**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-Q**





( **Mark
      One)**




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




**For
      the quarterly period ended March 31, 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
      May
      12, 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 Months Ended March 31, 2007 and 2008
            F-1Condensed
                Consolidated Balance Sheets as of December 31, 2007 and March 31,
                2008
            F-2Condensed
                Consolidated Statements of Cash Flows for the Three Months Ended
                March 31,
                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
            12Item
                4.
            Controls
                and Procedures.
            12Part
                II:
            Other
                Information
            13Item
                1.
            Legal
                Proceedings
            13Item
                1A.
            Risk
                Factors
            13Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            13Item
                3.
            Defaults
                Upon Senior Securities
            14Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            14Item
                5.
            Other
                Information
            14Item
                6.
            Exhibits
            14Signatures
            
            15




**NOTE
      REGARDING FORWARD LOOKING STATEMENTS**




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




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





2


****
 **WLG
        Inc.**
  **Consolidated
        Statements of Operations**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
 
 **3 months ended**
                **March 31,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**Note*
              
              *US$*
              
              *US$***Revenues:**Freight
              
              
              
              
              
              15,975
              
              
              32,264Agency
                  services
              
              
              
              
              
              1,060
              
              
              967Customs
                  and other services
              
              
              
              
              
              12,274
              
              
              20,871**Total
                  revenues**
              
              
              
              
              
              29,309
              
              
              54,102**Operating
                  expenses**Cost
                  of forwarding
              
              
              
              
              
              (24,561
              )
              
              (47,365
              )Selling
                  and administrative expenses
              
              
              
              
              
              (4,206
              )
              
              (6,051
              )Depreciation
                  and amortization
              
              
              
              
              
              (242
              )
              
              (318
              )Total
                  operating expenses
              
              
              
              
              
              (29,009
              )
              
              (53,734
              )**Income
                  from operations**
              
              
              
              
              
              **300**
              
              
              **368**Other
                  income(expense)Interest
                  income
              
              
              
              
              
              9
              
              
              15Interest
                  expense
              
              
              
              
              
              (118
              )
              
              (244
              )Other
                  income (expense), net
              
              
              
              
              
              47
              
              
              (52
              )**Income****before
                  income taxes**
              
              
              
              
              
              238
              
              
              87Provision
                  for income taxes
              
              
              
              
              
              (88
              )
              
              (81
              )**Net
                  Income**
              
              
              
              
              
              150
              
              
              6**Dividends
                  on preferred stock**
              
              
              
              
              
              (22
              )
              
              (22
              )**Income
                  (Loss) applicable to common stock**
              
              
              
              
              
              128
              
              
              (16
              )Other
                  comprehensive income, net of taxes:Foreign
                  currency translation adjustment
              
              
              
              
              
              28
              
              
              73**Total
                  comprehensive income**
              
              
              
              
              
              156
              
              
              57**Earnings
                  (loss) per share:****Basic
                  earnings (loss) per share**
              
              
              *2*
              
              
              0.00
              
              
              0.00**Diluted
                  earnings (loss) per share**
              
              
              *2*
              
              
              0.00
              
              
              0.00**Weighted
                  average common shares outstanding****Basic**
              
              
              
              
              
              26,690,080
              
              
              31,400,094**Diluted**
              
              
              
              
              
              26,833,422
              
              
              31,400,094
 
 The
        financial statements should be read in conjunction with the accompanying
        notes.
  F-1
  **WLG
        Inc.**
 
 **Consolidated
        Balance Sheets**
 At
        December 31, 2007 and March 31, 2008
 *(Dollars
        in thousands except share data and per share amounts)*
 
 **At**
                **December 31,**
                **2007**
              
              **At**
                **March 31,**
                **2008***(unaudited)**Note*
              
              *US$*
              
              *US$***ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              
              
              
              
              1,631
              
              
              2,346Restricted
                  cash
              
              
              
              
              
              649
              
              
              526Trade
                  receivables, net of allowance (2007-$798; 2008-$706)
              
              
              
              
              
              22,198
              
              
              21,107Deposits,
                  prepayments and other current assets
              
              
              
              
              
              894
              
              
              1,070Tax
                  prepaid
              
              
              
              
              
              18
              
              
              5**Total
                  current assets**
              
              
              
              
              
              25,390
              
              
              25,054Property,
                  plant and equipment, net
              
              
              
              
              
              1,396
              
              
              1,455Deposits
                  and other non-current assets
              
              
              
              
              
              208
              
              
              58Deferred
                  tax assets
              
              
              
              
              
              246
              
              
              325Intangible
                  assets, net
              
              
              
              
              
              5,505
              
              
              5,288Goodwill
              
              
              
              
              
              9,328
              
              
              9,328**Total
                  assets**
              
              
              
              
              
              42,073
              
              
              41,508**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Bank
                  overdrafts
              
              
              *3*
              
              
              471
              
              
              619Trade
                  payables
              
              
              
              
              
              11,650
              
              
              11,975Accrued
                  charges and other payables
              
              
              
              
              
              3,868
              
              
              3,802Bank
                  loans - maturing within one year
              
              
              *3*
              
              
              7,854
              
              
              6,267Current
                  portion of capital lease obligations
              
              
              
              
              
              102
              
              
              83Due
                  to directors
              
              
              *5*
              
              
              1,710
              
              
              2,274Income
                  tax payable
              
              
              
              
              
              314
              
              
              324**Total
                  current liabilities**
              
              
              
              
              
              25,969
              
              
              25,344**Non-current
                  liabilities**Non-current
                  portion of capital lease obligations
              
              
              
              
              
              163
              
              
              144Other
                  non-current liabilities
              
              
              
              
              
              232
              
              
              231Deferred
                  tax liabilities
              
              
              
              
              
              9
              
              
              30404
              
              
              405Commitments
                  and contingencies
              
              
              *4*
              
              
              -
              
              
              -
  The
          financial statements should be read in conjunction with the accompanying
          notes.
 F-2
  **WLG
        Inc.**
 
 **Consolidated
        Balance Sheets**
 At
        December 31, 2007 and March 31, 2008
 *(Dollars
        in thousands except share data and per share amounts)*
 
 **At**
                **December 31,**
                **2007**
              
              **At**
                **March 31,**
                **2008***(unaudited)**US$*
              
              *US$***Stockholders'
                  equity**Preferred
                  stock, US$0.001 par value, 5 million shares authorized and none
                  issued
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock, $0.001 par value, 2.0 million shares
                  authorized and issued (Redemption and liquidation value of
                  $1,500)
              
              
              2
              
              
              2Common
                  stock, US$0.001 par value, 55 million shares authorized, 31,400,094
                  shares
                  issued and outstanding
              
              
              31
              
              
              31Additional
                  paid-in capital
              
              
              12,760
              
              
              12,762Accumulated
                  other comprehensive income-
                  Foreign currency translation adjustments
              
              
              220
              
              
              293Retained
                  earnings
              
              
              2,687
              
              
              2,671**Total
                  stockholders' equity**
              
              
              15,700
              
              
              15,759**Total
                  liabilities and stockholders' equity**
              
              
              42,073
              
              
              41,508
  The
          financial statements should be read in conjunction with the accompanying
          notes.
  F-3
 **WLG
          Inc.**
 
 **Consolidated
        Statements of Cash Flows**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
 
 **3 months ended**
                **March 31,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**US$*
              
              *US$***Cash
                  flows from****operating
                  activities:**Netincome
              
              
              150
              
              
              6**Adjustments
                  to reconcile net income****to net cash provided by operating activities**Depreciation
              
              
              79
              
              
              101Amortization
              
              
              163
              
              
              217Allowance
                  for bad debts
              
              
              4
              
              
              67Other
                  non-cash items
              
              
              16
              
              
              2**Changes
                  in working capital:**Trade
                  receivables
              
