Unassociated Document

Wako China	Usage		Area (sq ft)		Lease expiration		Annual lease rental
Beijing		Office		740		31-Oct.-09	$	11,411
Shanghai		Office		5,170		19-Oct-08		131,936
China – 4 staff apartments		Quarters		1.600		Various		28,712
Shanghai		Warehouse		700		31-Mar-08		4,922
Guangzhou		Office		1,500		10-May-09		18,605
Tianjin		Office		1,100		30-Nov.-08		16,258
Qingdao		Office		650		06-July-09		9,748
Ningbo		Office		1,210		28-Feb-09		16,787
Dalian		Office		480		14-Mar-08		2,510
Shenzhen		Warehouse		9,920		31-Dec-08		43,355
Shenzhen		Office		1,400		12-Dec-09		28,827
Total China				24,080			$	314,300

Usage

San Francisco, California

Des Plaines, Illinois

MSA

Long Beach, California

WCS

Long Beach, California

Australian premises:

Asean — Australia

Usage

Area (sq ft)

Lease expiration

(*Note that Asean sublets approximately 60% of the office space in Tullamarine to a third party.)

United Kingdom premises:

WLG (UK) — United Kingdom

Usage

Area (sq ft)

Lease expiration

Total United Kingdom (see Note (a))

45,000

277,375

Note (a): Lease for office and warehouse on month-to-month was terminated in the first quarter of 2008. At the date of this report, the Group leases approximately 45,000 sq. ft. of space in the UK, of which about 3,000 and 42,000 sq. ft. is used as an office and warehouse, respectively.

ITEM 3. 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 the insurance policies we have obtained to cover such losses. Subject to the claim discussed below, at December 31, 2007, 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 California Proceedings consist of the following actions: Regal Beloit Corporation v. Kawasaki Kisen, Case Number CV06-3016 DSF (FMOx) filed on May 17, 2006; Victory Fireworks, Inc. v. Kawasaki Kisen Kaisha, Ltd., et al, Case Number CV 06-3017 AHM (MANx), filed on May 17, 2006; Royal & Sun Alliance, Etc. v. Kawasaki Kisen, et al, Case Number CV06-3019-SVW (CTx), filed on June 1, 2006; and PICC Property & Casualty Company Limited Shanghai Branch v. Kawasaki Kisen Kaisha, Ltd., et al, Case Number CV 06-3018 R (RZx), filed on June 2, 2006.

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

According to the complaints filed in the foregoing actions, the plaintiffs are seeking compensation for damages relating to the derailment on April 21, 2005, at Tyrone, Oklahoma, of three rail cars attached to a Union Pacific train. The foregoing complaints generally allege that a steel products mold, which was being shipped from China to Chicago, Illinois, in a 20 foot container, fell through the floor of the container while it was being transported in a rail car on a Union Pacific train, allegedly causing the derailment of the three rail cars. 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.

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

On November 30, 2007, the Company’s board of directors and holders of all of the Company’s Series A Convertible Redeemable Preferred Stock and holders of approximately 78% of the Company’s Common Stock approved by written consent an amendment to the Company’s Restated Certificate of Incorporation to change the Company’s name from Wako Logistics Group, Inc. to WLG Inc. No other matters were submitted to the vote of security holders during the fourth quarter of the fiscal year covered by this Report.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER REPURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Over-The-Counter Bulletin Board ("OTCBB") under the symbol "WLGI" and has been since December 31, 2007. From July 27, 2005, to December 30, 2007, our common stock was traded on the OTCBB under they symbol WKOL. The closing high and low bid price quotations for our common stock, as reported by the OTCBB, are as follows for the periods indicated:

Years Ended December 31, 2007 and 2006:	High		Low
Fourth quarter 2007	$	1.50	$	1.45
Third quarter 2007	$	1.50	$	1.25
Second quarter 2007	$	1.85	$	1.30
First quarter 2007	$	2.85	$	1.80

Fourth quarter 2006	$	2.85	$	2.85
Third quarter 2006	$	2.85	$	2.00
Second quarter 2006	$	3.00	$	2.30
First quarter 2006	$	3.50	$	2.50

The quotations set forth above for our common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

The last sale price for our common stock was on January 30, 2008, at $0.65 per share.

Adoption of 2005 Stock Incentive Plan

In April 2005, our board adopted, and our stockholders approved, by the written consent of Christopher Wood, our majority stockholder at that date, 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 for any of our subsidiaries or other affiliates. The Plan is currently 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, we reserved 4,000,000 shares of our common stock for the issuance of awards under the Plan, which amount will be automatically increased (but not decreased) to 20% of the total number of our 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 has been increased from 5,078,016 to 6,280,019.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information about the Company's common stock that may be issued upon the exercise of stock options under all of our equity compensation plans and the exercise of warrants that are outstanding as of December 31, 2007.

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders (1) (3)		220,000	$	1.17		4,858,016

Equity compensation plans not approved by security holders (2)		100,000	$	2.00		0

Total		320,000				4,858,016

Notes:

For the year ended December 31, 2007, we granted options to three employees under the Plan to acquire 20,000 shares of our common stock.

On August 1, 2005, a third party consultant was given a warrant in exchange for services to purchase 100,000 shares of our common stock at an exercise price of $2.00 per share.

Holders

As of March 25, 2008, there were 31,400,094 shares of our common stock outstanding, held by approximately 448 stockholders of record.

Dividends

Subject to the rights that have been designated to the holders of our Series A Convertible Redeemable Preferred Stock and any other holders of preferred stock that may be authorized by our Board of Directors, holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors out of funds legally available therefore. We have not paid any dividends on our common stock. The payment of dividends, if any, in the future is within the discretion of the Board of Directors. The payment of dividends, if any, in the future will depend upon our earnings, capital requirements, financial condition and other relevant factors. Our Board of Directors does not presently intend to declare any dividends on our common stock in the foreseeable future. Instead, our Board of Directors intends to retain all earnings, if any, for use in our business operations.

Pursuant to our Restated Certificate of Incorporation, our Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of up to 5,000,000 shares of preferred stock from time to time in one or more series and to establish the number of shares to be included in each such series and to fix the designation, powers, preferences and relative, participating, optional and other special rights of the shares of each such series and any qualifications, limitations or restrictions thereof. Because the Board of Directors has such power to establish the powers, preferences and rights of each series, it may afford the holders of preferred stock preferences, powers and rights (including voting rights and rights to receive dividends) senior to the rights of the holders of common stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal.

In September 2005, WLG approved the designation of a new series of preferred stock, consisting of 2.0 million shares of preferred stock designated as Series A Convertible Redeemable Preferred Stock, par value $0.001 (the “Series A Preferred Stock”). Effective as of September 30, 2005, WLG's controlling shareholder (the “Holder”) subscribed to all of the Series A Preferred Stock in exchange for $1.5 million in debt represented by a Promissory Note in the face amount of $1.0 million and other debt of $0.5 million owed to the Holder by the Company. Certain conforming amendments were made to the Series A Preferred Stock in November 2006 to correct the original certificate of Series A Preferred Stock. As of December 31, 2007, we had one series of preferred stock authorized, the Series A Convertible Redeemable Preferred Stock (“Series A Preferred Stock”), par value $.001. The Series A Preferred has a stated, liquidation and redemption value of $0.75 per share. The Series A Preferred pays a 6% annual cumulative dividend, determined on its stated value of $0.75 per share. As of March 27, 2008, there were 2.0 million shares of Series A Convertible Preferred Stock authorized, issued and outstanding. The Series A Preferred is convertible into a maximum 2.0 million common shares, and the conversion ratio shall be the stated value of $0.75 divided by conversion price of $0.50 per share

Recent Sales of Unregistered Securities.

None

Penny Stock Considerations

Our securities may be subject to the “penny stock rules” adopted pursuant to Section 15(g) of the Securities Exchange Act of the 1934, as amended, or “Exchange Act”. The Securities and Exchange Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Penny stocks are subject to certain additional oversight and regulatory requirements. Brokers and dealers affecting transactions in our common stock in many circumstances must obtain the written consent of a customer prior to purchasing our common stock, must obtain information from the customer and must provide disclosures to the customer. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to sell your shares of our common stock in the secondary market. Further, for companies whose securities are traded on the “pink sheets” or on the OTC Bulletin Board, it is more difficult: (1) to obtain accurate quotations, (ii) obtain coverage for significant new events because major wire services, such as the Dow Jones News Service, generally do not publish press releases about such companies, and (iii) to obtain needed capital.

ITEM 6. SELECTED FINANCIAL DATA

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

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. The Company would like to caution readers regarding certain forward-looking statements in this document and in all of its communications to shareholders and others, press releases, securities filings, and all other communications. Statements that are based on management's projections, estimates and assumptions are forward-looking statements. The words "believe," "expect," "anticipate," "intend," "will," and similar expressions generally identify forward-looking statements. While we believe in the veracity of all statements made herein, forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by us, are inherently subject to significant business, economic and competitive uncertainties and contingencies and known and unknown risks. Many of the uncertainties and contingencies may affect events and could cause our actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf.

