributable to our sea freight business increased by $0.95
      million, or 36%, from approximately $2.67 million for the three months ended
      June 30, 2007, to $3.62 million for the same period in 2008. In large part,
      this
      increase is attributable to the acquisition of WCS in the third quarter of
      2007,
      which added overhead expenses of $0.85 million to the Group. The remaining
      increase in overhead expenses is about $0.10 million, which is an increase
      of
      about 3% when compared to same period last year. All of this increase relates
      to
      our existing operations.


8


Net
      segment income for our sea freight operations is approximately $408,000 for
      the
      three months ended June 30, 2008, compared to net income of $235,000 for the
      same period in 2007. WE China, MSA and Asean’s net incomes increased by $31,000,
      $126,000, and $3,000, respectively. Hong Kong’s sea freight operations reported
      a decrease of $97,000 in net income. WLG (UK) and WLG (USA)’s net incomes
      for this segment were $78,000 and $24,000, respectively, for the three months
      ended June 30, 2008, compared to a net loss of $66,000 and net income of
      $79,000, respectively, for the same period in 2007. WCS, which was not part
      of the Group during the second quarter of 2007, reported a net income of $21,000
      for the same period in 2008.





***Customs
      brokerage services:*** Asean,
      MSA, WLG (UK) and WCS each have a division that provides customs brokerage
      services. For the three months ended June 30, 2008, revenues from customs
      brokerage services totaled approximately $18.41 million, compared to $8.21
      million for the same period in 2007, for an increase of about $10.20 million.
      This increase is mostly attributable to additional revenues of $9.08 million
      from WCS’s customs practice. Asean and WLG (UK)’s customs revenues increased by
      about $0.55 million and $1.07 million, respectively, for the three months ended
      June 30, 2008, when compared to the same period in 2007. Direct and
      administrative costs for this segment totaled about $18.47 million, producing
      a
      net loss of $58,000 for the three months ended June 30, 2008, compared to a
      net
      loss of $26,000 for the same period in 2007. The loss is attributable to WLG
      (UK), which reported a net loss of $76,000 in this segment, compared to a net
      loss of $28,000 for the same period in 2007. WCS recorded a net income of
      $12,000 for the three months ended June 30, 2008.




**Other
      Operating Expenses**





*Salaries
      and allowances*




Salaries
      and related expenses increased by $1.12 million, or 37%, from $3.07 million
      for
      the three months ended June 30, 2007, to $4.19 million for the same period
      in
      2008. This increase is attributable to several factors, including normal
      increments in employee salaries given at the beginning of 2008, personnel hired
      during the period and to WCS, which we acquired in the third quarter of 2007.
      The acquisition of WCS increased our employee count by 56 and added personnel
      costs of $0.99 million for the three months ended June 30, 2008. The remaining
      increase of $0.13 million is attributable to salary increases in our existing
      operations, compensation expense for stock options, and to new employees added
      by Asean, mostly for its new warehouse facility. As of June 30, 2008, the
      Group's employee headcount was 338, compared to 257 at June 30,
      2007.





*Rent*




Rent
      expense for our facilities increased by 45% from $0.33 million for the three
      months ended June 30 2007, to $0.48 million for the same period in 2008, for
      an
      overall increase of $0.15 million. The acquired operations of WCS added $60,000
      of rent expense to the Group. WLG (UK) moved to a larger warehouse facility
      in
      the first quarter of 2008, which increased its rental expense by $33,000, when
      compared to the three months ended June 30, 2007. In addition, Asean added
      rent
      expense of $39,000, mainly attributable to an increase in its office rent and
      to
      the rent for a new warehouse facility, which opened in May 2007 in Melbourne,
      Australia.




*Other
      selling and administrative expenses*





Other
      SG&A expense for the three months ended June 30, 2008, totaled about $1.37
      million, compared to $1.00 million for the same period in 2007, for an increase
      of $0.37 million. The increase is primarily attributable to the acquisition
      of
      WCS, which increased Other SG&A expenses by $0.27 million. Asean’s Other
      SG&A expenses increased by $64,000 for the three months ended June 30, 2008,
      when compared to the same period in 2007, mainly as a result of an increase
      in
      operating costs for a new warehouse facility in Melbourne, Australia. There
      was
      an overall increase of $36,000 in the Other SG&A expenses for the remaining
      companies in the Group.




*Depreciation
      and Amortization*




Depreciation
      expense for property, plant and equipment increased to $104,000 for the three
      months ended June 30, 2008, compared to $79,000 for the same period in 2007,
      for
      an increase of $25,000. All of this increase is attributable to WCS, which
      recorded depreciation expense of $28,000 for the three months ended June 30,
      2008. There was a net decrease of $3,000 in depreciation expense relating
      to our existing subsidiaries.