              
              2,409
              
              
              1,024Deposits,
                  prepayments and other current assets
              
              
              (174
              )
              
              (26
              )Trade
                  payables
              
              
              (632
              )
              
              325Accrued
                  charges and other payables
              
              
              123
              
              
              (29
              )Due
                  from related parties
              
              
              (1
              )
              
              -Due
                  to directors
              
              
              (65
              )
              
              (61
              )Income
                  tax payable
              
              
              (69
              )
              
              (35
              )**Net
                  cash provided by operating activities**
              
              
              2,003
              
              
              1,591**Cash
                  flows from investing activities:**Acquisitions
                  of property, plant and equipment
              
              
              (78
              )
              
              (125
              )**Net
                  cash used in investing activities**
              
              
              (78
              )
              
              (125
              )**Cash
                  flows from financing activities:**Restricted
                  cash
              
              
              (136
              )
              
              123Bank
                  overdrafts
              
              
              (138
              )
              
              148Bank
                  loans repaid
              
              
              (1,005
              )
              
              (1,587
              )New
                  director loan
              
              
              -
              
              
              625Repayment
                  of capital lease obligations
              
              
              (30
              )
              
              (38
              )Dividends
                  on preferred stock
              
              
              (22
              )
              
              (22
              )**Net
                  cash****used in financing activities**
              
              
              (1,331
              )
              
              (751
              )**Net
                  increase in cash and cash equivalents**
              
              
              594
              
              
              715**Cash
                  and cash equivalents at beginning of period**
              
              
              1,528
              
              
              1,631**Cash
                  and cash equivalents at end of period**
              
              
              2,122
              
              
              2,346
 The
          financial statements should be read in conjunction with the accompanying
          notes.
 F-4
  **WLG
          Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 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, WLG’s 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 certain 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 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, and since that date, WEHK’s principal
        activity has been the provision of sea freight forwarding services.
 
 WAE
        was
        incorporated in Hong Kong on February 24, 1989, and since that date, WAE’s
        principal activity has been the provision of air freight forwarding
        services.
 
 In
        July
        and November 2004, the Group established two 100% owned subsidiaries, Wako
        Express (China) Co. Ltd. (“WE China”) in the People’s Republic of China (“PRC”)
        and Wako Express (China) Co. Limited (“WECCL”) in Hong Kong. WE China began
        business in China in February 2005 as a full-service, freight forwarding
        company. WECCL had not commenced business as of March 31, 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 the voting interests of 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-5
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 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
        shares of ALI 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).
 
 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 an office in Melbourne
        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 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 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 US.
 
 On
        July
        31, 2007, the Group acquired all of the membership interests in World Commerce
        Services LLC. WCS is based in Schaumburg, Illinois, and has offices in New
        York,
        Atlanta, Los Angeles and San Francisco. It is a non-asset based freight
        forwarding company and provides a full range of logistics and customs brokerage
        services to its customers, specializing in freight imports from Asia, mostly
        by
        sea, and with an emphasis on imports from China.
  F-6
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 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., and the amendment became effective December 21,
        2007.
 
 As
        of
        March 31, 2008, all subsidiaries are wholly-owned, and all material intercompany
        balances and transactions have been eliminated in consolidation.
 
 The
        accompanying financial data as of March 31, 2008, and for the 3 months ended
        March 31, 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 the
        management, all adjustments (which include only normal recurring adjustments)
        necessary to present fairly the financial position as of March 31, 2008,
        and
        results of operations and cash flows for the 3 months ended March 31, 2007
        and
        2008, have been made. The results of operations for the 3 months ended March
        31,
        2007 and 2008, are not necessarily indicative of the operating results for
        the
        full year.
  F-7
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
  **2.** **EARNINGS
        (LOSS) PER SHARE**
 
 Earnings
        (Loss) per share were computed as follows (unaudited):
 **3 months ended March 31, 2007****Income**
              
              **Weighted**
                **average number**
                **of shares**
              
              **Per share**
                **amount***US$*
              
              
              
              *US$*Net
                  income
              
              
              150Dividends
                  on convertible redeemable preferred stock
              
              
              (22
              )
              
              2,000,000
              
              
              0.01Basic
                  earnings per shareIncome
                  available to common stockholders
              
              
              128
              
              
              25,390,080Additional
                  common stock to be issued as earn-out payment
              
              
              -
              
              
              1,300,000128
              
              
              26,690,080
              
              
              0.00Effect
                  of dilutive securitiesEmployee
                  stock options*(Note
                  #)*
              
              
              -
              
              
              21,671Warrants*(Note
                  #)*
              
              
              -
              
              
              121,671Convertible
                  redeemable preferred stock (Note #)
              
              
              -
              
              
              -Diluted
                  earnings per shareIncome
                  available to common stockholdersassuming conversion of dilutive securities
              
              
              128
              
              
              26,833,422
              
              
              0.00
  F-8
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
  **2.** **EARNINGS
        (LOSS) PER SHARE (CONTINUED)**
 **3 months ended March 31, 2008****Income (Loss)**
              
              **Weighted**
                **average number**
                **of shares**
              
              **Per share**
                **amount***US$*
              
              
              
              *US$*Net
                  income
              
              
              6Dividends
                  on convertible redeemable preferred stock
              
              
              (22
              )
              
              2,000,000
              
              
              0.01Basic
                  loss per shareLoss applicable
                  to common stockholders
              
              
              (16
              )
              
              31,400,094
              
              
              0.00Effect
                  of dilutive securitiesEmployee
                  stock options*(Note
                  #)*
              
              
              -
              
              
              -Warrants*(Note
                  #)*
              
              
              -
              
              
              -Convertible
                  redeemable preferred stock (Note #)
              
              
              -
              
              
              -Diluted
                  loss per shareLoss
                    applicable to common stockholdersassuming conversion of dilutive securities
              
              
              (16
              )
              
              31,400,094
              
              
              0.00
 
 #:
              For
                  2007, common stock was not increased by the 2,000,000 shares related
                  to
                  the convertible preferred stock, and, for 2008, common stock is
                  not
                  increased by the 2,000,000 shares related to the convertible preferred
                  stock, the 500,000 shares issuable to the sellers of WCS upon conversion
                  of the convertible preferred stock, or the exercise of the 100,000
                  outstanding warrants granted to a consultant in exchange for services
                  rendered and the exercise of 245,000 outstanding employee stock
                  options
                  granted to employees because the effect of increasing the outstanding
                  common stock by 2.0 million and 2.8 million shares would be anti-dilutive
                  for 2007 and 2008,
                  respectively.
  F-9
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 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**
                **March 31,**
                **2008***US$*
              
              *US$**(Unaudited)***Facilities
                  granted**-
                  bank guarantees
              
              
              1,148
              
              
              1,041-
                  overdraft facilities
              
              
              591
              
              
              619-
                  bank loans and revolving credit lines
              
              
              12,778
              
              
              10,942-
                  foreign exchange facilities
              
              
              219
              
              
              229-
                  lease facilities
              
              
              235
              
              
              246Total
                  bank facilities
              
              
              14,971
              
              
              13,077
 
 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 $517 will expire within one year from March 31, 2008, but may
        be
        renewed, provided the Group makes available the cash required by the banks
        to
        collateralize each guarantee. A bank guarantee of $126 and the overdraft
        facilities have no expiry dates, but the bank or WLG may terminate either
        facility by giving 30 days notice to the other party. The remaining bank
        guarantee of $398 has no fixed expiration date and is cancelable and/or
        renewable at the option of the bank.
 