Overview

WLG is an international, non-asset based logistics company that provides air and ocean freight forwarding, contract logistics, customs clearances and other supply chain management services, throughout the world, from its offices in Hong Kong, the PRC, Australia, the United Kingdom and the United States. We serve our customers through our offices and through a worldwide network of agents. All of our business is conducted by our operating subsidiaries.

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/or operate commercial aircraft, ships, trucks, river barges and railroads and arrange with these companies to provide transportation services for the forwarding of freight on behalf of our customers. Our revenues are generated from the freight transportation services that we arrange, customs brokerage services and from valued added services performed by us. Our customers benefit from the extensive experience we have in arranging for the transportation of freight and performing customs clearance services. For our freight forwarding business, we focus on large cargo shipments as these types of shipments usually require sophisticated logistical networks in many countries, as well as access to almost all modes of transportation.

Freight-Forwarding and Related Services

Due to the volume of shipments we arrange, we are generally able to negotiate rates that are better than the rates our customers could negotiate directly with transportation providers. Often, the shipping rates we pay may be reduced due to the volumes of sea and air freight that we arrange to have shipped. As a result, our customers, by placing their freight shipments through us, benefit from lower rates, and we, in turn, benefit by increasing our revenues.

A significant portion of our freight business expenses are variable and relate directly to the amount of business we book. Direct transportation costs are our largest variable expense. Staff costs represent the second largest expense for our freight operations. Due to the nature of our business, we have acquired the necessary experience to be able to staff our operations based on the number of customer orders we fulfill. Nonetheless, staff costs are less flexible than other variable costs, and, in the near term, we may not be able to alter our staff levels to adjust for unexpected peaks and downturns in our business.

We also derive a significant portion of our revenues from the consolidation of cargo, particularly for air shipments. In this part of our business, we always seek to combine a mix of light and heavy cargo in order to maximize the weight and cubic capacity for all of our shipments by air. In general, this improves our profitability on these shipments.

A substantial portion of our costs for air freight and, to a much lesser degree, costs for our sea freight are incurred pursuant to contracts for the advance purchase of cargo space for which we guarantee a minimum volume of shipments. Under these contracts, we are required to pay for the minimum amount of space we guarantee, even if we do not use the minimum amount. In the past, we have been able to minimize our risk of loss by carefully gauging customer demand, and by entering into arrangements with other freight forwarders whereby they pay to use the excess cargo space that we are unable to fill. However, we do not have the opportunity to require our customers to ship minimum amounts, and, as such, we are not able to pass this risk on to our customers. As an industry practice these contracts are enforced by the air carriers, which do require payment for unused space. However, very few shipping lines choose to enforce these contracts and do not normally require payment if space is not used.

Customs Brokerage Operations

We now have customs brokerage practices in our offices in Sydney, Australia, Manchester, England, Seattle, Washington, Long Beach and San Francisco, California, Rosedale, New York and Schaumburg, Illinois, In each case, we acquired a business with an existing customs practice. These practices tend to be stable businesses and the revenue and expense streams for each are generally more predictable than those of our freight-forwarding operations. Pricing in this business is very competitive and margins are often small. In some cases, we accept customers as a strategic decision to allow us to obtain additional freight-forwarding customers or to retain the ones we have. Also, due to competitive factors, we often advance funds on behalf of our customers to pay the duty on their freight imports, and, as a result, we do incur credit risk, which may be substantial. 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 services are based on the number of freight clearances for a particular customer and may include the costs of ancillary services such as arranging the local delivery of goods and the preparation and pick-up of documentation for the shipments. The specific charges are normally similar to what other brokerage companies charge in a specific geographical area. Because the revenue from this type of business tends to be stable, we are able to estimate with a degree of certainty what our personnel needs are, with personnel costs being the largest expense for this business.

With the acquisition of WLG (UK) and the expansion of our warehousing capabilities in both the UK and Australia, the performance of warehousing and other VAS is becoming more significant to the Group. In 2007, the overall revenues for this business were not material, but we anticipate that this part of our business will continue to grow in 2008. Our billings for VAS are generally based on the nature of the services performed as well as the time and warehouse spaced devoted to a particular customer. In general, we bill customers on a per piece basis for inventory that we pick, pack and distribute. In other cases, we may bill for the space allocated to a customer, or for special work such as deconsolidating and consolidating inventory for shipments to a customer’s distribution centers.

For calendar year 2007, we continued to execute our business plan, which called for the integration of the businesses acquired in prior years, an emphasis on internal growth and growth by acquisition. Because of the acquisitions made in prior years and in 2007, it is difficult to compare our results for the year ended December 31, 2007, to the results in our Form 10-K for the year ended December 31, 2006, and to prior years. As background, in 2004, we took the decision to change the Group's year-end from April 30 to December 31, effective at December 31, 2004. During 2005, we acquired three new companies, one in the second quarter and two in the fourth quarter of 2005. Taken together, the three companies acquired in 2005 added revenues of approximately $18.6 million, $52.6 million and $68.5 million in 2005, 2006 and 2007, respectively. In calendar year 2007, revenues from these acquisitions totaled 35.3% of our total revenues. As noted earlier, we acquired two businesses in 2006, and these companies increased our revenues in 2006 and 2007 by $6.1 million and $31.5 million, respectively. For 2007, the revenues from the 2006 acquisitions accounted for 16.3% of our total revenues. And in July of 2007, we acquired WCS, which added revenues of about $34.0 million for the five months ended December 31, 2007, or about 17.5% of our reported revenues. We commenced business in China in 2005 through a newly created subsidiary, which added $9.2 million in sales for 2005, $14.6 million in 2006 and $20.2 million in calendar 2007. While we have gained significant amounts of revenues and shipping volumes from the acquired companies, we have yet to realize all of the synergistic benefits of these acquisitions. To date, we have spent considerable management time and Group resources to integrate all of the acquired businesses with our core operations. This process is fundamental to our internal growth and is especially important to allow us to leverage the investment we have made to establish and grow the 8 offices we have in China. Integration of the acquired entities is on-going, and the costs incurred in this effort, to the extent not charged to capital accounts, are reflected in our general and administrative expenses in the periods incurred. In 2008, we will concentrate on consolidating the acquisitions made in prior years. In particular, we have streamlined our US operations by combining the Chicago operations of WLG (USA) with those of WCS in its Schaumburg office. In Los Angeles, we have eliminated the office of MSA and have consolidated it with WCS’s office in Long Beach, California. As part of these changes, we have eliminated employee costs of about $1.0 million and operating costs of approximately $180,000. Also, as part of these consolidation efforts, we did lose some of WLG (USA)’s customers, which, for 2007 generated annual gross profits for the Group of about $0.33 million.

As part of our strategy to supplement internal growth by making acquisitions, we have completed the purchase of six freight forwarding and brokerage businesses in the last three years, three in 2005, two in 2006 and one in 2007. An integral part of our business plan also included obtaining a public listing for our common stock, which we did by filing a registration statement that became effective in mid-2005. Since 2005, we have incurred substantial monetary costs and management time to comply with the regulations to maintain our status as a publicly listed company. Looking forward, we would caution that a full understanding of the changes that have occurred in 2005, 2006 and 2007 are necessary to make meaningful comparisons of our 2007 results to those reported for 2006 and prior years.

As part of our business plan, in 2008, we will continue to seek opportunities to make strategic acquisitions. To do so, we would need to raise outside capital, and, in all likelihood, we will look at the opportunities to do so following the end of the first quarter in 2008. We also expect that our business will grow internally, but with the caveats that volatile fuel prices, the US economy, political events in Asia and the Middle East and other trade related concerns such as rising protectionism and trade tariffs, particularly between China and the US, could negatively impact our revenues and operating profits. Moreover, many trading nations continue to exert pressure on the Chinese government to strengthen the Chinese Renminbi against their respective currencies, and especially the US dollar. If this pressure succeeds, our revenues and profits might be reduced. We do not as of yet provide guidance as to the Group’s financial performance. However, we do expect that the Group’s results for 2008, absent unforeseen political and/or commercial events, will improve as compared to our results reported for 2007.

The following is a recap of some significant developments in our business during the year ended December 31, 2007.

(i)	Continued the process to place all Group companies on a central information system to allow more efficient and effective tracking of customers’ shipments worldwide;
(ii)	Completed the acquisition of WCS, a freight forwarding and customs business in the Chicago area, which added new offices to the Group in the important gateway cities of San Francisco and New York;
(iii)	Took steps to reduce our operating costs in the US by combining certain operational and personnel functions following the acquisition of WCS. By the end of 2007, we had reduced salaries and related personnel costs by approximately $1.0 million on an annual basis and had combined facilities and eliminated other duplicative functions which, on an annual basis, are expected to produce cost savings of about $180,000; and
(iv)	By the end of 2007, initiated negotiations to double our warehouse space in the UK to about 40,000 sq. ft. and finalized a new lease in February 2008. In addition, we added 44,000 sq. ft. of warehouse space in Australia, all with a view of expanding our VAS business.