9


Amortization
      expense is attributable to the customer lists acquired in the acquisitions
      of
      WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with
      the
      acquisition of WLG (USA), we recorded a customer list asset of $0.51 million,
      which is being amortized on a straight-line basis over 5 years. Asean's customer
      list was valued at $1.56 million and is being amortized on a straight-line
      basis
      over 8 years. A value of $0.16 million was assigned to ALI's customer list,
      which, due to impairment write-downs and normal amortization in 2006 and 2007,
      was fully amortized by the end of 2007. WLG (UK)'s customer list was valued
      at
      $0.83 million and is being amortized over 5 years. A cost of $1.55 million
      was
      assigned to the customer list of the MSA Group, which is being amortized over
      a
      10-year life. However, in 2007, MSA’s customer list was reduced by $0.60 million
      due to MSA not achieving certain earnings targets. WCS’s customer list was
      valued at $2.84 million and is being amortized over 9 years. For the three
      months ended June 30, 2008, amortization expense totaled $0.22 million, and
      is
      attributable to WLG (USA), Asean, WLG (UK), the MSA Group and WCS in the
      approximate amounts of $26,000, $49,000, $42,000, $22,000 and $79,000,
      respectively. Amortization expense for the three months ended June 30, 2007,
      was
      $0.16 million and related to WLG (USA), Asean, ALI, WLG (UK) and the MSA Group
      in the approximate amounts of $26,000, $49,000, $8,000, $42,000 and $39,000,
      respectively. WCS was not part of the Group until July 31, 2007 and, as such,
      the amortization expense reported for the three months ended June 30, 2007,
      did
      not include an amount for WCS.




*Interest
      Expense*




Interest
      expense increased from $86,000 for the three months ended June 30, 2007, to
      $195,000 for the same period in 2008, for an increase of $109,000. This increase
      is partly attributable to WCS, which recorded interest expense of approximately
      $29,000 for the second quarter of 2008. Asean reported an increase in interest
      expense of $41,000, mainly as a result of an increase in interest rates and
      higher bank debt. WLG (USA)’s interest expense decreased by $43,000 due to a
      reduction in its bank borrowings. WLG (USA)’s term loan was fully repaid in
      March 2008, and its line of credit was fully repaid in April 2008. In addition,
      the Group incurred interest expense of about $22,000 for a director’s loan of
      $0.75 million, and interest expense of about $60,000 for loans totaling $2.39
      million from another director. All director loans carry an interest rate of
      12%
      per annum.




*Other
      income/ expense*





Other
      expense for the three months ended June 30, 2008, totaled $26,000, and consisted
      mainly of exchange losses attributable to our operations in China and the UK.
      Other income of $15,000 reported for the same period in 2007 was composed of
      exchange gains recorded by WLG (UK) and WLG (USA).





*Provision
      for Income Taxes*





The
      provision for income taxes increased from $123,000 for the three months ended
      June 30, 2007, to $146,000 for the same period in 2008. Income tax of $98,000
      was provided on the combined net income of $558,000 attributable to our Hong
      Kong, China and Australian operations, for an effective tax rate of 17.6%.
      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 $134,000, which
      includes about $268,000 of expenses which are not deductible for income tax
      purposes, the largest being amortization of $205,000. Total taxes of $48,000,
      including state taxes of $8,000, were provided on the income of the US
      companies, and this amount offset the tax benefit recorded for the first quarter
      of 2008. After giving effect to all losses and amortization expense, for which
      no income tax benefit was provided, the effective tax rate on the Group's income
      of $402,000 is approximately 36.31% for the three months ended June 30,
      2008.





SIX
      MONTHS ENDED JUNE 30, 2008 COMPARED WITH SIX MONTHS ENDED JUNE 30,
      2007.




**Results
      of Operations**





Total
      revenues for the six months ended June 30, 2008, increased by about $50.51
      million, or 83%, compared with total revenues for the six months ended June
      30,
      2007, growing from approximately $61.19 million to $111.70 million. Of this
      increase, revenues from our existing operations on a like-to-like basis grew
      by
      $8.25 million, for an increase of 13%. WCS, the US company we acquired in the
      third quarter of 2007, added revenues of $42.26 million.





For
      the
      increase in like-to-like revenues of $8.25 million, Asean contributed revenues
      of approximately $5.59 million, or about 47% of the total increase. Our Hong
      Kong and China operations added about $4.09 million in revenues, or 34%, and
      revenues in the UK grew by about $2.33 million over the same period last year,
      adding approximately 19% to the total increase. Our existing US operations,
      however, reported a decrease of $3.76 million in revenues.