 The
        bank
        loans and revolving credit lines mature on various dates as follows: (i)
        $276 on
        October 17, 2008, and (ii) $7,000 revolving credit line in May 2008. The
        remaining loan facility of $3,666 is an on-going facility that may be terminated
        by either the bank or WLG giving 30 days notice to the other party. On March
        12,
        2008, WLG (USA) received a notice from the bank terminating its term loan
        facility and revolving credit line. The bank required that the outstanding
        balance of principal and accrued interest for the term facility, which was
        approximately $751, be settled prior to the end of March 2008, and set April
        15,
        2008, for cancellation of the revolving credit line. This term loan was fully
        settled in March 2008 from WLG’s working capital and by a director loan, and the
        balance of $125 in the revolving credit line was paid in full in April 2008,
        from the Group’s working capital.
 
 The
        bank
        loans and revolving credit lines of $10,942 are secured as follows: (i) term
        loan of $276 is unsecured and repayable within one year by monthly installments,
        (ii) $7,000 is secured by all of WCS’s assets including accounts receivables and
        a guarantee provided by the Group’s parent company, and (iii) $3,666 is secured
        by Asean’s accounts receivable and a registered mortgage charge over the assets
        of Asean.
  F-10
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
  **3.** **BANKING
        FACILITIES (CONTINUED)**
 
 Certain
        of the bank guarantees, totaling $517, are collateralized by cash of $526.
        In
        addition, a bank guarantee of $126 is secured by (i) a letter of support
        from
        the Group’s parent company, and (ii) a registered mortgage debenture over all of
        the assets of Asean. The remaining bank guarantee of $398 is secured by a
        fixed
        and floating charge on all of the assets of WLG (UK) and by a guarantee of
        the
        Group’s parent company.
 
 The
        overdraft facility of $619 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 in the amount of $229, which at March 31, 2008,
        had
        not been utilized. Asean has a leasing facility of $246, of which $13 was
        outstanding as of March 31, 2008. 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 March 31, 2007 and
        2008, the weighted average interest rate of the Group’s short-term bank
        borrowings was 9.76% and 7.98% per annum, respectively.
 
 **At**
                **December 31,**
                **2007**
              
              **At**
                **March 31,**
                **2008***US$*
              
              *US$**(Unaudited)***Utilized**Committed
                  lines-
                  bank guarantees
              
              
              1,148
              
              
              1,041-
                  overdraft facilities
              
              
              471
              
              
              619-
                  bank loans and revolving credit lines
              
              
              7,854
              
              
              6,267-
                  foreign exchange facilities
              
              
              -
              
              
              --
                  lease facilities
              
              
              36
              
              
              13Total
                  bank facilities utilized
              
              
              9,509
              
              
              7,940
  F-11
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 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 approximate future minimum lease payments for operating leases
                  in
                  effect as of December 31, 2007 and March 31,
                  2008:
 
 **At**
                **December 31,**
                **2007**
              
              **At**
                **March 31,**
                **2008***(unaudited)**US$*
              
              *US$*Within
                  one year
              
              
              1,358
              
              
              1,557Over
                  one year but not exceeding two years
              
              
              968
              
              
              1,137Over
                  two years but not exceeding three years
              
              
              466
              
              
              805Over
                  three years but not exceeding four years
              
              
              250
              
              
              649Over
                  four years but not exceeding five years
              
              
              60
              
              
              401Total
                  operating lease commitments
              
              
              3,102
              
              
              4,549
 
 Rental
                  expense under operating leases for the 3 months ended March 31,
                  2007 and
                  2008, was $207 and $472,
                  respectively.
 In
          February 2008, WLG (UK) entered into a ten-year lease for new office and
          warehouse facilities in the UK. Prior to February 2008, WLG (UK) rented
          premises
          on a month-to-month basis. Under the new lease, the base rent is approximately
          $200 for the first two years and increases to $400 for the remaining eight
          years. WLG Inc. has provided a rolling three-year guarantee by which it
          shall be
          obligated to pay three years rent from the date the guarantee is
          enforced.
 ***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 March
                  31, 2008,
                  the obligation for the minimum amount of such cargo space to be
                  utilized
                  in the coming twelve months was $5,667.
 
 ***Contingencies –
        outstanding claims***
 The
                  Group is subject to claims that arise in the ordinary course of
                  business.
                  In general, such claims are covered by insurance policies issued
                  for the
                  Group’s businesses.
 
 As
        of
        March 31, 2008, and subject to the legal proceeding against WCS as described
        below, the aggregate, outstanding amount of claims was approximately $42. Management
        believes that the disposition or ultimate resolution of such claims will
        not
        have a material adverse effect on the financial position of the Group. In
        addition, the Group has identified potential claims of approximately $205
        that
        might be asserted by various parties. The Company believes that the ultimate
        liability, if any, for these potential claims 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
                  delays, lost profits and lost revenues. 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.
  F-12
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
  **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%
 
 The
        following is a summary of the amounts included in the accompanying balance
        sheets:
 **At**
                **December 31,**
                **2007**
              
              **At**
                **March 31,**
                **2008***US$*
              
              *US$**(unaudited)***Due
                  to directors (Note (i))**CW
              
              
              960
              
              
              1,524DK
              
              
              750
              
              
              7501,710
              
              
              2,274
 
 Note :
 (i)
              Amounts
                  due to directors are unsecured, interest-free and repayable on
                  demand
                  except for the director loans of $1,375 and $750 due to CW and
                  DK
                  respectively, which were used as part of the consideration for
                  the
                  acquisition of 100% of the membership interests of WCS and repayment
                  of
                  bank loans. The loans carry an interest rate of 12% per annum and
                  have no
                  fixed repayment terms.
 
 **Additional
        details of transactions**
 **3 months ended**
                **March 31,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**US$*
              
              *US$***Rental
                  paid/payable**JWP
              
              
              27
              
              
              27
  F-13
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 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 March 31, 2007 and 2008, with directors
        /
        stockholders (unaudited):
 
 **CW**
              
              **DK**
              
              **Total***US$*
              
              *US$*
              
              *US$*January
                  1, 2007
              
              
              439
              
              
              -
              
              
              439Expenses/draws
              
              
              (65
              )
              
              -
              
              
              (65
              )March
                  31, 2007
              
              
              374
              
              
              -
              
              
              374January
                  1, 2008
              
              
              960
              
              
              750
              
              
              1,710Loan
                  from director
              
              
              625
              
              
              -
              
              
              625Interest
                  accrued
              
              
              23
              
              
              23
              
              
              46Interest
                  paid
              
              
              (23
              )
              
              (23
              )
              
              (46
              )Expenses
                  paid
              
              
              (61
              )
              
              -
              
              
              (61
              )March
                  31, 2008
              
              
              **1,524**
              
              
              **750**
              
              
              **2,274**
 
 Note :
  ·
              Expenses
                  include amounts that were either paid directly to or for the benefit
                  of CW
                  or DK.
 
 **6.** **SUPPLEMENTAL
        DISCLOSURES OF CASH FLOW INFORMATION**
 
 **3 months ended**
                **March 31,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**US$*
              
              *US$***Cash
                  paid for:**Interest
                  expense
              
              
              118
              
              
              244Income
                  taxes
              
              
              156
              
              
              116
  F-14
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
  **7.** **SHARE-BASED
        PAYMENT**
 
 In
        April
        2005, the board and stockholders of the Company approved the Wako Logistics
        Group, Inc. 2005 Stock Incentive Plan (the “Plan”). The Plan, which is effective
        until April 19, 2015, provides for awarding stock options, stock appreciation
        rights and restricted stock to 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 periods ended March 31, 2007
        and
        2008, was $16 and $2, respectively. As of March 31, 2008, the compensation
        expense related to non-vested options totaled $19 and is expected to be
        recognized over 33 months. The total intrinsic value of the options outstanding
        and options exercisable as of March 31, 2008 was Nil. No tax benefit was
        recognized for the stock option expense recorded for the three months ended
        March 31, 2007 and 2008.
  F-15
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 3
        months
        ended March 31, 2007 and 2008
 *(Dollars
        in thousands except share data and per share amounts)*
  **7.** **SHARE-BASED
        PAYMENT (CONTINUED)**
 