Results of Operations

Total revenues in 2007 increased by about $75.99 million, or 76%, compared to 2006 revenues, growing from approximately $100.31 million to $176.30 million. Of this increase, revenues from our existing business on a like-to-like basis grew by $18.03 million, for an increase of 19%. The two companies, WLG (UK) and MSA, which we acquired in the fourth quarter of 2006, added revenues of $24.02 million over the amounts contributed in 2006. WCS, which we acquired in the third quarter of 2007, added revenues of $33.94 million.

For the increase in revenues of $18.03 million from our existing operations, Asean contributed revenues of approximately $7.46 million, or about 41%. Our Hong Kong and China operations added about $5.60 million in new revenues, or 31% and our US revenues grew by about $4.97 million over the same period last year, adding approximately 28% to the total increase in revenues from our existing operations. Our UK acquisition, which was completed in September 2006, reported full year revenues in 2007 of $15.23 million compared to revenues of $4.77 million recorded in the last three months of 2006. The MSA Group, which we acquired on December 1, 2006, contributed revenues of $14.83 million, compared to $1.27 million reported for December 2006.

Gross profit rose from $15.73 million in 2006 to $24.03 million in 2007, for an increase of $8.30 million, or 53%. Of this increase, our Hong Kong and China operations contributed $1.15 million. Our existing US operations, WLG (USA) and ALI, added $0.15 million and Asean added $1.60 million. WLG (UK) and MSA, the acquisitions completed in 2006, added gross profit of $1.88 million and $0.70 million over the amounts reported in 2006, respectively. The remaining increase in gross profit of $2.82 million is from WCS, and is attributable to the five months ended December 31, 2007.

The Group's overall gross margin decreased from 15.7% in 2006 to 13.6% in 2007. WCS for the five months ended December 31, 2007, had a gross margin of 8.3%. Including WCS in the Group's results for 2007 had the effect of reducing our overall margin by 1.3 percentage points. Most of the remaining reduction in gross margin is attributable to WLG (USA) and MSA, which posted gross margins in 2007 of 13.1% and 5.6%, respectively. In 2007, a decision was made by MSA and WLG (USA) to accept lower margin customers for sea-freight shipments from Asia to the US as a means to gain market share in the Asia-US trade lanes. Accepting this business not only negatively impacted the gross margins of MSA and WLG (USA), but also lowered the Group’s gross margin, by an amount estimated to be about 0.7 percentage point. A small 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. 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 2007 compared to last year.

During the year ended December 31, 2007, total operating expenses increased to about $21.74 million, as compared to approximately $14.50 million in 2006, for an increase of $7.24 million, or 49%. Of the total increase in operating costs, approximately $2.80 million is attributable to WLG (UK) and MSA, which were acquired in the fourth quarter of 2006 and about $2.35 million is from WCS, which was acquired at the end of July 2007. The remaining increase of $2.09 million in operating expenses is attributable to our existing operations, and represents a 15% increase in operating expenses over the same period last year. This compares to an increase in revenues of about 19% reported by our existing businesses in 2007, when compared with 2006. In 2007, salaries and related personnel costs increased by about $5.3 million, or 60%, from $8.80 million to $14.10 million. Of this increase, $1.17 million and $0.7 million is attributable to WLG (UK) and MSA, respectively, and $1.63 million relates to WCS. Other selling and administrative costs grew by approximately 30% from $4.98 million to $6.48 million, which, when combined with the increase in personnel costs, results in a total increase of almost $6.80 million for operating costs, not including amortization and depreciation. Amortization and depreciation expense increased from $0.72 million to $1.16 million, or about 62%. Almost all of this increase is for amortization expense, which increased as a result of recording certain intangible assets in connection with the two acquisitions in 2006 and WCS in 2007. See discussion of Operating Expenses below.

After the provision for income taxes, the Group's net income in 2007 is $1.12 million, compared to net income of $0.55 million for 2006. WAE, WEHK, WE China and Asean reported a combined net income of $2.48 million, representing an increase of almost $0.99 million, compared with net income of $1.49 million for these entities in 2006. The improvement in their net incomes is mainly due to an increase in revenues matched by a slower growth in their overhead expenses. WLG (USA) and MSA incurred losses of $372,000 and $98,000, respectively, in 2007, compared to net incomes in 2006 of $146,000 and $57,000, respectively. WLG (USA)’s net loss was due to several factors, including recognizing bad debts of nearly $0.22 million, higher personnel costs of $0.44 million and other operating expenses of about $0.17 million, which compares to WLG (USA)’s $0.35 million increase in its gross profit. Their losses were offset by the growth in net income from our other operating subsidiaries. ALI reported a net income of $44,000, compared to a net loss of $0.16 million in 2006, as a result of its administrative functions being assumed by WLG (USA). WLG (UK), acquired in the fourth quarter of 2007, recorded an increase in net income of $0.12 million. The parent company’s loss increased by about $0.41 million in 2007, with about $0.35 million of the increase being due to additional amortization and $0.06 million for operating costs. In addition, WCS, the acquisition we completed on July 31, 2007, reported net income of $0.32 million for the five month period from August to December 2007.

Segment Information

Air freight operations: Revenue from our air freight operations in 2007 increased to about $34.11 million from approximately $29.96 million, or about 14%, when compared to the same period in 2006. Asean, WLG (USA) and WE China each reported increases in their air freight revenue, contributing $0.65 million, $0.14 million and $1.11 million, respectively, to the overall growth in revenues. Hong Kong’s air freight operations and ALI reported decreases in their air freight revenues of $0.66 million and $0.14 million, respectively. The reduction in revenues in Hong Kong results from doing less business with co-loaders, which was a decision taken in 2007 to improve gross margins. In 2007, MSA and WLG (UK) added revenues to the Group of $0.13 million and $1.43 million, respectively. WCS reported air freight revenues of $1.49 million for the five months from August to December, 2007.

Cost of sales for our air freight operations increased by approximately 12%, from $25.59 million in 2006, to $28.62 million in 2007. This increase is due to higher volumes of air freight shipments arranged by us. The 12% increase in cost of sales is less than the 14% increase in revenues reported for this segment in 2007. In addition, part of the increase is due to the operations of WLG (UK), MSA and WCS, which, in the aggregate, added about $2.51 million to our cost of sales in 2007, compared to 2006. WLG (UK) and MSA were acquired in the last quarter of 2006 and WCS became a member of the Group on July 31, 2007.

The Group’s gross profit margin for its air-freight business increased from 14.6% in 2006 to 16.1% in 2007. In general, the rates we paid to the airlines for shipments in 2007 were lower than the rates we paid for shipments in 2006, due to our ability to source better rates in 2007. Also, we did less business with co-loaders in 2007 because this type of business tends to yield lower gross margins. In addition, we were able to improve our mix of cargos which created more efficient shipments and higher margins. In some markets, we were able to increase local charges to our customers. This increase in our gross profit margin is primarily attributable to an increase in the gross profit margin of WAE, which reported a gross margin of 12.9% in 2007, compared to a gross margin of 7.7% in 2006.

Segment overhead for our air freight operations increased by approximately $0.62 million, or 22%, from about $4.11 million in 2006 to $4.73 million in 2007. Of this increase, approximately $0.37 million is attributable to the overhead expenses of WLG (UK) and MSA, which were added to the Group near the end of 2006, and to $0.11 million of overhead expenses from WCS, which become part of the Group on July 31, 2007. Excluding the overhead expenses of the two acquisitions in 2006 and WCS in 2007, the overhead incurred by our other subsidiaries for this segment in 2007 increased by approximately $0.14 million, when compared to 2006, for an increase of about 4%.

Net segment income for our air freight operations is approximately $0.76 million in 2007, compared to net income of $0.26 million for the same period in 2006, for an increase of $0.50 million. Most of this growth is attributable to Hong Kong's air freight operations, which reported net income of approximately $0.38 million in 2007, compared with a net loss of approximately $0.13 million for the same period in 2006, for an overall improvement of $0.51 million. This increase is largely due to obtaining lower shipping rates from air carriers, doing less co-load business and improving the efficiency of our shipments. In addition, Asean reported an increase of approximately $52,000 in net income in 2007. The increases in net income posted by Hong Kong and Asean offset decreases in income reported by the combined operations of WLG (USA) and ALI of about $70,000. WCS, which we acquired in July 2007, reported a net income of $13,000 in this segment for the five months from August to December, 2007.

Sea freight operations: Revenues from our sea freight operations rose by about 125% in 2007 when compared to 2006, growing from approximately $42.90 million to $96.48 million, for an increase of $53.58 million. Much of this improvement is a result of the growth in our existing operations, which generated an increase in revenues of about $15.05 million, or nearly 38% over 2006. Our Hong Kong operations accounted for $2.52 million of the increase, and revenues generated by WE China accounted for $2.63 million of the growth in this segment. WLG (USA) and ALI, our US subsidiaries, added revenues accounting for $4.98 million of the growth. In addition, Asean's sea freight business contributed new revenues of $4.92 million to this segment. The two acquisitions completed in 2006 provided increased revenues of about $14.72 million. Of this increase, the MSA Group contributed revenues of $10.40 million, and WLG (UK) added revenues of about $4.32 million. WCS, acquired in the third quarter of 2007, contributed revenues of approximately $23.81 million for the five months ended December 31, 2007.