10


Gross
      profit rose from $9.77 million in the six months ended June 30, 2007, to
      $13.71 million for the same period in 2008, for an increase of $3.94 million,
      or
      40%. Of this increase, our Hong Kong and China operations contributed $0.39
      million and Asean added $1.06 million. In addition, MSA and WLG (UK) reported
      an
      increase in gross profit of $0.14 million and $40,000, respectively. WLG (USA)
      reported a decrease of $0.68 million in its gross profit. This drop in gross
      profit is mainly due to the reduction in business from a former UK agent of
      WLG
      (USA) that established its own office in the US, and to a contraction in WLG
      (USA)’s customer base in connection with the integration of its business with
      that of WCS. The remaining increase in gross profit of $2.99 million is
      attributable to WCS, which was not part of the Group during the first half
      of
      2007.





The
      Group's overall gross margin decreased from 16.0% for the six months ended
      June
      30, 2007, to 12.3% for the same period in 2008. A part of the reduction in
      gross
      margin is due to higher sea and air fuel surcharges levied by the various air
      and shipping lines. In almost all cases, we were able to bill the fuel
      surcharges to our customers, but at no mark up, with the effect that this
      reduced our gross profit margin, but not our gross profit. Most of the decline
      in gross margin is attributable to WCS, which we acquired during the third
      quarter of 2007. WCS recorded a gross margin of 7.0% covering both its freight
      forwarding and customs brokerage operations for the six months ended June 30,
      2008. The lower gross margin of WCS is due, in part, to low margins for its
      freight forwarding business and the duty paid on behalf of its clients. WCS’s
      lower margins had the effect of reducing the Group’s overall gross margin by
      about 3.3 percentage points, and accounts for most of the total decline of
      3.7
      percentage points in the Group’s gross
      margin.
      The gross margins of Asean and MSA increased in the first half of 2008, compared
      to the same period last year. However, the gross margins of our other operations
      declined, with the net effect of the differences being nearly zero.





During
      the six months ended June 30, 2008, total operating expenses increased to about
      $12.73 million, as compared to approximately $9.09 million for the same period
      in 2007, for an increase of $3.64 million, or 40%. Most of the increase in
      operating costs in the first half of 2008 is attributable to $2.85 million
      of operating expenses of WCS, which was acquired in the third quarter of 2007.
      The remaining increase of $0.79 million is attributable to our existing
      operations, and represents a 9% increase in operating expenses over the same
      period in 2007. This compares to an increase in revenues of about 13% reported
      by our existing operations for the first half of 2008, when compared to same
      period in 2007. For the six months ended June 30, 2008, salaries and related
      personnel costs increased by about $2.31 million, or 39%, from $5.97 million
      to
      $8.28 million. Of this increase, $2.05 million is attributable to WCS. Other
      selling and administrative costs grew by approximately 45% from $2.63 million
      to
      $3.81 million, which, when combined with the increase in personnel costs,
      results in a total increase of almost $3.49 million for operating costs, not
      including amortization and depreciation. Of the $3.49 million increase,
      approximately $2.79 million relates to WCS, which was not part of the Group
      during the first half of 2007. In part, our operating expenses are higher in
      2008, when compared to 2007, because we opened two new warehouse facilities
      since the first quarter of 2007. Asean added a new warehouse in Melbourne,
      Australia, near the end of the second quarter in 2007, and WLG
      (UK) moved to a larger warehouse in Manchester, England, in the first
      quarter of 2008. Amortization and depreciation expense increased from $0.49
      million to $0.64 million, or about 31%. Most of this increase is for
      amortization expense, which increased as a result of recording certain
      intangible assets in connection with the acquisition of WCS in 2007.
      See *discussion of Other Operating Expenses* below.





After
      the
      provision for income taxes, the Group recorded a net income of $0.26 million
      for
      the six months ended June 30, 2008, compared to net income of $0.36 million
      for
      the same period in 2007. Hong Kong and China’s operations reported a combined
      net income of $1.01 million in the first half of 2008, compared with net income
      of $0.77 million for the same period in 2007, representing an increase of
      approximately $0.24 million. The improvement in their net incomes is mainly
      due
      to an increase in the volume of business done, resulting in higher revenues
      matched by a slower growth in their overhead expenses. In addition, MSA’s net
      income improved to $139,000 for the six months ended June 30, 2008, compared
      to
      a loss of $73,000 for the same period in 2007, mainly as a result of an increase
      in its gross margin. Asean’s net income for the six months ended June 30, 2008
      is $106,000, compared to $104,000 for the same period in 2007. This increase
      of
      $2,000 is due to increases in both Asean’s freight forwarding and customs
      brokerage business, but was negatively affected by operating costs of its new
      warehouse facility. WLG (USA) and WLG (UK) incurred losses of $20,000 and
      $174,000, respectively, for the six months ended June 30, 2008, compared to
      a
      net income of $140,000 and net loss of $50,000, respectively, for the same
      period in 2007. The 2008 losses for these two companies are a result of a
      bankruptcy of a UK customer, expenses connected with the move to a new warehouse
      in the UK and to the loss of business in connection with the integration of
      WLG
      (USA)’s operations with those of WCS. The parent company’s loss increased by
      about $307,000 for the six months ended June 30, 2008, mainly due to additional
      amortization of about $158,000 from the intangible assets of WCS
      and interest expense of $127,000 incurred for the WCS acquisition and the
      repayment of certain bank debt of WLG (USA). WCS, which we acquired in the
      third
      quarter of 2007, reported a net income of $45,000 for the six months ended
      June
      30, 2008.