 The
        Company estimates the fair value of stock options using the Black-Scholes
        option
        pricing model, with the following assumptions:
 
 **Options granted 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
              
              
              None
              
              
              None
              
              
              NoneWeighted
                  average grant-date fairvalue(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 March 31, 2008
              
              
              245,000
              
              
              1.12
              
              
              7.70Exercisable
                  at March 31, 2008
              
              
              208,333
              
              
              1.07
              
              
              7.39
  F-16
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 For
        the 3
        months ended March 31, 2007 and 2008
 
 **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
        following table summarizes the Group ’s
        operations analysed by air
        forwarding, sea forwarding and customs brokerage services :
  **(i)**  **During
        the 3 months ended March 31, 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
              
              
              7,248
              
              
              9,492
              
              
              14,027
              
              
              29,061
              
              
              8,034
              
              
              15,549
              
              
              29,309
              
              
              54,102Cost
                  of forwarding
              
              
              (6,015
              )
              
              (7,973
              )
              
              (11,128
              )
              
              (25,068
              )
              
              (7,418
              )
              
              (14,324
              )
              
              (24,561
              )
              
              (47,365
              )Depreciation
              
              
              (24
              )
              
              (16
              )
              
              (106
              )
              
              (63
              )
              
              (8
              )
              
              (22
              )
              
              (138
              )
              
              (101
              )Interest
                  income
              
              
              4
              
              
              5
              
              
              5
              
              
              7
              
              
              -
              
              
              3
              
              
              9
              
              
              15Interest
                  expense
              
              
              (25
              )
              
              (29
              )
              
              (66
              )
              
              (115
              )
              
              (27
              )
              
              (55
              )
              
              (118
              )
              
              (199
              )Other
                  segment income, net
              
              
              11
              
              
              (5
              )
              
              25
              
              
              (38
              )
              
              11
              
              
              (9
              )
              
              47
              
              
              (52
              )Other
                  segment expenses
              
              
              (1,101
              )
              
              (1,199
              )
              
              (2,386
              )
              
              (3,521
              )
              
              (555
              )
              
              (1,186
              )
              
              (4,042
              )
              
              (5,906
              )Taxation
              
              
              -
              
              
              (27
              )
              
              (80
              )
              
              (63
              )
              
              (8
              )
              
              (4
              )
              
              (88
              )
              
              (94
              )Segment
                  income (loss)
              
              
              98
              
              
              248
              
              
              291
              
              
              200
              
              
              29
              
              
              (48
              )
              
              418
              
              
              400Corporate
                  expenses
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (268
              )
              
              (394
              )Net
                  income
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              150
              
              
              6Property,
                  plant and equipment ***–***
                  additions
              
              
              8
              
              
              26
              
              
              58
              
              
              58
              
              
              12
              
              
              42
              
              
              78
              
              
              126
  F-17
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 For
        the 3
        months ended March 31, 2007 and 2008
 
  **8.** **SEGMENTS
        OF THE BUSINESS (CONTINUED)**
 
 **(a)** **Business
        segments (continued)**
 
 **(ii)**  **As
        of December 31, 2007 and March 31, 2008**
 
 **Air forwarding**
              
              **Sea forwarding**
              
              **Customs brokerage**
              
              **Total****2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008**
              
              **2007**
              
              **2008***(unaudited)*
              
              
              
              *(unaudited)*
              
              
              
              *(unaudited)*
              
              
              
              *(unaudited)**US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*
              
              *US$*Segment
                  assets
              
              
              6,765
              
              
              7,181
              
              
              15,472
              
              
              14,869
              
              
              4,997
              
              
              4,824
              
              
              27,234
              
              
              26,874Unallocated
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              14,839
              
              
              14,634Total
                  assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              42,073
              
              
              41,508
  F-18
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 For
        the 3
        months ended March 31, 2007 and 2008
  **8.**
              **SEGMENTS
                  OF THE BUSINESS
                  (CONTINUED)**
 
 (b)
              The
                  table below summarizes the percentage of the Group’s revenues during the
                  three months ended March 31, 2007 and 2008, analyzed by geographical
                  locations:
 
 **3 months ended**
                **March 31,****2007**
              
              **2008***(unaudited)*
              
              *(unaudited)**%*
              
              *%***Revenues**America
              
              
              15
              
              
              47Asia
                  and others
              
              
              53
              
              
              22Australia
              
              
              20
              
              
              24Europe
              
              
              12
              
              
              7100
              
              
              100
 
 (c)
              The
                  Group made no sales during the three months ended March 31, 2007
                  and 2008,
                  which qualified as sales to a major customer (defined as a customer
                  where
                  sales to it represent 10% or more of total revenues).
  
 **9.**
              **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.
  F-19
  **WLG
        Inc.**
 
 **Notes
        to the Consolidated Financial Statements**
 For
        the 3
        months ended March 31, 2007 and 2008
  **9.**
              **RECENT
                  ACCOUNTING PRONOUNCEMENTS
                  (CONTINUED)**
 
 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-20
 *Unaudited
                    Consolidated Financial Statements****WLG
                    Inc.****3
                    months ended March 31, 2007 and
                    2008*




**Part
      I: Financial Information**




**Item
      1. Financial Statements**




**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 March 31,
      2008, include the following entities: Wako Express (HK) Co. Ltd. (“WEHK”), Wako
      Air Express (HK) Co. Ltd. (“WAE”), Wako Express (China) Co. Ltd. (“WE China”),
      WLG (USA) LLC (“WLG (USA)”) (formerly dba “Kay O'Neill”), Mares-Shreve &
Associates, Inc. (“MSA”), Sea Systems Ocean Line, Inc. (“Sea Systems”), Asean
      Cargo Services Pty Limited (“Asean”), WLG (UK) Limited (“WLG (UK)”) and World
      Commerce Services, LLC, (“WCS”).





WLG
      was
      incorporated in Delaware on December 2, 2003, under the name Wako Logistics,
      Inc. In January 2004, it changed its name to Wako Logistics Group, Inc., and,
      in
      December 2007, its name was changed 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 its sole
      shareholder.





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





WEHK
      was
      incorporated in Hong Kong on September 4, 1982, and carries on the business
      of
      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 Asia-Australian trade lanes, and, more recently, on the
      trade lanes running from Asia to the US and Europe.




WAE
      was
      incorporated in Hong Kong on February 24, 1989. Its business is 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 business operations have been conducted through our two Hong Kong
      based subsidiaries since January 18, 2004, (the date we acquired WEHK and WAE)
      and through WE China, following the commencement of business by it in February
      2005.




On
      April
      1, 2005, we completed the acquisition of all of the voting interests in Kay
      O'Neill (USA) LLC (“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 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.





Effective
      October 1, 2005, WLG acquired all of the voting stock of 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). Prior to the
      acquisition, WLG and ALI worked closely together pursuant to the terms of an
      agency agreement.





3





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





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





On
      December 1, 2006, we acquired all of the voting shares of MSA and its wholly
      owned subsidiary, Sea Systems, (collectively, “MSA Group”). MSA, which was
      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.





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
      product by sea from Asia, with a heavy emphasis on shipments from China. In
      addition to its head office in Schaumburg, Illinois, WCS has offices in Long
      Island, New York, Atlanta, Georgia and two offices in California located in
      Los
      Angeles and San Francisco. Prior to the acquisition, the Group and WCS had
      not
      worked together.




With
      the
      exception of performing administrative, oversight and regulatory tasks, 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 forward 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.