Cost of sales for our sea freight operations increased 143% from $33.61 million in 2006 to $81.80 million, for an increase of $48.19 million in 2007. This increase is mainly attributable to a corresponding increase in sea freight revenues, but also to higher shipping rates, fuel surcharges and to the acquired businesses of WLG (UK), MSA and WCS, which increased the Group’s cost of sales by about $35.40 million in 2007.

The Group’s gross profit margin decreased from approximately 21.7% in 2006, to 15.2% in 2007. The decrease is due to the acquisitions of WCS and MSA, the decision of WLG (USA) to accept lower margin business and to market forces. WCS, acquired in the third quarter of 2007, and MSA, acquired at the end of 2006, posted gross margins of 7.7% and 6.8%, respectively in 2007, and this caused a reduction in our gross margin of about 4.47 percentage points. In 2006, WLG (USA) achieved a gross margin of 16.42%, which compares to its gross margin of 12.60% for 2007. WLG (USA)’s decrease caused a drop in the Group’s overall margin of about 0.47 percentage points. The remaining drop in gross margin for this segment is due to increased freight rates and to fuel surcharges levied by the shipping lines. We were able to pass on most of the fuel surcharges, but not all of the increases in freight rates, to our customers. In cases where we did bill our customers for the fuel surcharges, we still suffered a small decline in our gross margins because the fuel surcharges are not marked up to yield any gross margin. The lower gross profit margins attributable to WLG (USA) and MSA are due to a decision to grow their import business from Asia to the US as a means of gaining market share. Previously WLG (USA) had focused more on its business from exports rather than on imports.

Total segment overhead attributable to our sea freight business increased by $5.00 million, or 62%, from approximately $8.22 million in 2006, to $13.22 million in 2007. In part, this increase is attributable to the acquisitions of WLG (UK) and MSA in the fourth quarter of 2006, which together, added overhead expenses of $1.76 million to the Group in 2007 over 2006, and to WCS, which recorded overhead expenses of $1.63 million, following its acquisition on July 31, 2007. The remaining increase of $1.61 million in overhead expenses, which is an increase of about 21% when compared to last year, is attributable to our other operating subsidiaries and was incurred by them to cope with increases in their business, which on a year-to-year basis showed an increase in revenues of about 38%.

Net segment income for our sea freight operations is approximately $1.46 million in 2007, which compares to net income of $1.08 million in 2006. The improvement in net income is mainly attributable to increases in the net incomes of WEHK, WE China, and Asean which reported increases of $126,000, $67,000 and $149,000, respectively. In addition, WLG (UK) reported an increase in net income of $86,000 in this segment. A further improvement of about $0.29 million in this segment was realized in 2007 compared to 2006, resulting from WLG (USA) taking over most of ALI’s administrative operations. Against these improvements, WLG (USA) reported a net loss of $0.29 million in 2007, as compared to a net income of $0.11 million in 2006, mainly attributable to lower gross profit margins on imports and to an increase of about $0.22 million in its provision for bad debts. MSA, which was not part of the Group until December of 2006, reported a net loss in this segment of $81,000, compared to net income of $57,000 in 2006. WCS, acquired in the third quarter of 2007, reported a net income of $0.21 million for the five months ended December 31, 2007.

Customs brokerage services: Asean, MSA, WLG (UK) and WCS's operations each include a division that provides customs brokerage services. In 2007, revenues from customs brokerage services totaled approximately $45.71 million, compared with $27.45 million in 2006, for an increase of about $18.26 million. This growth is attributable to additional revenues of $4.70 million and $3.03 million, respectively, from WLG (UK) and MSA, and to WCS’s customs revenues of $8.64 million for the five months from August to December, 2007. Asean's customs revenues increased by about $1.89 million in 2007, or about 8%. Direct and administrative costs for this segment totaled about $45.36 million, producing net income of $0.35 million in 2007, compared to a net income of $0.13 million in 2006. The results for 2006 included a full year of Asean's customs brokerage business, as well as WLG (UK)’s business for the last quarter of 2006. In 2007, WLG (UK) reported net income of $71,000, and MSA reported a net loss of $15,000. WCS reported net income of $97,000 for the five months from August to December, 2007. Asean’s brokerage business accounts for the remaining net income of $0.20 million.

Other Operating Expenses

Salaries and allowances

Rent

Rent expense for our facilities increased by 78% from $0.85 million in 2006, to $1.51 million in 2007, for an overall increase of $0.66 million. The operations of WLG (UK), MSA and WCS added rent expense to the Group of $289,000, $52,000 and $128,000, respectively. WLG (UK) and MSA were not part of the Group until the fourth quarter of 2007, and WCS was acquired in July 2007. .In addition, Asean added rent expense of $0.22 million, mainly attributable to an increase in its office rent and to the rental in May 2007 of a new warehouse facility in Melbourne, Australia.

Other selling and administrative expenses

Other SG&A expense in 2007 totaled about $4.97 million, compared to $4.13 million for the same period in 2006, for an increase of about $0.84 million. The increase is primarily attributable to the acquisitions of WLG (UK) and MSA, which increased Other SG&A expenses by $0.28 million and $87,000 in 2007, respectively, and WCS, which added Other SG&A of $0.55 million. The Other SG&A costs of ALI and WLG (USA) increased by $0.17 million when compared to 2006. Included in the increased Other SG&A costs of WLG (USA) for 2007 is an increase of $0.22 million in its provision for bad debts. As a result of cost control measures and a reduction of consulting fees, there is an overall decrease of about $.25 million in the Other SG&A expenses of the remaining subsidiaries.

Depreciation and Amortization

Depreciation expense for property, plant and equipment increased to $0.38 million in 2007, compared to $0.28 million in 2006. This increase of $0.10 million is partially due to the aggregate depreciation expense of $83,000 for WLG (UK), MSA and WCS. The remaining increase of $17,000 is attributable to the depreciation expense for additions of office equipment, computer equipment and leasehold improvements.

Amortization expense is attributable to the customer lists acquired in the acquisitions of WLG (USA), ALI, Asean, WLG (UK), the MSA Group and WCS. In connection with the acquisition of WLG (USA), we recorded a customer list asset of $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 five-year life and a value of $0.16 million were assigned to ALI's customer list, which, due to impairment write-downs in 2006 and 2007, and to amortization in 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 five 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 a failure of MSA to achieve certain earnings targets. WCS’s customer list was valued at $2.84 million and is being amortized over nine years. In 2007, amortization expense totaled $0.78 million, which included an impairment loss of $20,790 for the customer list of ALI as a result of the decline in its value. Total amortization expense is attributable to WLG (USA), Asean, ALI, WLG (UK), the MSA Group and WCS in the amounts of $102,456, $195,328, $31,185, $166,654, $155,012, and $131,270, respectively. Amortization expense in 2006 was $0.43 million and related to WLG (USA), Asean, ALI and WLG (UK) in the amounts of $102,456, $195,327, $124,742 and $14,014 respectively. The UK business of WLG (UK) was acquired in the fourth quarter of 2006, and no amortization expense was recorded for its customer list until the end of 2006. No amortization was provided for the customer list of MSA in 2006, as it was acquired in December of 2006. WCS was not part of the Group until July 31, 2007 and, as such, no amortization expense was recognized in 2006 for WCS’s customer list.

Interest Expense

Interest expense increased from $0.39 million for the year ended December 31, 2006, to $0.65 million in 2007. This increase is partly attributable to additional interest expense of approximately $71,000 for WLG (USA), which results from an increase in borrowings under its revolving line of credit and from a five-year, $1.0 million term loan incurred to acquire the MSA Group. WCS, which we acquired on July 31, 2007, recorded interest expense of $0.13 million for borrowings under its bank facilities. In addition, the Group incurred additional interest expense of $75,000 for two director loans of $0.75 million each, and which carry an interest rate of 12% per annum. Asean’s interest expense decreased by $16,000, mainly as a result of a reduction in the rate of interest charged for its loan facilities.

Provision for Income Taxes

The provision for income taxes increased from $0.50 million for the year ended December 31, 2006 to $0.75 million in 2007, mainly attributable to income reported by our operations in Hong Kong and Australia. Income tax of $0.56 million was provided on the combined net income of $2.69 million attributable to our Hong Kong and Australian operations. The income tax provision represents an effective tax rate of 21% and includes the use of an operating loss carry forward of $95,000 in Hong Kong. The US operations of ALI, 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 $0.94 million. As such, no provision for US federal income taxes is required for these companies in 2007, but does include a provision of $25,000 for state taxes. After giving effect to all losses and amortization expense, for which no income tax benefit is provided, the effective tax rate on the Group's income of $1.87 million is approximately 41% in 2007.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2007, our operations provided cash of approximately $2.23 million, compared with cash of $0.13 million provided by our operations for in 2006. In 2007, cash was provided by the following sources: net income of $1.12 million; increase in trade payables of $2.31 million; increase in taxes payable of $0.11 million; decrease in deposits and prepayments of $0.16 million; decrease in due from related parties of $0.2 million; amortization and depreciation expense of $1.16 million; provision for bad debts of $0.33 million and other non cash items of $42,000. Major components that used cash for operations in 2007 included: increase in trade receivables of $2.39 million; decrease in accrued charges and other payables of $0.58 million and the repayment of $0.23 million to a director.