**Segment
      Information**





***Air
      freight operations*** :
      Revenues from our air freight operations for the six months ended June 30,
      2008,
      increased by nearly $6.25 million to about $21.0 million from approximately
      $14.75 million, or about 42%, when compared to the same period in 2007. Asean,
      WLG (UK), WE China, WEHK and WAE all reported increases in their air freight
      revenues, contributing $0.69 million, $0.13 million, $1.72 million, $0.36
      million and $2.29 million, respectively, to the overall growth in revenues.
      WLG
      (USA) and MSA reported a decrease in their air freight revenues of $0.32 million
      and $20,000, respectively. WCS, which was not part of the Group during the
      six
      months ended June 30, 2007, contributed air freight revenues of $1.40
      million.


11


Cost
      of
      sales for our air freight operations increased by approximately 47%, from $12.09
      million for the six months ended June 30, 2007, to $17.73 million for the same
      period in 2008. This increase is due to higher volumes of air freight shipments
      arranged by us, and is attributable to a growth in the business of our
      Australian, Hong Kong and China operations and new air freight revenues from
      WCS. Of the total increase of $5.64 million in cost of sales for our air freight
      operations, approximately $1.26 million is attributable to WCS.





The
      Group’s gross profit margin for its air freight business decreased from 18.1%
      for the six months ended June 30, 2007, to 15.6% for the same period in 2008,
      and is the result of several factors. First, all of our companies continued
      to
      experience higher fuel surcharges in 2008, compared to 2007. Although we have
      been able to bill our customers for the fuel surcharges, these additional
      charges had the effect of reducing our gross margin, but not our gross profit,
      because the surcharges were passed on to our customers without a
      mark-up. For 2008, our Hong Kong and China airfreight operations increased
      their
      commitments for cargo space compared to the amounts available to them in 2007,
      and in order to fill some of this cargo space, they increased the
      business done with co-loaders, which normally resulted in a lower profit
      margin.





Segment
      overhead for our air freight operations increased by approximately $0.37
      million, or 16%, from $2.31 million for the six months ended June 30, 2007,
      to
      $2.68 million for the same period in 2008. Of this increase, approximately
      $0.13
      million is attributable to the overhead expenses of WCS. The overhead incurred
      by our other subsidiaries in this segment for the six months ended June 30,
      2008, increased by approximately $0.24 million, when compared to the same period
      in 2007, representing an increase of about 10%.




Net
      segment income for our air freight operations is approximately $0.60 million
      for
      the six months ended June 30, 2008, compared to net income of $0.36 million
      for
      the same period in 2007, for an increase of $0.24 million. Our Hong Kong and
      China air freight operations reported net incomes of approximately $0.47 million
      and $0.10 million for the six months ended June 30, 2008, respectively, compared
      with net incomes of approximately $0.31 million and $5,000, respectively, for
      the same period in 2007, for a combined improvement of $0.25 million. The
      increase in net income results from a growth in the volume of shipments
      by our Hong Kong and China operations, especially to Australia. In
      addition, Asean and WLG (UK) reported an increase of approximately $1,000 and
      $12,000 in net income, respectively, for the six months ended June 30, 2008.
      Increases in the net incomes of our Hong Kong, China and Australian and WLG
      (UK)
      operations served to offset a decrease of about $35,000 in the net income of
      WLG
      (USA). WCS reported a net income of $2,000 for this segment.




***Sea
      freight operations:*** Revenues
      from our sea freight operations rose by about 88% for the six months ended
      June
      30, 2008, when compared to the same period in 2007, growing from approximately
      $30.19 million to $56.74 million, for an increase of $26.55 million. Much of
      this increase is attributable to WCS, which was acquired during the third
      quarter of 2007, and which reported revenues of $25.21 million for the six
      months ended June 30, 2008. As a result of the growth in our existing
      operations, the net revenues of these companies increased by about $1.34 million
      for the six months ended June 30, 2008, or nearly 4%, over the same period
      in
      2007. Asean, WE China, WLG (UK) and MSA reported increases in their revenues
      of
      $3.38 million, $1.05 million, $0.99 million and $0.58 million, respectively,
      compared to the same period in 2007. WLG (USA) experienced a decrease in
      revenues of $3.33 million as a result of a reduction in its customer base,
      due,
      in part, to the integration of its operations with those of WCS. Our Hong
      Kong sea freight operations reported a decrease in revenue of $1.33 million,
      mainly due to a decrease in business to the UK and
      Australia.