Our
      revenues are generated from the air, sea and local freight transportation
      services that we arrange, customs brokerage services we perform and the VAS
      we
      provide such as scanning, pick and pack, price ticketing and warehousing of
      goods. We believe that our customers benefit from the extensive experience
      we
      have in arranging the transportation of freight, performing customs clearance
      services and providing VAS in the many countries in which we operate and in
      which we maintain agency relationships. For our freight forwarding business,
      our
      experience allows us to focus on large cargo shipments, because these types
      of
      shipments normally require access to sophisticated logistical networks in many
      countries, which we have 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 business is variable and
      relate directly to the amounts and volumes of shipments we book. Direct
      transportation costs are our largest variable expense. Personnel costs represent
      the second largest expense for our freight operations. Over time, we have gained
      the experience necessary to allow us to project our staffing needs based on
      the number of customer orders we fulfill. Nonetheless, staff costs are less
      flexible than other variable costs so that, in the short term, we may not be
      able to alter our staff levels to adjust for unexpected peaks and downturns
      in
      our business.





4





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





In
      order
      to ensure that we are able to maintain an “inventory” of 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 allocated 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 becoming a necessary and important part of
      our
      business and may cover a wide range of supply chain services. As an example,
      we
      may provide some or all of the following VAS to our customers: pick and scan;
      pick and pack; co-packing; bar code printing; labeling and price tagging at
      both
      the carton and item levels. At the carton level, each carton remains unopened,
      which makes this a simpler service. At the item level, each individual item
      may,
      as in the case of apparel, be processed by size and color, which requires
      advanced information technology capabilities.





The
      VAS
      that we provide may also involve receiving goods from one or multiple factories
      on behalf of 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 a customer a more efficient and less costly means to store and
      distribute its products. Performance of VAS relies on the application of a
      wide
      range of information technologies, and requires an ability to receive, process
      and provide shipping and inventory information from and to our customers on
      a
      time-sensitive basis. Our billings for VAS vary with the type of services
      performed, but they are often based on a per-piece count measured by the actual
      number of units we store and prepare for shipment.





**Customs
      Brokerage Operations**





We
      have
      customs brokerage practices in our offices in Sydney, Australia, Manchester,
      England, Seattle, Washington, Long Beach 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 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 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 and pick-up of documentation for the shipments. The
      amounts we bill are normally similar to what other brokerage companies charge
      in
      a specific geographical area. 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 high degree of certainty
      what our personnel needs are for this segment of our business.





**Global
      Agency Network**





We
      work
      with just 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.





5





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





By
      working with independent cargo agents, we may be able to expand our
      business without the costs typically associated with the ownership and
      maintenance of company-owned offices. Given the importance of overseas cargo
      agents to our business, our senior management is involved on a regular basis
      with them 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 handle both sides, import and export, of a shipping transaction. In
      addition, it is more difficult to ensure the same level of service to a customer
      when part of a shipment is handled by an independent agent.





**Results
      of Operations**





THREE
      MONTHS ENDED MARCH 31, 2008 COMPARED WITH THREE MONTHS ENDED MARCH 31,
      2007.




**Results
      of Operations**





Total
      revenues for the three months ended March 31, 2008, increased by about $24.79
      million, or 85%, compared with total revenues for the three months ended March
      31, 2007, growing from approximately $29.31 million to $54.10 million. Of this
      increase, revenues from our existing business on a like-to-like basis grew
      by
      $4.41 million, for an increase of 15%. WCS, the US company we acquired in the
      third quarter of 2007, added revenues of $20.38 million.





For
      the
      increase in like-to-like revenues of $4.41 million, Asean contributed revenues
      of approximately $2.89 million, or about 49% of the total increase. Our Hong
      Kong and China operations added about $2.50 million in revenues, or 42%, and
      revenues in the UK grew by about $0.51 million over the same period last year,
      adding approximately 9% to the total increase. Our existing US operations,
      however, reported a decrease of $1.49 million in revenues.




Gross
      profit rose from $4.75 million in the three months ended March 31, 2007, to
      $6.74 million for the same period in 2008, for an increase of $1.99 million,
      or
      42%. Of this increase, our Hong Kong and China operations contributed $0.29
      million and Asean added $0.52 million. In addition, MSA reported an increase
      in
      gross profit of $39,000. WLG (USA) and WLG (UK) reported decreases in gross
      profit of $0.33 million and $0.10 million, respectively. The drop in gross
      profit from these two companies is due to several factors, including the
      bankruptcy of a large customer in the UK, the establishment of an office in
      the
      US by a former UK agent of WLG (USA) and a contraction in WLG (USA)’s customer
      base in
      connection with the integration of WCS with our US operations. The remaining
      increase in gross profit of $1.58 million is attributable to WCS, which was
      not
      part of the Group during the first quarter of 2007.





The
      Group's overall gross margin decreased from 16.1% for the three months ended
      March 31, 2007, to 12.5% for the same period in 2008. A part of the reduction
      in
      gross margin is due to higher sea freight rates and fuel surcharges levied
      by
      the various shipping lines. In most 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. We were not able
      to
      pass on all of the rate increases to our customers, and, to the extent that
      the
      higher rates could not be billed, this caused our gross margin to decline in
      the
      first quarter of 2008 compared to last year. WCS, which we acquired during
      the
      third quarter of 2007, recorded a gross margin of 7.7% covering both its freight
      forwarding and brokerage operations for the three months ended March 31, 2008.
      Including WCS in the Group's results for 2008 had the effect of reducing
      our overall margin by 3 percentage points, due, in part, to low margins for
      its freight forwarding business and the duty paid on behalf of its clients.
      The
      remaining reduction in gross margin is partially attributable to the decrease
      in
      the gross margins of WLG (USA) and WLG (UK), which posted gross margins of
      11.6%
      and 14.2% for the three months ended March 31, 2008, respectively, compared
      to
      16.6% and 19.8%, respectively, for the same period in 2007. The decrease for
      WLG
      (UK) is mainly due to the bankruptcy of a large customer for which
      costs have been incurred but which may not be recoverable. WLG (USA)’s
      gross margin has declined due to a decision in 2007 to seek new import freight
      business at lower margins than its export business and to a
      reduction or discontinuance of services for certain customers in
      connection with the integration of WLG (USA) into the operations of WCS.





During
      the three months ended March 31, 2008, total operating expenses increased to
      about $6.37 million, as compared to approximately $4.45 million for the same
      period in 2007, for an increase of $1.92 million, or 43%. Most of the increase
      in operating costs in the first quarter of 2008 is attributable to $1.50
      million of operating expenses of WCS, which was acquired in the third quarter
      of
      2007. The remaining increase of $0.42 million in operating expenses 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 15% reported by our existing businesses for the three months
      ended March 31, 2008, when compared to same period in 2007. For the three months
      ended March 31, 2008, salaries and related personnel costs increased by about
      $1.18 million, or 41%, from $2.91 million to $4.09 million. Of this increase,
      $1.07 million is attributable to WCS. Other selling and administrative costs
      grew by approximately 51% from $1.30 million to $1.96 million, which, when
      combined with the increase in personnel costs, results in a total increase
      of
      almost $1.84 million for operating costs, not including amortization and
      depreciation. Of the $1.84 million increase, approximately $1.47 million relates
      to WCS, which was not part of the Group during the first quarter 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.
      Australia added a new warehouse in Melbourne during the latter half 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
      $0.24 million to $0.32 million, or about 33%. 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.