Net cash used by financing activities totaled about $0.88 million for the year ended December 31, 2007, compared to net cash of about $1.44 million provided by financing activities for 2006. Cash provided by financing activities in 2006 included increases in bank loans of $1.31 million and a director loan of $0.26 million. Cash provided by financing activities for the year ended December 31, 2007, included two director loans of $0.75 million each, which are more fully described below. Cash used by financing activities in 2007 consists of an increase in restricted cash of $32,000, a decrease in bank overdrafts of $0.15 million, the net repayment of bank debts of $0.27 million and the repayment of capital lease obligations totaling $88,000. In addition, we paid dividends of $90,000 on our preferred stock in 2007.

Effective July 31, 2007, the Group acquired all of the membership interests of WCS in consideration for cash of $2.6 million and the issuance of 4,710,014 shares of its restricted common stock. In addition to the consideration paid at closing, the Group is obligated to issue an additional 1,962,506 shares of its restricted common stock in increments to the sellers of WCS in the event that WCS achieves certain levels of profit during the 24 month period following the closing date of the transaction. Further, the sellers of WCS shall also be entitled to receive up to 500,000 shares of WLG’s restricted common stock if any of WLG’s Series A convertible redeemable preferred stock, which was outstanding as of July 31, 2007, is converted to WLG common stock. In July 2007, two directors loaned $1.5 million to the Group, which the Group used, in part, for the purchase of WCS. Each director loan is for $0.75 million and carries an interest rate of 12% per annum. In addition, the Group used $1.1 million of its cash to complete the WCS transaction.

As of December 31, 2007, certain banks in Hong Kong had issued bank guarantees of $0.63 million to several airlines on behalf of WAE. With these guarantees, the airlines, in turn, grant credit terms to WAE. 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 cash of approximately $0.65 million deposited 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 Customs and Excise Department in the UK for the benefit of WLG (UK). In return for this guarantee, the UK Customs and Excise Department grants credit terms to WLG (UK).

In October 2004, WEHK and WAE (the “Hong Kong Subsidiaries”) obtained a bank loan of $0.45 million, which they used to pay income taxes and for general working capital needs. This loan was repayable in 24 equal monthly installments, with interest at the best rate charged by the lending bank, less one percent. The interest rate on this loan was 7% per annum and the loan was repaid in full by October 2006. In October 2005, the Hong Kong Subsidiaries obtained an additional loan of approximately $0.13 million, and used the loan proceeds to pay income taxes and for general working capital purposes. This loan was repaid by November, 2006. During 2006, the Hong Kong Subsidiaries borrowed approximately $0.11 million to pay income taxes and for use as working capital. This loan was fully repaid by November, 2007. In October 2007, the Hong Kong Subsidiaries borrowed $0.28 million to pay income taxes, which was repayable by equal installments over the next twelve months. As of December 31, 2007, the outstanding balance of the loan is approximately $0.23 million.

As of December 31, 2007, WLG (USA) owed $0.37 million under a $1.0 million revolving line of credit and $0.80 million on a five-year, $1.0 million term loan pursuant to loan facilities granted to it by a bank in the last quarter of 2006. The revolving line of credit will expire on April 15, 2008. The term loan was to mature in November 2011, but has been terminated by the bank in March, 2008, and, as discussed below, was repaid in full at that time. In addition, during the third quarter of 2007, WLG (USA) was granted an additional term loan of $0.25 million from the same bank, which expired in November 2007 and was fully repaid. All of these loans carry interest at LIBOR plus 2.75%, which at December 31, 2007, was 7.98%. The $1.0 million term loan required monthly principal payments of $16,667, plus accrued interest. Principal payments of $200,000 were due in 2007. Total borrowings under the revolving line of credit and the term loan are limited to 75% of the eligible trade receivables, as defined in the loan agreement, of WLG (USA) and the MSA Group. All borrowings under these loan facilities are secured by a first position blanket lien on substantially all of the assets of WLG (USA) and the MSA Group and a guarantee provided by the Group's parent company. The loan agreement calls for the maintenance of certain financial covenant ratios, including minimum cash flow coverage and maximum funded debt to earnings before taxes, interest and non-cash items, each of which is to be applied on a rolling basis at the end of each calendar quarter. In addition, WLG (USA) may not pay dividends without approval from its bank. As of December 31, 2007, WLG (USA) was not in compliance with the financial covenants set out in its loan agreement. As noted above, in March 2008, WLG (USA)’s bank canceled the term loan facility and required settlement of the outstanding balance of principal and accrued interest, which was approximately $0.75 million. This amount was fully settled in March 2008 from WLG’s working capital and a loan from the Group's majority shareholder.

Asean has a receivables loan facility in the face amount of approximately $3.50 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 $0.54 million. At December 31, 2007, Asean's bank debt under its receivables and overdraft facilities was $2.55 million and $0.47 million, respectively, with interest rates of approximately 10.65% for the receivables line and 9.75% for the overdraft facility. Asean's bank, in addition to having a charge over all of its accounts receivable, holds a first registered mortgage over all of Asean's assets. Asean’s overdraft facilities are also guaranteed by the Group’s parent company.

WCS has a receivables loan facility from a bank in the face amount of $7.00 million. This facility, which is secured in part, by all of WCS’s trade receivables, allows borrowings equal to 85% of eligible receivables, as defined in the loan agreement. As of December 31, 2007, WCS owed approximately $3.90 million under this facility. This loan facility is also secured by all of the assets of WCS and by a guarantee from the Group’s parent company. The facilities will expire on May 31, 2008.

We continue to execute our business plan which calls for us to make strategic acquisitions to supplement our internal growth. In 2005, we completed three acquisitions of freight forwarding and logistics companies, one of which had a customs brokerage business. We followed this in 2006 by acquiring two freight forwarding and customs brokerage companies. As set forth in our Form 8K filed on August 3, 2007, we disclosed the details of the acquisition of WCS, a freight forwarding and customs brokerage company, which we closed on July 31, 2007. We expect to make additional strategic acquisitions as a means to expand our ability to provide a full range of logistics services on a global scale. To the extent that we are unable to use our common stock in the acquisition of other companies, we will likely need to raise additional capital, if we are to be successful in executing our business plan. At this point, we are not certain of the amount of capital we may need because the amount will vary with the size, type and nature of consideration required for the prospective acquisitions. However, there can be no assurance that we will be successful in identifying suitable acquisition targets, and, if we are, there can be no certainty that we will be able to complete the acquisitions. Nor can there be any assurance that we would be successful in our efforts to raise additional capital, either in the form of long-tem debt and/or equity.

Our approximate contractual cash obligations as of December 31, 2007, 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 $384,000 per month over the following twelve months.

	Payments Due by Period (in thousands)
Contractual Obligations	Total		Less than 1year		1-3 years		4-5 years		After 5years
Facilities rental and equipment lease obligations	$	3,102	$	1,358	$	1,684	$	60	$	—
Cargo space commitments	$	3,245	$	3,245		—		—		—
Total contractual cash obligations	$	6,347	$	4,603	$	1,684	$	60	$	—

During the years ended December 31, 2007 and 2006, we have not engaged in any:

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

trading activities in non-exchange traded contracts.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's discussion and its analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America. All intercompany balances and transactions have been eliminated.

Use of estimates in preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of our consolidated financial statements.

Revenue Recognition Policy

Because of the way we conduct our business, we recognize revenue gross as a principal rather than net as an agent. We recognize revenue in this manner because, as a freight forwarder, as distinguished from other logistics forwarders who may recognize revenues net of certain expenses as an agent, we are subject to credit risk, inventory/cargo risk and insurance risk.

As a non-asset based carrier, we do not own transportation assets. Rather, we generate the major portion of our air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to our customers. The sell rate is the rate we bill to customers and the buy rate is the rate we pay to the carriers.

Air freight revenues reflect income for shipments when we act as a freight consolidator. Ocean freight revenues reflect income for arranging shipments when we act as a Non-Vessel Operating Common Carrier. In each case we are acting as an indirect carrier. In the case of import freight forwarding transactions, revenues and associated expenses are recognized when the shipment arrives at its contracted destination and possession of the shipment is transferred from the overseas carrier. For export freight forwarding transactions, revenues and associated expenses are recognized when the carrier takes possession of the shipment at the point of origin. In each case, the Company has completed its obligations for which the customer had contracted and has the right to receive payment. Under the Company’s revenue recognition policies, it does not account for freight in transit for export transactions by either air or sea. WLG has tested the revenue recognized under its policy and has compared this to amounts it would have recognized if it were to apply the revenue and expense recognition policies set forth in Method 3 of EITF No. 91-9, and it believes the results of operations and financial position at the end of any quarter or year-end would not be materially different than reported.

Revenues for customs clearances are recognized when goods are cleared by customs, and revenues for ancillary services performed by each customs practice, such as the delivery of goods, are recognized when the services are completed. Other services include fees earned for the provision of terminal and document handling services. These revenues are recognized upon completion of the services.