Cost
      of
      sales for our sea freight operations increased by almost 100% from $24.39
      million for the six months ended June 30, 2007, to $48.72 million for the same
      period in 2008, for an increase of $24.33 million. This increase is mainly
      attributable to a net increase in sea freight revenues of our existing
      operations, higher fuel surcharges and to the acquisition of WCS, which
      increased the Group’s cost of sales by about $23.56 million for the six months
      ended June 30, 2008.




The
      Group’s gross profit margin decreased from approximately 19.2% for the six
      months ended June 30, 2007, to 14.1% for the same period in 2008. As with our
      air freight business, increased fuel surcharges levied by the shipping lines
      contributed to the decrease in gross margin for this segment. We were able
      to
      pass on the fuel surcharges to our customers. However, we did suffer a
      decline in our gross margins, but not our gross profit, because the fuel
      surcharges were not marked up to yield any gross profit. For the six months
      ended June 30, 2008, WCS reported a gross profit margin of 7.2% for its sea
      freight operations, which caused a decline in the overall gross margin of about
      5.6 percentage points for this segment of our business, and compares to the
      overall decline in gross margin of 5.1 percentage points for 2008 from
      2007. There were increases and decreases in the gross margins of the other
      companies in this segment, but the increases and declines mostly offset one
      another.


12


Total
      segment overhead attributable to our sea freight business increased by $2.14
      million, or 41%, from approximately $5.28 million for the six months ended
      June
      30, 2007, to $7.42 million for the same period in 2008. In part, this increase
      is attributable to the acquisition of WCS in the third quarter of 2007, which
      added overhead expenses of $1.82 million to the Group for the six months ended
      June 30, 2008. The remaining increase of $0.32 million, which represents an
      increase of about 6% in overhead expenses when compared to same period last
      year, is attributable to our other operating subsidiaries and is due to
      additional costs incurred by them to cope with increases in their business,
      which on a year-to-year basis showed an increase in revenues of about
      4%.




Net
      segment income for our sea freight operations is approximately $0.61 million
      for
      the six months ended June 30, 2008, compared to net income of $0.53 million
      for
      the same period in 2007. WE China, MSA and Asean’s net incomes for the six
      months ended June 30, 2008, increased by $130,000, $185,000, and $4,000,
      respectively, over the amounts they reported for the same period in 2007. Hong
      Kong’s sea freight operations reported a decrease of $144,000 in its net
      income for this period compared to the first six months of 2007. WLG (UK) and
      WLG (USA) incurred net losses of $18,000 and $15,000, respectively, for the
      six
      months ended June 30, 2008, compared to a net loss of $27,000 and net income
      of
      $110,000, respectively, for the same period in 2007. In addition, WCS
      reported a net income of $23,000 for the six months ended June 30, 2008.
      WCS was not part of the Group during the six months ended June 30,
      2007.





***Customs
      brokerage services:*** Asean,
      MSA, WLG (UK) and WCS each have a division that provides customs brokerage
      services. For the six months ended June 30, 2008, revenues from customs
      brokerage services totaled approximately $33.96 million, compared to $16.25
      million for the same period in 2007, for an increase of about $17.71 million.
      This growth is mostly attributable to new revenues of $15.66 million from WCS’s
      customs practice. Revenues from Asean and WLG (UK)’s customs practices increased
      by about $1.51 million and $1.21 million, respectively, for the six months
      ended
      June 30, 2008, when compared to the same period in 2007. Direct and
      administrative costs for this segment totaled about $34.07 million, producing
      a
      net loss of $0.11 million for the six months ended June 30, 2008, compared
      to a
      net income of $3,000 for the same period in 2007. The loss is attributable
      to
      WLG (UK), which reported a net loss of $159,000 in this segment, compared to
      a
      net income of $14,000 for the same period in 2007. WCS recorded a net income
      of
      $13,000 for the six months ended June 30, 2008.




**Other
      Operating Expenses**





*Salaries
      and allowances*




Salaries
      and related expenses increased by $2.31 million, or 39%, from $5.97 million
      for
      the six months ended June 30, 2007, to $8.28 million for the same period in
      2008. This increase is attributable to several factors, including normal
      increments in employee salaries given at the beginning of 2008, personnel hired
      during the period, particularly for Asean’s new warehouse facility, and to WCS,
      which was acquired in the third quarter of 2007. WCS increased our employee
      count by 56 and added personnel costs of $2.05 million for the six months ended
      June 30, 2008. The remaining increase of $0.26 million is attributable to salary
      increases in our existing operations, compensation expense for stock options,
      and to new employees added by Asean. As of June 30, 2008, the Group's employee
      headcount was 338, compared to 257 at June 30, 2007.