6





After
      the
      provision for income taxes, the Group recorded a net income of $6,000 for the
      three months ended March 31, 2008, compared to net income of $150,000 for the
      same period in 2007. Hong Kong and China operations reported a combined net
      income of $511,000 in the first quarter of 2008, compared with net income of
      $303,000 for the same period in 2007, representing an increase of approximately
      $208,000. The improvement in their net incomes is mainly due to an increase
      in
      revenues matched by a slower growth in their overhead expenses. In addition,
      MSA’s net income improved to $44,000 for the three months ended March 31, 2008,
      compared to a loss of $18,000 for the same period in 2007, mainly as a result
      of
      an increase in its gross margin. Asean’s net income for the first quarter of
      2008 is $74,000, compared to $46,000 for the same period in 2007. This increase
      of $28,000 is due to increases in both Asean’s freight forwarding and
      customs brokerage business. WLG (USA) and WLG (UK) incurred losses of $52,000
      and $181,000, respectively, for the three months ended March 31, 2008, compared
      to net incomes of $43,000 and $16,000, respectively, for the same period in
      2007. The 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 integration of WLG (USA)’s operations with those of WCS. The parent
      company’s loss increased by about $153,000 for the three months ended March 31,
      2008, mainly due to additional amortization of about $79,000 from the intangible
      assets of WCS and interest expense of $45,000 incurred for the WCS
      acquisition. WCS, which we acquired in the third quarter of 2007, reported
      a net
      income of $3,000 for the three months ended March 31, 2008.





**Segment
      Information**





***Air
      freight operations*** :
      Revenues from our air freight operations for the three months ended March 31,
      2008, increased to about $9.49 million from approximately $7.25 million, or
      about 31%, when compared to the same period in 2007. Asean, WLG (UK), WE China,
      WEHK and WAE reported increases in their air freight revenues, contributing
      $0.10 million, $0.09 million, $1.01 million and $0.78 million, respectively,
      to
      the overall growth in revenues. WLG (USA) reported a decrease in its air
      freight revenues of $0.36 million. WCS, which was not part of the Group during
      the three months ended March 31, 2007, contributed air freight revenues of
      $0.63
      million .





Cost
      of
      sales for our air freight operations increased by approximately 32%, from $6.02
      million for the three months ended March 31, 2007, to $7.97 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 of $1.95 million in the cost of sales for our air freight operations,
      approximately $0.73 million is attributable to WCS.





The
      Group’s gross profit margin for its air-freight business decreased from 17.0%
      for the three months ended March 31, 2007, to 16.0% for the same period in
      2008,
      and is the result of several factors. First, all of our companies continued
      to
      experience higher fuel surcharges during the first quarter of 2008. Although
      we
      have been able to pass the fuel surcharges onto our customers, these additional
      charges have the effect of reducing our gross margin, but not our gross profit,
      because the surcharges are a passed on to our customers without a mark-up.
      Lastly, we have also signed more cargo space commitments for our Hong Kong
      airfreight operations, and in order to fill some of this cargo space, we
      have increased our business with co-loaders, which is normally done at a
      lower profit margin.





Segment
      overhead for our air freight operations increased by approximately $0.13
      million, or 11%, from $1.14 million for the three months ended March 31, 2007,
      to $1.27 million for the same period in 2008. Of this increase, approximately
      $63,000 is attributable to the overhead expenses of WCS. The overhead incurred
      by our other subsidiaries in this segment for the three months ended March
      31,
      2008, increased by approximately $67,000, when compared to the same period
      in
      2007, representing an increase of about 6%.




Net
      segment income for our air freight operations is approximately $248,000 for
      the
      three months ended March 31, 2008, compared to net income of $98,000 for the
      same period in 2007, for an increase of $150,000. Most of this growth is
      attributable to our Hong Kong and China air freight operations, which reported
      net incomes of approximately $183,000 and $58,000 for the three months ended
      March 31, 2008, respectively, compared with a net income of approximately
      $86,000 and a net loss of $1,000, for the same period in 2007, for a combined
      improvement of $156,000. 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 reported an increase of approximately $12,000
      in
      net income for the three months ended March 31, 2008. Increases in the net
      incomes of our Hong Kong, China and Australian operations have served to offset
      a decrease of about $25,000 in the net income of WLG (USA). WCS reported a
      net
      income of $1,000 for this segment.




***Sea
      freight operations:*** Revenues
      from our sea freight operations rose by about 107% for the three months ended
      March 31, 2008, when compared to the same period in 2007, growing from
      approximately $14.03 million to $29.06 million, for an increase of $15.03
      million. Much of this increase is attributable to WCS, which was acquired during
      the third quarter of 2007, and which reported revenues of $13.18 million for
      the
      three months ended March 31, 2008. As a result of the growth in our existing
      operations, there was an increase in revenues of about $1.85 million for the
      three months ended March 31, 2008, or nearly 13%, over the same period in 2007.
      Asean, WE China, WLG (UK) and MSA reported increases in their revenues of $1.82,
      $0.88, $0.28 and $0.16 million, respectively, compared to the same period in
      2007. WLG (USA) experienced a decrease in revenues of $1.12 million as a result
      of a reduction in its customer base, due, in part, to the integration with
      WCS.
      Our Hong Kong sea freight operations reported a decrease in revenue of $0.17
      million, mainly as a decrease in business to the UK and Australia.





7





Cost
      of
      sales for our sea freight operations increased by 125% from $11.13 million
      for
      the three months ended March 31, 2007, to $25.07 million for the same period
      in
      2008, for an increase of $13.94 million. This increase is mainly attributable
      to
      a corresponding increase in sea freight revenues and to higher shipping rates,
      fuel surcharges and to the acquisition of WCS, which increased the Group’s cost
      of sales by about $12.26 million for the three months ended March 31,
      2008.




The
      Group’s gross profit margin decreased from approximately 21.7% for the three
      months ended March 31, 2007, to 13.8% for the same period in 2008. As with
      our
      air freight business, increased freight rates and 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, but not all of the increases in
      freight rates, to our customers. In the cases where we billed our customers
      for
      the 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 7.3% for this segment, which
      caused a decline in the overall gross margin for this part of our business.
      The
      remaining decline in the gross margin for this is segment is attributable to
      WLG
      (UK) and WLG (USA). WLG (UK)’s gross profit margin dropped from 31.1% for the
      three months ended March 31, 2007, to 21.1% for the same period in 2008, as
      a
      result of a bankruptcy of one of its major customers. In addition, WLG (USA)’s
      gross profit margin fell from 15.4% for the three months ended March 31, 2007,
      to 10.4% for the same period in 2008, as a result of a loss of certain customers
      in connection with the steps taken to integrate its business with that of WCS
      and the decision of a UK agent to establish its own office in the US.





Total
      segment overhead attributable to our sea freight business increased by $1.18
      million, or 45%, from approximately $2.61 million for the three months ended
      March 31, 2007, to $3.79 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 $0.97 million to the Group. The remaining
      increase of $0.21 million in overhead expenses, which is an increase of about
      8%, 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 13%.




Net
      segment income for our sea freight operations is approximately $200,000 for
      the
      three months ended March 31, 2008, compared to net income of $291,000 for the
      same period in 2007. WE China, MSA and Asean’s net incomes increased by $99,000,
      $59,000, and $1,000, respectively. Hong Kong’s sea freight operations reported a
      decrease of $47,000 in its net income. WLG (UK) and WLG (USA) incurred net
      losses of $96,000 and $39,000, respectively, for the three months ended March
      31, 2008, compared to net incomes of $39,000 and $31,000 for the same period
      in
      2007. In addition, WCS reported a net income of $2,000 for the three months
      ended March 31, 2008. WCS was not part of the Group during the three months
      ended March 31, 2007.





***Customs
      brokerage services:*** Asean,
      MSA, WLG (UK) and WCS each have a division that provides customs brokerage
      services. For the three months ended March 31, 2008, revenues from customs
      brokerage services totaled approximately $15.55 million, compared with $8.03
      million for the same period in 2007, for an increase of about $7.52 million.
      This growth is mostly attributable to additional revenues of $6.58 million
      from
      WCS’s customs practice. Asean and WLG (UK)’s customs revenues increased by about
      $0.96 million and $0.14 million, respectively, for the three months ended March
      31, 2008, when compared to the same period in 2007. MSA reported a
      decrease in revenues of $0.16 million for this segment, compared to the
      first quarter of 2007. Direct and administrative costs for this segment totaled
      about $15.60 million, producing a net loss of $48,000 for the three months
      ended
      March 31, 2008, compared to a net income of $29,000 for the same period in
      2007.
      The loss is mainly attributable to the loss incurred by WLG (UK), which reported
      a net loss of $83,000 in this segment, compared to a net income of $14,000
      for
      the same period in 2007. WCS recorded a net income of $1,000 for the three
      months ended March 31, 2008.