Revenues realized in other capacities, for instance, when we act as an agent for the shipper, include only the commissions and fees earned for the services performed. These revenues are recognized upon completion of the services. In addition, revenues for our warehousing services, which may include distribution, pick and pack activities and other services in connection with a customer’s inventory are recognized when the services are completed.

Recognition of Cost of Forwarding

The receipt of invoices for freight forwarding costs are often delayed, usually until after a shipment is completed. As a result, we must estimate the cost of purchased transportation and services, and accrue an amount on a shipment by shipment basis in a manner that is consistent with revenue recognition. Such estimates are based on past trends and on the judgment of management. Historically, upon completion of the payment cycle (receipt and payment of transportation bills), the actual, aggregate transportation costs are not materially different than the amounts accrued. Any differences which arise because the actual costs vary significantly from the amounts accrued are adjusted at the time the actual amounts are known.

Accounting for Income Taxes

In preparing our consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions where we operate. This process involves estimating actual current tax expense, together with identifying permanent differences between financial income and taxable income, assessing temporary differences resulting from the differing treatment of items for income tax and accounting purposes. Temporary timing differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and to the extent that we believe that recovery is not likely, we must establish a valuation allowance. To the extent we establish a valuation allowance, we must include an expense within the tax provision of the statement of income in each period in which the allowance is increased.

Significant judgments are required in determining the provision for income taxes, deferred tax assets and liabilities, and the valuation allowances for deferred tax assets. In the event that actual results differ from these estimates or the estimates are adjusted in future periods, we may then need to establish an additional valuation allowance, which could materially impact our financial position and results of operations. Based on our current financial projections, we currently believe that we will realize 100% of our deferred tax assets.

Off-balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The full text of our audited consolidated financial statements, including the years ended December 31, 2007, and December 31, 2006, begins on page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On July 19, 2007, we filed a Current Report on Form 8-K disclosing the resignation of our prior auditors and the designation of our new auditors. In connection with such resignation of our prior auditors, we reported no disagreements as set forth in Item 304(b) and no reportable events as set forth in Item 304(a)(1)(v)(A) through (D) of Regulation S-K.

ITEM 9A(T). 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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K, 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.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of published financial statements and the reliability of financial reporting.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

In connection with the preparation of the 2006 annual audit of the Company’s subsidiary, WLG (USA) and its subsidiaries (“WLG (USA) Group”) Company’s management and Board of Directors were notified by Blackman Kallick Bartelstein, LLP, (“BKB”), the auditor for WLG (USA) Group , that during the course of their audit of WLG (USA) Group’s consolidated financial statements for 2006 they identified deficiencies in WLG (USA) Group’s internal control over financial reporting (“internal control”) that they consider to be significant deficiencies. The deficiencies relate to the following: (1) with respect to related party transactions with the Company and the Company’s other subsidiaries, a lack of regular reconciliation of inter-company account balances; (2) a lack of regular review and reconciliation of WLG (USA) Group’s general ledger and financial statements and failure to maintain proper segregation of accounting duties; (3) WLG (USA) Group’s year end close procedures did not include developing estimates to state accounts receivable at net realizable value or properly adjust revenues for subsequent adjustments to sales; and (4) WLG (USA) Group’s chief executive officer’s ability to record transactions in the general ledger. In addition to the forgoing, BKB identified certain control deficiencies in WLG (USA) Group’s IT security policies and procedures that they did not consider to be significant deficiencies. BKB has notified the Company’s management and Board of Directors that during the course of their audit of WLG (USA) Group’s consolidated financial statements for 2007 that some of the deficiencies identified in 2006 were present in 2007. BKB also indicated that in connection with their audit of WCS’s financial statements for the five month period from August 1, 2007, to December 31, 2007, they had identified certain deficiencies in WCS’s internal control over financial reporting that they consider to be significant deficiencies or a material weakness. For 2007, the deficiencies were (1) WCS’s operational and accounting software does not determine work-in-process at the end of a month, and that this work is done manually; and (2) WCS and WLG Group’s procedures are not adequate in developing estimates to properly adjust revenues for subsequent credit memos.

Subsequent to and during calendar year 2007, management made a number of changes to address the deficiencies in internal control of the WLG (USA) Group and WCS. The changes have been wide-ranging and have addressed both internal control policies as well as personnel issues. At the core of the changes was the appointment of a new Chief Operating Officer and Chief Financial Officer to oversee the operations of the WLG (USA) Group. In early 2007, we began discussions to acquire WCS, and we completed the acquisition of this company on July 31, 2007. As part of this acquisition, both WCS’s President and its Chief Financial Officer assumed an oversight role for the WLG (USA) Group. Shortly after assuming these responsibilities, WLG (USA) Group’s existing President and its Chief Financial Officer tendered their resignations. Before and following their resignations, steps were taken to address and remediate the internal control deficiencies of the WLG (USA) Group. In addition, the deficiencies related to WCS have been addressed and changes are underway to remediate such deficiencies. To date, the following has occurred: (1) A policy is in place and is being monitored to ensure a regular reconciliation of inter-company account balances is done for related party transactions; (2) a regular review and reconciliation of WLG (USA)’s general ledger and financial statements is performed with procedures in place to maintain proper segregation of accounting duties and the balances thereof; (3) WLG (USA)’s interim and year-end close procedures now include developing estimates to state accounts receivable at net realizable value or properly adjust revenues for subsequent adjustments to sales; (4) WLG (USA)’s chief executive officer, whose employment terminated in September 2007 and his replacement do not have the ability to record transactions in the general ledger; and (5) management has taken the decision to install at WCS the operational and accounting software used by all members of the Group, and expects the conversion to be made in 2008. In addition to these changes, significant changes have been made to WLG (USA) Group’s IT security policies and procedures. In general, these changes addressed matters of WLG (USA) Group’s security, confidentiality and the integrity for its IT hardware and software. More specifically, the changes include improving password security, restricting access to files and data bases and up-grading equipment to improve the integrity of the back-up of operating and accounting data.

Management reviewed the Securities and Exchange Commission’s Interpretive Guidance regarding management’s report on internal control over financial reporting (Release No. 34-55929) and assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2007. Based on such assessment, we believe that, as of December 31, 2007, the Company's internal control over financial reporting is effective.

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

Changes in Internal Control Over Financial Reporting

Subject to the changes made to the internal control of the WLG (USA) Group as noted above, there were no changes in the Company's internal control over financial reporting in the quarter ended December 31, 2007, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below are the names, ages, and positions of each of our executive officers and directors, together with such person's business experience during the past five years. Their business experience is based on information provided by each of them to us. Directors are to be elected annually at our annual meeting of stockholders and serve in that capacity until the earlier of their resignation, removal or the election and qualification of their successor. Executive officers serve for the terms set forth in their employment agreements or are elected annually by our Board of Directors to hold office until the earlier of their death, resignation, or removal.

NAME	AGE	POSITIONS HELD AND TENURE
Christopher Wood	62	Chief Executive Officer and WLG director
Remo Picchietti	45	Executive Vice-President and WLG director
Paul Pomroy	52	Asean Managing Director and WLG director
Phillip Forsyth	44	Chief Operating Officer
David Koontz	65	Chief Financial Officer and WLG director
Kelvin Tang	35	Secretary

Officers and Directors:

Christopher Wood has been our Chief Executive Officer and a director since our formation. In addition, he served as our Chief Financial Officer until August 2005. Prior to the formation of WLG, Mr. Wood had been a director and Chief Executive Officer of WEHK from July 1982, and also served as a director and Chief Executive Officer of WAE from February 1989. Mr. Wood has also served as a director of WE China since its formation in July 2004. Following the acquisition of Asean, Mr. Wood serves as a director of that company as well as a director of our newly formed Australian holding company, WLG (Australia) PTY LTD. Mr. Wood also serves as a director of our two UK subsidiaries and of WCS and WLG (USA). Mr. Wood received a First Class Honours Bachelor of Science in Physics from Imperial College in June 1966, and a Doctor of Philosophy in Theoretical Physics from Balliol College, Oxford in July 1969. Except as set forth below in the narrative for Mr. Picchietti, there are no special arrangements or understandings between Mr. Wood and any other person(s) pursuant to which he was or is to be selected as a director or nominee.

Remo Picchietti, following the acquisition of WCS, was elected to be a director and to serve as the Executive-Vice President of WLG, effective August 1, 2007. He is also to continue as the President and Chief Executive Officer of WCS, and also served in these positions beginning in January 2004, when he acquired the business. Prior to 2004, Mr. Picchietti founded in 1998 and was the Principal of Mayflower Associates, which provided business development advice, strategies, and capital to assist enterprise growth via global trade specializing in the areas of logistics and supply chain management. Mr. Picchietti teaches graduate-level International Management and International Marketing classes at Chicago-area business schools. He specializes in marketing and logistics management and earned his B.S. degree from Drake University in 1984, studied at Ealing College in London, England, and earned his MBA from Northwestern University’s Kellogg Graduate School of Management in 1989.