*Rent*




Rent
      expense for our facilities increased by 52% from $0.62 million for the six
      months ended June 30 2007, to $0.94 million for the same period in 2008, for
      an
      overall increase of $0.32 million. The acquired operations of WCS added $135,000
      of rent expense to the Group. WLG (UK) moved to a larger warehouse facility
      in
      the first quarter of 2008, which increased its rental expense by $61,000, when
      compared to the first half of 2007. In addition, Asean’s rental expenses grew by
      about $105,000, mainly attributable to an increase in its office rent and to
      the
      rent for a new warehouse facility, which opened in May 2007 in Melbourne,
      Australia.




*Other
      selling and administrative expenses*





Other
      SG&A expense for the six months ended June 30, 2008, totaled about $2.86
      million, compared to $2.01 million for the same period in 2007, for an increase
      of $0.85 million. The increase is primarily attributable to the acquisition
      of
      WCS, which increased Other SG&A expenses by $0.60 million. Asean’s Other
      SG&A expenses increased by $0.17 million for the first half of 2008, when
      compared to the same period in 2007, mainly as a result of an increase in
      overseas traveling expenses and to operating costs for a new warehouse facility
      in Melbourne, Australia. The increase in the Other SG&A expenses for the
      remaining companies in the Group totaled about $80,000.


13


*Depreciation
      and Amortization*




Depreciation
      expense for property, plant and equipment increased to $205,000 for the six
      months ended June 30, 2008, compared to $161,000 for the same period in 2007,
      for an increase of $44,000. All of this increase is attributable to WCS, which
      recorded depreciation expense of $56,000 for the first half of 2008.
      Depreciation expense in our existing subsidiaries declined by about
      $12,000.




Amortization
      expense is attributable to the customer lists acquired in the acquisitions
      of
      WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with
      the
      acquisition of WLG (USA), we recorded a customer list asset of $0.51 million,
      which is being amortized on a straight-line basis over 5 years. Asean's customer
      list was valued at $1.56 million and is being amortized on a straight-line
      basis
      over 8 years. A value of $0.16 million was assigned to ALI's customer list,
      which, due to impairment write-downs and normal amortization in 2006 and 2007,
      was fully amortized by the end of 2007. WLG (UK)'s customer list was valued
      at
      $0.83 million and is being amortized over 5 years. A cost of $1.55 million
      was
      assigned to the customer list of the MSA Group, which is being amortized over
      a
      10-year life. In 2007, MSA’s customer list was reduced by $0.60 million due to
      MSA not achieving certain earnings targets. WCS’s customer list was valued at
      $2.84 million and is being amortized over 9 years. For the six months ended
      June
      30, 2008, amortization expense totaled $0.43 million, and is attributable to
      WLG
      (USA), Asean, WLG (UK), the MSA Group and WCS in the approximate amounts of
      $51,000, $98,000, $83,000, $44,000 and $158,000, respectively. Amortization
      expense for the six months ended June 30, 2007, was $0.33 million and related
      to
      WLG (USA), Asean, ALI, WLG (UK) and the MSA Group in the approximate amounts
      of
      $51,000, $98,000, $16,000, $83,000 and $78,000, respectively. WCS was not part
      of the Group until July 31, 2007 and, as such, the amortization expense reported
      for the first half of 2007 did not include an amount for WCS.





*Interest
      Expense*




Interest
      expense increased from $205,000 for the six months ended June 30, 2007, to
      $439,000 for the same period in 2008, for an increase of $234,000. This increase
      is partly attributable to WCS, which recorded interest expense of approximately
      $110,000 for the first half of 2008. Asean reported an increase in interest
      expense of $49,000, mainly as a result of an increase in interest rates and
      additional bank borrowing. WLG (USA)’s interest expense declined by about
      $54,000 due to the repayment in full of a term loan and its line of credit,
      in
      March and April 2008, respectively. In addition, the Group incurred interest
      expense of $45,000 for a director’s loan of $0.75 million, and $82,000 for loans
      of $2.39 million from another director. All directors’ loans carry an interest
      rate of 12% per annum.




*Other
      income/ expense*





Other
      expense for the six months ended June 30, 2008, totaled $78,000, and consisted
      of exchange losses of about $50,000 attributable to our operations in China
      and
      the UK and to miscellaneous expense items totaling $28,000. Other income of
      $62,000 for the same period in 2007 was composed of exchange gains recorded
      by
      Asean and WLG (UK).