**Other
      Operating Expenses**





*Salaries
      and allowances*




Salaries
      and related expenses increased by $1.18 million, or 41%, from $2.91 million
      for
      the three months ended March 31, 2007, to $4.09 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 was acquired in the third quarter of 2007.
      WCS increased our employee count by 57 and added personnel costs of $1.07
      million for the three months ended March 31, 2008. The remaining increase of
      $0.11 million is attributable to salary increases in our existing operations,
      compensation expense for stock options, and to new employees added by Asean.
      As
      of March 31, 2008, the Group's employee headcount was 327, compared to 260
      at
      March 31, 2007.





8





*Rent*




Rent
      expense for our facilities increased by 62% from $0.29 million for the three
      months ended March 31 2007, to $0.47 million for the same period in 2008, for
      an
      overall increase of $0.18 million. The acquired operations of WCS added $75,000
      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 $28,000, when
      compared to the three months ended March 31, 2007. In addition, Asean added
      rent
      expense of $67,000, 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 March 31, 2008, totaled about $1.49
      million, compared to $1.01 million for the same period in 2007, for an increase
      of $0.48 million. The increase is primarily attributable to the acquisition
      of
      WCS, which increased Other SG&A expenses by $0.33 million. Asean’s Other
      SG&A expenses increased by $0.11 million for the three months ended March
      31, 2008, when compared to same period in 2007, mainly as a result of an
      increase in software costs and overseas traveling expenses. The increase in
      the
      Other SG&A expenses for the remaining companies in the Group totaled about
      $0.04 million.




*Depreciation
      and Amortization*




Depreciation
      expense for property, plant and equipment increased to $101,000 for the three
      months ended March 31, 2008, compared to $79,000 for the same period in 2007,
      for an increase of $22,000. All of this increase is attributable to WCS, which
      recorded depreciation expense of $28,000 for the first quarter of 2008. There
      is
      an overall decrease of $6,000 in depreciation expense relating to our
      existing subsidiaries.




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 three months ended
      March 31, 2008, amortization expense totaled $0.22 million, and is attributable
      to WLG (USA), Asean, WLG (UK), MSA Group and WCS in the amounts of $25,614,
      $48,832, $41,663, $22,083 and $78,762, respectively. Amortization expense for
      the three months ended March 31, 2007, was $0.16 million and related to WLG
      (USA), Asean, ALI, WLG (UK) and the MSA Group in the amounts of $25,614,
      $48,832, $7,796, $41,663 and $38,753, respectively. WCS was not part of the
      Group until July 31, 2007 and, as such, the amortization expense reported for
      the three months ended March 31, 2007, did not include an amount for
      WCS.




*Interest
      Expense*




Interest
      expense increased from $118,000 for the three months ended March 31, 2007,
      to
      $244,000 for the same period in 2008, for an increase of $126,000. This increase
      is partly attributable to WCS, which recorded interest expense of approximately
      $82,000 for the first quarter of 2008. Asean reported an increase in interest
      expense of $9,000, mainly as a result of an increase in interest rates. WLG
      (USA) had a decrease in interest expense of $11,000 due to a declining balance
      in its term loan, which was fully repaid in March 2008. In addition, the Group
      incurred interest expense of $45,000 for two director loans of $0.75 million
      each, and which carry an interest rate of 12% per annum.




*Other
      income/ expense*





Other
      expense for the three months ended March 31, 2008, totaled $52,000, and
      consisted mainly of exchange losses attributable to our operations in Australia
      and the UK. Other income of $47,000 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 decreased from $88,000 for the three months ended
      March 31, 2007, to $81,000 for the same period in 2008. Income tax of $117,000
      was provided on the combined net income of $633,000 attributable to our Hong
      Kong, China and Australian operations, for an effective tax rate of 18.4%.
      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 loss of approximately $336,000, which includes
      about $234,000 of expenses which are not deductible for income tax purposes,
      the
      largest being amortization of $205,000. A net tax benefit of $36,000 has been
      provided on the US losses. No tax benefit has been provided on the loss of
      WLG
      (UK), which totaled $210,000. 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 $87,000 is approximately 93.4% for the three months ended
      March 31, 2008.





9





**LIQUIDITY
      AND CAPITAL RESOURCES**




For
      the
      three months ended March 31, 2008, our operations provided cash of approximately
      $1.59 million, compared with cash of $2.00 million provided by operations for
      the same period in 2007. In 2008, cash was provided by the following sources:
      net income of $6,000; amortization and depreciation expense of $0.32 million;
      provision for bad debts of $67,000; other non cash items of $2,000; decrease
      in
      trade receivables of $1.02 million and an increase in trade payables of $0.33
      million. Major components that used cash for operations in 2008 included: an
      increase in deposits and prepayments of $26,000; a decrease in accrued
      charges and other payables of $29,000; repayment of $61,000 to a director and
      a
      decrease in taxes payable of $35,000.




Net
      cash
      used by financing activities totaled about $0.75 million for the three months
      ended March 31, 2008, compared to net cash of about $1.33 million used by
      financing activities in 2007. Cash used by financing activities in 2007 included
      the repayment of bank loans of $1.01 million, repayment of overdraft facilities
      of $0.14 million and an increase in restricted cash of $0.14 million. Cash
      used
      by financing activities in 2008 included repayment of bank loans and capital
      lease obligations of $1.59 million and $38,000, respectively, and cash dividends
      of $22,000 paid on our preferred stock. Cash provided by financing activities
      in
      2008 included a decrease in restricted cash of $0.12 million, an increase of
      $0.15 million in our bank overdraft facilities and a loan of $0.63 million
      from
      our majority shareholder.




As
      of
      March 31, 2008, certain banks in Hong Kong and China had issued bank guarantees
      of $0.52 million to several airlines on behalf of WAE and WE China. With these
      guarantees, the airlines, in turn, have granted credit terms to each company.
      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 $0.53 million in cash in restricted bank accounts. We have
      also
      given a bank guarantee of about $0.12 million in favor of the owner of the
      office premises occupied by Asean in Australia. In addition, a UK bank has
      provided a bank guarantee of $0.40 million to the UK Customs and Excise
      Department for the benefit of WLG (UK). In return for this guarantee, the UK
      Customs and Excise Department grants credit terms to WLG (UK). We have also
      given a parent company guarantee in support of the new office and warehouse
      facilities of WLG (UK). The guarantee is limited to an amount equal to three
      years rent at the date the guarantee is enforced. As of March 31, 2008, our
      obligation under this guarantee is about $0.80 million.




During
      2006, WEHK borrowed approximately $0.11 million to pay income taxes and for
      use
      as working capital. This loan was fully repaid by November, 2007. In October
      2007, WEHK borrowed $0.28 million to pay income taxes, which is repayable in
      equal installments over the next twelve months. As of March 31, 2008, the
      outstanding balance of this loan was approximately $0.16 million.





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, which required the term loan
      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) was required 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 and the bank
      waived the violations. However, 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, from WLG’s working capital and a loan from a director.
      No amount was owed under the $1.0 million revolving line of credit at March
      31,
      2008. However on the termination date, April 15, 2008, there was a balance
      of
      $0.13 million under this facility, and the loan was repaid in full.