Pursuant to a Letter Agreement executed in connection with the acquisition of WCS, Mr. Wood agreed to take all necessary or appropriate action at any meeting of WLG’s stockholders at which directors are to be elected and with respect to any consent of stockholders in lieu of a meeting to elect directors to cause all of the outstanding shares of WLG’s voting stock owned by Mr. Wood or any of his affiliates to be voted, or consent to be executed in such a manner, as to elect Remo Picchietti as a member of WLG’s board of directors. In addition, Remo Picchietti agreed to take all necessary or appropriate action at any meeting of WLG’s stockholders at which directors are to be elected and with respect to any consent of stockholders in lieu of a meeting to elect directors to cause all of the outstanding shares of WLG’s voting stock owned by Remo Picchietti or any of his affiliates to be voted, or consent to be executed in such a manner, as to elect Mr. Wood as a member of WLG’s board of directors. The Letter Agreement shall terminate on the earlier of (i) Remo Picchietti’s written request that Mr. Wood cease voting for him as a member of WLG’s board of directors (ii) the date on which Remo Picchietti beneficially owns less than 5% of WLG’s common stock (or securities convertible into or exercisable for shares of WLG’s common stock), (iii) the date on which Remo Picchietti’s non-competition obligations under his Employment Agreement expire and are no longer in effect or (iv) the date on which Remo Picchietti becomes employed by a competitor of WLG or WCS and such employment constitutes a breach of the non-compete obligations under the Employment Agreement, or would have constituted a breach of his non-compete obligations if such obligations were it still in effect.

Phillip Forsyth has been our Chief Operating Officer and, in addition, the Chief Executive Officer of WE China since February 2005. Prior to joining us, from January 2001 to February 2005, Mr. Forsyth was a General Manager for South China with Maersk Logistics, a large multi-national shipping line and logistics provider. From June 1996 to December 31, 2000, Mr. Forsyth was the Managing Director of World Connect Limited, a logistics services provider in Hong Kong. In January 2007, Mr. Forsyth relinquished his position as Chief Executive Officer of WE China. Mr. Anthony Leung, who joined the Group in January 2007, assumed the position of Chief Executive Officer for our Hong Kong and China subsidiaries.

David Koontz joined WLG in August 2005 as its Chief Financial Officer and was elected to serve as a director effective August 1, 2007. Following the acquisition of Asean, Mr. Koontz serves as a director of Asean and as a director of our newly formed Australian holding company, WLG (Aust). Immediately before joining WLG, he served for over three years as the Chief Financial Officer and director of a U.S. public company in the alternative energy sector. Before that, Mr. Koontz was self-employed and provided consulting service to various entities including companies in Hong Kong and China. Mr. Koontz earned a CPA certificate granted by the state of California, and holds a Bachelors Degree in Business from California State University at Northridge, California. There are no special arrangements or understandings between Mr. Koontz and any other person(s) pursuant to which he was selected as a director.

Kelvin Tang has been our Company Secretary since March 2005. From June 2004, Mr. Tang has also served as the Finance and Accounts Manager for WEHK and WAE. Prior to joining the Group, he worked as an auditor for two public accounting firms for more than five years. Mr. Tang is a member of the Hong Kong Institute of Certified Public Accountants and Association of Chartered Certified Accountants. He has a Masters Degree in Corporate Finance from Hong Kong Polytechnics University.

Significant Employees

Paul Pomroy, age 52, is the Managing Director and a director of both WLG and Asean and has worked with Asean since its inception in 1984. Paul has extensive experience in all facets of the freight forwarding and logistics industry, including air and sea freight forwarding, customs brokerage and related logistics services. He has considerable experience in working in China and is familiar with doing business throughout Asia. Mr. Pomroy was elected to serve as a director of WLG, effective January 28, 2008. There are no special arrangements or understandings between Mr. Pomroy and any other person(s) pursuant to which he was selected as a director.

Robert Wong, age 51, serves as the Chief Executive Officer of our Hong Kong and China operations. Prior to assuming this position in January 2008, Robert, in February 2004, became the Vice President of WEHK. Before joining WEHK, Mr. Wong, from 1993 to 2002, was a group vice president of Jardine Logistics Services (HK) Ltd, a logistics service provider. Following that position, he then acted as a logistics consultant for ANL Container Line Pty Ltd in Melbourne, Australia. He is an MBA holder and also has a full membership in The Chartered Institute of Shipbrokers (MCIS), The Chartered Institute of Logistics and Transport (MILT) and The Chartered Institute of Marketing (MCIM).

Raymond Chan, age 51, assumed the position the Vice-President for our operations in Hong Kong and South China as of the end of 2007. Before that and beginning in 1986, he served as the General Manager of WEHK. In that role, he was responsible for our sea freight and VAS business in Hong Kong and Southern China. He received an Outstanding Service Award from Target Stores in Australia for logistical support in 2002.

Antony Wilshaw, age 45, worked for the UK company that was acquired by WLG (UK) when it commenced doing business in the UK in September 2006. Mr. Wilshaw is responsible for the Group’s UK operations. He has over 25 years experience in the freight forwarding and logistics industry and has worked for several public companies, holding a number of management positions. For the last eleven years, he served as a key executive of one of UK's largest independent logistics companies. Being responsible for this company's regional UK offices gave him a wide range of experience in operations, sales and finance at a senior level.

Gordon Dean, age 38, worked for the UK company that was acquired by WLG (UK) when it commenced doing business in the UK in September 2006 and is responsible for sales and marketing for our operations in the UK. Gordon has over 20 years working in all facets of the freight forwarding and logistics industry. He gained his experience working in the UK, but has significant expertise in working with the Far East and Indian Sub-Continent markets, focusing mainly on the Hong Kong, China and the India trade lanes.

Janice Williams, age 51, joined the Group when MSA was acquired in December 2006, and serves as the President of Mares-Shreve & Associates, Inc. Prior to the acquisition of MSA by the Group, Janice was the President and a co-owner of MSA, having joined the company in 1984. She has substantial experience in the logistics industry, including working extensively with customers that ship products in the Asian-US trade lanes. Janice also has substantial experience in the area of US customs, and, in addition to being responsible for MSA’s freight business, also oversees its customs practice.

Bill Ip, age 48, has been a vice president of WE China since February 2005 and is responsible for its business in Northern China. He also serves as a director of WE China. Prior to assuming his current position, in 2000, he became the general manager of WEHK.

Nicholas Hilton, age 43, is the Manager of Asean's operations in the state of Victoria, Australia, and also serves as the company's National Sales Manager. Mr. Hilton has worked for Asean since 1993 in various capacities and has gained extensive experience within the logistics industry, including freight forwarding, customs brokerage and logistics services in Australia and South East Asia.

Peter John Gialouris, age 48, is the Chief Financial Officer of Asean, having joined the company in September 2005. Prior to joining Asean, Mr. Gialouris provided consulting services for two advisory firms over the past five years in the areas of accounting, business consulting and financial planning. He holds a Bachelor of Economics degree from the University of Sydney, Australia, and is a Chartered Accountant and member of the Institute of Chartered Accountants in Australia.

Directors serve for a one-year term. Our Bylaws provide for a minimum of one director and a maximum of four directors. Our Board of Directors does not have a nominating committee since all of the members of our Board of Directors participate in the consideration of director nominees.

Audit Committee and Code of Ethics.

We have not formally appointed an audit committee, and our Board of Directors serves the function of an audit committee. The Board has determined that one of its directors would qualify as an audit committee financial expert, however, the Board, using the criteria established by the American Stock Exchange, has determined that the director is not independent. The Company has not yet adopted a code of ethics applicable to its chief executive officer and chief accounting officer, or persons performing those functions, because of the small number of persons involved in the management of the Company.

Family Relationships

There are no family relationships among our officers or directors.

Legal Proceedings

Based on our inquiries of all of our officers and directors, we are not aware of any pending or threatened legal proceedings involving any of our officers or directors that would be material to an evaluation of our management.

Section 16(a) Beneficial Ownership Reporting Compliance

Our officers, directors and holders of greater than 10% of our outstanding shares of common stock are not subject to the reporting requirements of Section 16(a) of the Securities Exchange Act.

ITEM 11. EXECUTIVE COMPENSATION

The following summary compensation table sets forth the aggregate compensation paid or accrued by the Company to the Principal Executive Officer and each of the two most highly compensated executive officers, other than the Principal Executive Officer (collectively, the “ Named Executive Officers”) for the fiscal year ended December 31, 2007.