*Provision
      for Income Taxes*





The
      provision for income taxes increased from $211,000 for the six months ended
      June
      30, 2007, to $227,000 for the same period in 2008. Income tax of $215,000 was
      provided on the combined net income of $1.19 million attributable to our Hong
      Kong, China and Australian operations, for an effective tax rate of 18.1%.
      The
      US operations of WLG (USA), MSA and WCS are included in a US consolidated
      federal income tax return with the Group's parent company, and, together, these
      companies reported a consolidated pre-tax loss of approximately $470,000, which
      includes about $502,000 of expenses which are not deductible for income tax
      purposes, the largest being amortization expense of $409,000. Income tax of
      $12,000 was provided on the net income of our US operations, and consisted
      of state taxes only. No federal US tax was provided due to the availability
      of
      US loss carryforwards. No tax benefit has been provided on the loss of WLG
      (UK),
      which totaled $233,000. After giving effect to all losses and amortization
      expense, for which no income tax benefit was provided, the effective tax rate
      on
      the Group's income of $489,000 is approximately 46% for the six months ended
      June 30, 2008.


14




**LIQUIDITY
      AND CAPITAL RESOURCES**




For
      the
      six months ended June 30, 2008, our operations provided cash of approximately
      $1.71 million, compared with cash of $2.41 million provided by our operations
      for the same period in 2007. In 2008, cash was provided by the following
      sources: net income of $0.26 million; amortization and depreciation expense
      of
      $0.64 million; provision for bad debts of $99,000; other non cash items of
      $5,000; decrease in trade receivables of $0.82 million and an increase in trade
      payables of $0.42 million. Major components that used cash for operations in
      2008 included: an increase in deposits and prepayments of $0.06 million; a
      decrease in other accrued liabilities of $0.17 million; repayment of
      $0.21 million to a director and a decrease in taxes payable of
      $92,000.




Net
      cash
      used by financing activities totaled about $0.39 million for the six months
      ended June 30, 2008, compared to net cash used of about $1.23 million by
      financing activities in 2007. Cash used by financing activities in 2007 included
      the repayment of bank loans of $0.96 million, repayment of capital lease
      obligations of $0.06 million, repayment of overdraft facilities of $0.04
      million, an increase in restricted cash of $0.12 million and cash dividends
      of
      $45,000 on our preferred stock. Cash used by financing activities in 2008
      included repayment of bank loans and capital lease obligations of $2.03 million
      and $62,000, respectively, increase in restricted cash of $63,000, and cash
      dividends of $45,000 on our preferred stock. Cash provided by financing
      activities in 2008 included an increase of $0.18 million in our bank overdraft
      facilities and loans from a director totaling $1.64 million.




As
      of
      June 30, 2008, certain banks in Hong Kong and China had issued bank guarantees
      of $0.54 million to several airlines on behalf of WAE and WE China. With these
      guarantees, the airlines, in turn, grant credit terms to these companies. 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 in cash in restricted bank accounts. Asean
      has given a bank guarantee of about $0.13 million in favor of the owner of
      the office premises occupied by it. In addition, a UK bank has provided a bank
      guarantee of $0.60 million to the UK Customs and Excise Department for the
      benefit of WLG (UK). In return for this guarantee, the UK Customs and Excise
      Department has granted credit terms to WLG (UK). In addition to giving a
      parent company guarantee to the UK bank that provided a guarantee
      to the UK Customs and Excise Department, a parent company
      guarantee has been given in support of the new office and warehouse facilities
      of WLG (UK). This latter guarantee is limited to an amount equal to three years
      rent at the date the guarantee is enforced. As of June 30, 2008, our
      obligation under this guarantee is about $0.88 million.




During
      2006, WEHK borrowed approximately $0.11 million to pay income taxes and to
      use
      as working capital. This loan was fully repaid by November 2007. In October
      2007, WEHK borrowed $0.28 million to pay income taxes, and the loan is repayable
      in equal installments over the next twelve months. As of June 30, 2008, the
      outstanding balance of this loan was approximately $94,000.





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





Asean
      has
      a receivables loan facility in the face amount of approximately $3.84 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 $0.65
      million. At June 30, 2008, Asean's bank debt under its receivables and overdraft
      facilities was $2.34 million and $0.65 million, respectively, with interest
      rates of approximately 11.73% for the receivables line and 10.83% for the
      overdraft facility. Asean's bank, in addition to having a charge over all of
      its
      accounts receivable, holds a first registered mortgage over all of Asean's
      assets. Asean’s overdraft facilities are guaranteed by the Group’s parent
      company.