Asean
      has
      a receivables loan facility in the face amount of approximately $3.67 million,
      which is secured by, and based on, 100% and 80% of its accounts receivable,
      respectively. It also has an overdraft facility with a limit of about $0.62
      million. At March 31, 2008, Asean's bank debt under its receivables and
      overdraft facilities was $2.49 million and $0.62 million, respectively, with
      interest rates of approximately 11.48% for the receivables line and 10.58%
      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 $7.00 million. This
      facility, which is secured in part, by all of WCS’s trade receivables, allows
      borrowings equal to 85% of eligible receivables, as defined in the loan
      agreement. As of March 31, 2008, WCS owed approximately $3.61 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 May 31,
      2008.





10





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 as a means to expand our
      ability to provide a full range of logistics services on a global scale. To
      the
      extent that we are unable to use our common stock 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, including the companies we have acquired since 2004.




Our
      approximate contractual cash obligations as of March 31, 2008, are set forth
      in
      the table below, which includes all equipment lease, office and warehouse rental
      obligations, as well as payments due under our cargo space commitments. These
      cash obligations 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 5yearsFacilities
                    rental and equipment lease obligations
                
                $
                4,549
                
                $
                1,557
                
                $
                1,942
                
                $
                1,050
                
                $
                —Cargo
                    space commitments
                
                $
                5,667
                
                $
                5,667
                
                
                —
                
                
                —
                
                
                —Total
                    contractual cash obligations
                
                $
                10,216
                
                $
                7,224
                
                $
                1,942
                
                $
                1,050
                
                $
                —




During
      the three months ended March 31, 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.





11





**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 period covered by
        the Report on Form 10-Q that has materially affected, or is reasonably likely
        to
        materially affect, the Company’s internal control over financial
        reporting.





12




**Part
      II: Other Information**




**Item
      1: Legal Proceedings:**





We
      have a
      number of claims, currently outstanding, relating to lost or damaged cargo
      occurring in the normal course of our business. Many of these claims are settled
      by the carriers we engage to ship goods on behalf of our customers. In the
      event
      that we become liable to our customers for any of such claims, we believe that
      these claims are sufficiently insured under our insurance policies to cover
      such
      losses. Subject to the claim discussed below, at March 31, 2008, and through
      the
      date of filing of this Report, we are not aware of any uninsured claim that
      would have a materially adverse economic effect on our business.





Prior
      to
      its acquisition by WLG, WCS was named as a third-party defendant in pending
      proceedings filed in the United States District Court for the Southern District
      of New York (the “New York Proceedings”) and the United States District Court,
      Central District of California (the “California Proceedings”) relating to claims
      arising out of the derailment on April 21, 2005, at Tyrone, Oklahoma, of three
      rail cars attached to a Union Pacific train.





The
      New
      York Proceedings consist of the following actions: Indemnity Insurance Company
      of North America v. K-Line America, Inc. et al, Case Number 06 Civ. 0615, filed
      on January 25, 2006 (consolidated with Royal & Sun Alliance Insurance PLC v.
      K-Line America, Inc. et al, Case Number 06 Civ. 2557; Mitsui Sumitomo Insurance
      Co. Ltd et al v. “K” Line America, Inc. et al, Case Number 06 Civ. 2956; Philips
      PC Peripherals v. M/V Chang Jiang Bridge et al, Case Number 06 Civ. 2962;
      Federal Insurance Company v. “K” Line America, Inc. et al, Case Number 06 Civ.
      3038, ACK Controls, Inc. v. “K” Line America, Inc. et al, Case Number 06 Civ.
      3040; Navigators Management Company as Subrogee of American Shipping v. Union
      Pacific Railroad and “K” Line America, Inc., Case Number 06 Civ. 3042; and Tokio
      Marine & Nichido Fire Insurance Co. Ltd. et al v. Kawasaki Kisen Kaisha,
      Ltd. d/b/a “K” Line and Union Pacific Railroad Company, Case Number 06 Civ.
      5159) and Snap-On Logistics Company v. Kawasaki Kisen Kaisha, Ltd. d/b/a “K”
Line and Union Pacific Railroad Company, Case Number 06 Civ. 3073, filed on
      April 21, 2006.





The
      California Proceedings consist of the following actions: Regal Beloit
      Corporation v. Kawasaki Kisen, Case Number CV06-3016 DSF (FMOx) filed on May
      17,
      2006; Victory Fireworks, Inc. v. Kawasaki Kisen Kaisha, Ltd., et al, Case Number
      CV 06-3017 AHM (MANx), filed on May 17, 2006; Royal & Sun Alliance, Etc. v.
      Kawasaki Kisen, et al, Case Number CV06-3019-SVW (CTx), filed on June 1, 2006;
      and PICC Property & Casualty Company Limited Shanghai Branch v. Kawasaki
      Kisen Kaisha, Ltd., et al, Case Number CV 06-3018 R (RZx), filed on June 2,
      2006.





Plaintiffs
      in the foregoing proceedings are seeking an aggregate of approximately $6.8
      million in compensatory and unspecified damages for delays, lost profits and
      lost revenues.




The
      foregoing complaints generally allege that a steel products mold, which
      was being shipped from China to Chicago, Illinois, in a 20 foot container,
      fell through the floor of the container while it was being transported in a
      rail
      car on a Union Pacific train, allegedly causing the derailment of three rail
      cars. The Group has been advised by legal counsel that WCS has been named as
      a
      third party defendant for technical reasons, as it had been hired by one of
      its
      customers to arrange the shipment of the steel products mold from China to
      Chicago and that the shipment was on a WCS “House Bill”.





We
      intend
      to vigorously defend each of the foregoing actions. In addition, we have been
      advised by WCS’s legal counsel that the likelihood of any liability being
      assigned to WCS is minimal, but subject to the normal risks of litigation.
      However, we cannot provide any assurance as to the outcomes of these actions
      individually, or in the aggregate.




**Items
      1A: Risk Factors:** There
      have been no material changes in the Risk Factors set forth in WLG's Annual
      Report on Form10-K for the year ended December 31, 2007.





**Item
      2: Unregistered Sales of Equity Securities and Use of
      Proceeds:**





None





13





**Item
      3. Defaults Upon Senior Securities:**





None




**Item
      4. Submission of Matters to a Vote of Security Holders:**





None




**Item
      5. Other Information:**





None




**Item
      6. Exhibits.**





Exhibits





10.14
            Agreement
                between Bredbury Limited, WLG (UK) Limited and WLG Inc. dated February
                8,
                2008(1)31.1
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002 (Rule13a-4(a)).(2)31.2
            Certification
                of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley
                Act of
                2002 (Rule 13a-4(a)).(2)32.1
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to 18
                U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Rule 13a-14(b)).(2)





(1)
      Incorporated by reference to our annual report on Form 10-K filed on March
      31,
      2008.




(2)
      Filed
      herewith





14





**SIGNATURES**





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





WLG
                INC.Date:
                May 15, 2008
            By:
            /s/ Christopher
                WoodChristopher
                WoodChief
                Executive Officer,
              (
                Principal Executive Officer) and DirectorDate:
                May 15, 2008
            By:
            /s/ David
                L. KoontzDavid
                L. KoontzChief Financial Officer,
              (Principal Financial Officer and Accounting Officer)
              and Director




15





**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description
                of Exhibit**10.14
            
            Agreement
                between Bredbury Limited, WLG (UK) Limited and WLG Inc. dated February
                8,
                2008(1)31.1
            
            Certification
                of the Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002(Rule 13a-4(a)).(2)31.2
            
            Certification
                of the Chief Financial Officer to Section 302 of the Sarbanes-Oxley
                Act of
                2002 (Rule13a-4(a)).(2)32.1
            
            Certification
                of the Chief Executive Officer and Chief Financial Officer pursuant
                to 18
                U.S.C. Section1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002 (Rule 13a-14(b)).(2)




(1)
      Incorporated by reference to our annual report on Form 10-K filed on March
      31,
      2008.




(2)
      Filed
      herewith





16