WCS
      has a
      revolving loan facility from a bank in the face amount of $5.50 million. This
      facility, which is secured in part by all of the trade receivables of WCS,
      MSA
      and WLG (USA), allows borrowings equal to 80% of eligible receivables of the
      three companies. As of June 30, 2008, WCS owed approximately $3.39 million
      under
      this facility. This loan facility is also secured by all of the assets of WCS
      and by a guarantee from the Group’s parent company. These facilities expire on
      November 28, 2008.




15




We
      continue to execute our business plan which calls for us to make strategic
      acquisitions to supplement our internal growth. In 2005, we completed three
      acquisitions of freight forwarding and logistics companies, one of which had
      a
      customs brokerage business. We followed this in 2006 by acquiring two freight
      forwarding and customs brokerage companies. In 2007, we acquired WCS, which
      operates both a freight forwarding business and customs brokerage practice.
      We
      expect to make additional strategic acquisitions to expand our ability to
      provide a full range of logistics services on a global scale, as well as to
      increase our capabilities in certain key markets that we currently serve. To
      the
      extent that we are unable to use our common stock to acquire other
      companies, we will need to raise additional capital, if we are to be successful
      in executing our business plan. At this point, we are not certain of the amount
      of capital we may need because the amount will vary with the size, type and
      nature of consideration required for the prospective acquisitions. However,
      there can be no assurance that we will be successful in identifying suitable
      acquisition targets, and, if we are, there can be no certainty that we will
      be
      able to complete the acquisitions. Nor can there be any assurance that we would
      be successful in our efforts to raise additional capital, either in the form
      of
      long-tem debt and/or equity. We may also seek to raise additional capital to
      use
      as working capital to allow us to support and accelerate the growth of the
      Group, particularly in the US, Australia and Asia.




Our
      approximate contractual cash obligations as of June 30, 2008, are set forth
      in
      the table below and are expected to equal approximately $0.60 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 5yearsLong-term
              debt obligations
            
            $
            1,350
            
            $
            988
            
            $
            362
            
            
            —
            
            
            —Facilities
                rental and equipment lease obligations
            
            $
            4,288
            
            $
            1,491
            
            $
            1,812
            
            $
            985
            
            $
            —Cargo
                space commitments
            
            $
            4,744
            
            $
            4,744
            
            
            —
            
            
            —
            
            
            —Redeemable
              preferred stock*
            
            $
            1,700
            
            
            —
            
            $
            1,700
            
            
            —
            
            
            —Total
                contractual cash obligations
            
            $
            12,082
            
            $
            7,223
            
            $
            3,874
            
            $
            985
            
            $
            —




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




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





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




·
            trading
                activities in non-exchange traded
                contracts.





16




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





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




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





**Evaluation
      of Disclosure Controls and Procedures**





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




**Changes
      in Internal Control Over Financial Reporting**





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





**Part
      II: Other Information**





**Item
      1: Legal Proceedings:**





During
      the three months ended June 30, 2008, three legal proceedings were filed against
      the Company in China. The claimants are seeking damages of about $150,000 for
      cargoes that they allege were released without proper documentation and payment.
      Each of these claims has been submitted to our insurance carrier who is
      defending each one, as well is paying all legal fees. The Company’s maximum
      exposure under the three proceedings, assuming that the insurance carrier does
      not dispute coverage, which it has not done, is approximately $35,000.





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





**Item
      5. Other Information:**





On
      July
      1, 2008, we issued to Christopher Wood, our Chief Executive Officer, a director
      and our controlling shareholder, a $600,000 promissory note, dated July 1,
      2008
      (the “Note”). The Note was issued to set forth, among other things, the interest
      rate and repayment terms for $600,000 in loans that Mr. Wood
      previously made to us. The Note bears interest at the rate of 12% per year
      and
      is payable in twelve monthly installments of $50,000 each, with the first
      installment due on January 31, 2009. The Note is secured by our 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) our raising of not less than $3.0 million in new capital through the
      sale
      of securities, and (iv) the termination of Mr. Wood’s employment. The foregoing
      summary of the terms of the Note is qualified in its entirety by the text of
      the
      Note, which is attached as an exhibit hereto.





17




**Item
      6. Exhibits.**





Exhibits





4.3
            Promissory
                Note, dated July 1, 2008, issued to Christopher Wood.31.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002
                (Rule13a-4(a)).31.2
            Certification
                of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley
                Act of
                2002 (Rule 13a-4(a)).32.1
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to 18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Rule
                13a-14(b)).





18




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




19


**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description of Exhibit**4.3
            
            Promissory
                Note, dated July 1, 2008, issued to Christopher Wood.31.1
            
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002(Rule
                13a-4(a)).31.2
            
            Certification
                of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley
                Act of
                2002 (Rule13a-4(a)).32.1
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to 18
                U.S.C. Section1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Rule
                13a-14(b)).




20