SUMMARY COMPENSATION TABLE

(a)	(b)		(c)		(d)		(e)		(f)		(g)		(h)		(i)		(j)
											Non-Equity Incentive		Nonqualified
Name &									Option		Plan		Deferred		All Other
Principal			Salary		Bonus		Stock		Awards		Compensation		Compensation		Compensation		Total
Position	Year		($)		($)		($)		($)		($)		Earnings		($)		($)
			(1)		(2)		(3)		(4)				(5)		(6)
Christopher Wood
President and Chief Executive Officer – WLG and director		2007		247,742		0		0		0		0		0		128,945		376,687
		2006		247,742		0		0		0		0		0		119,822		367,564

Paul Pomroy
Managing Director –Asean and WLG director		2007		194,603		25,110		0		0		0		0		59,920		279,633
		2006		169,300		0		0		0		0		0		56,639		225,939

David Koontz
Chief Financial Officer – WLG and director		2007		191,250		0		0		33,844		0		0		25,692		250,536
		2006		185,000		0		0		23,156		0		0		25,692		233,848

(1) The amounts for each named individual include only that person’s base salary. Mssrs. Wood, Pomroy and Koontz serve as directors of the Group, but none of them receive any compensation for their service as a director. In addition, Mr. Picchietti, the Executive Vice-President of WLG, also serves as a director of the Group, but receives no compensation for his service as a director.

(2) (3) (5) No payments, accruals or other forms of compensation described in columns (e), (g) and (h) were made to Mr. Wood or any of the other Named Executives in the Summary Compensation Table for the years ended December 31, 2006 and 2007.

(6) Mr. Wood received a housing allowance of $108,387 for both 2007 and 2006. In addition, he was paid $17,632 and $8,845 as automobile allowances and payments of $1,548 and $1,548 and $1,378 and $1,041 were made on his behalf to a government mandated retirement plan and to a company medical plan, respectively for the years 2007 and 2006. Mr. Wood’s compensation is paid in Hong Kong dollars and has been translated at the rate of 7.8;1, which is the rate that the Hong Kong dollar is pegged to the U.S. dollar.

(6) Mr. Koontz received a monthly automobile allowance of $750 and a reimbursement of $16,692 for payments to a medical insurance plan for the years 2007 and 2006, respectively. In addition, Mr. Koontz was awarded an incentive stock option for the purchase of 200,000 shares of WLG’s common stock. The award vested over a period of 24 months and became fully vested in July, 2007. The amounts shown in column (f) are the amounts of compensation reported pursuant to FASB 123R in WLG’s consolidated, audited financial statements for the years 2007 and 2006. The exercise price for this option is $1.00 per share. The compensation element of the option award was determined using the Black-Scholes model and used the following factors: volatility - 45%; interest rate - 4.6% and assumed no forfeitures.

(6) Mr. Pomroy received payments of $39,164 and $38,666 for automobile allowances and auto reimbursements for the years 2007 and 2006, respectively. Cash amounts of $17,514 and $15,237 were contributed on his behalf to a government sponsored retirement plan and $3,243 and $2,736 were paid to a medical plan, respectively for the years 2007 and 2006. Mr. Pomroy’s bonus was paid in cash and was awarded on a discretionary basis in recognition of the performance of Asean for 2006. All of Mr. Pomroy’s compensation is paid in Australian dollars and has been translated at the historical average rate of the US dollar to the Australian dollar for 2007.

Employment Agreements.

We do not have a written employment agreement with Mr. Wood, who is the Group’s Chief Operating Officer, a director and the Group’s largest shareholder. As part of his employment, Mr. Wood receives a salary as shown in the Summary Compensation Table and is reimbursed for his housing and personal automobile expenses. Mr. Wood directly owns about 63.4 % of all voting shares of the Company’s common stock.

Paul Pomroy: Asean entered into an employment agreement with Paul Pomroy in July 2005 and this agreement remained in effect following the acquisition of Asean. Under his employment agreement, Mr. Pomroy serves as Asean's Managing Director for an indefinite term. Prior to April 2008, Mr. Pomroy received an annual salary of approximately $169,000, an annual car allowance of $22,300, reimbursement of all operating costs, an annual contribution equal to the statutory rate for Australia to a pension fund of his choice, and a bonus and stock options which shall be awarded at the sole discretion of Asean's board of directors. The agreement may be terminated by either party upon six months written notice, or in lieu thereof, upon the payment of six months salary. Effective, April 1, 2008, Mr. Pomroy’s salary was increased from Australian $225,000 to Australian $265,000 per annum, or $40,000. Translating Mr. Pomroy’s current salary to US dollars at exchange rates prevailing in March 2008 yields an annual salary of approximately US$244,000. (All of Mr. Pomroy’s compensation elements in his employment agreement are denominated in Australian dollars.)

The agreement also contains confidentiality, non-solicitation and non-competition provisions. Under these provisions, Mr. Pomroy may not solicit customers or employees of Asean or work in a competing business for a period of twelve months following termination of his employment. The prohibition against disclosing confidential is unlimited and continues after termination of employment.

David Koontz: In November 2005, the Company entered into an Employment Agreement with David Koontz to serve as its Chief Financial Officer. Pursuant to the Employment Agreement, Mr. Koontz is entitled to an annual salary of $185,000 and is eligible to receive an annual bonus, at the discretion of the Board, of up to 100% of his base salary. He is also entitled to reimbursements for health insurance premiums and to a car allowance of $750 per month. Pursuant to the Agreement, the Company granted to Mr. Koontz an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $1.00 per share, which shall be granted pursuant to the Company's 2005 Stock Incentive Plan. Effective August 2007, Mr. Koontz’s salary was increased to $200,000 per annum.

The Agreement is for a term of three years and may be renewed for successive one year terms, may be terminated by WLG for cause and by both parties by written notice or upon the death or disability (as defined in the agreement) of Mr. Koontz. If the Agreement is terminated by disability, Mr. Koontz is entitled to receive his salary and other benefits until he begins to receive disability benefits, to receive a prorated portion of any bonus he would otherwise have been entitled to and to be paid for any accrued but unused vacation. If the Agreement is terminated by the Company without cause (as defined in the Agreement), Mr. Koontz is entitled to receive his base salary and reimbursement for health and insurance premiums for the initial period of the agreement if termination occurs after 12 months of employment. In addition, Mr. Koontz shall be paid for any unused vacation time, and any bonus that had been approved by the Board, and any unvested options shall vest immediately.

Upon a change of control, as defined in the Agreement, all of Mr. Koontz's outstanding options will vest immediately. The Agreement also contains confidentiality, non-solicitation and non-competition provisions. The non-solicitation and non-competition provisions do not apply if the termination is without cause, or if Mr. Koontz terminates the Agreement for good reason.

Remo Picchietti: As part of the acquisition of WCS, Mr. Picchietti entered into an Employment Agreement with WLG and WCS, pursuant to which he was appointed the Chief Executive Officer of WCS and an Executive Vice President of WLG. Mr. Picchietti is to receive an annual base salary of $250,000 as the Chief Executive Officer of WCS, but shall receive no compensation in his capacity as an Executive Vice President of WLG. Mr. Picchietti is entitled to participate in WCS’s bonus program on a discretionary basis and shall be eligible to participate in WLG’s stock option plan. No stock option awards were made to Mr. Picchietti at the commencement of his Employment Agreement. He shall receive other employment benefits consistent with his position, including medical coverage, a car allowance and annual paid leave.

If the Agreement is terminated by the Group without cause or by Mr. Picchietti for Good Reason, (as defined in the Agreement), Mr. Picchietti is entitled to receive his base salary and reimbursement for health and insurance premiums for a period of twelve months if termination occurs after 12 months of employment. Lesser amounts shall be paid if a termination occurs before the expiration of 12 months. In addition, Mr. Picchietti shall be paid for any unused vacation time and any bonus that had been approved by the Board, and any unvested options shall vest immediately. Except for a termination without cause or by Mr. Picchietti for Good Reason, Mr. Picchietti shall be subject to non-solicitation and non-competition provisions, which shall continue for 18 months following the date the Agreement is terminated. The agreement also contains confidentiality provisions and these shall continue until such confidential information becomes publicly available.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

Presented in the following table are the outstanding equity awards as of December 31, 2007, for the Named Executive Officers listed in the Summary Compensation table.

	Option awards
Name	Number of securities underlying unexercised options (#) exercisable	Number of securities underlying unexercised options (#) unexercisable	Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)	Option exercise price ($)	Option expiration date
(a)	(b)	(c)	(d)	(e)	(f)
David Koontz	200,000	0		1.00	08/15/15

DIRECTOR COMPENSATION

No amounts were paid or accrued to the Group’s directors in connection with their service as directors for the fiscal year ended December 31, 2007.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of March 25, 2008, we had 31,400,094 shares of common stock issued and outstanding.

The following table sets forth information, as of March 25, 2008, with respect to the beneficial ownership of our preferred and common stock by: (i) all directors; (ii) the Named Executive Officers; (iii) all current executive officers and directors as a group; and (iv) each stockholder known by us to be the beneficial owner of more than 5% of our common stock.

Title of Class	Name of Beneficial Owner		Amount and Nature of Beneficial Owner (d) (e)			Percent of Class
Series A Preferred Stock		Chris Wood		2,000,000	(a)		100	%

Common Stock		Chris Wood		21,919,720	(a)		65.6	%
		Remo Picchietti		5,210,014	(b)		16.3	%

		David Koontz		200,000	(c)		0.6	%

		Paul Pomroy		1,589,000	(d)		5.1	%

		All directors and executive officers as a group (nine persons)		29,128,034	(e)		85.4	%

Mr. Wood owns 19,919,620 shares of common stock directly and beneficially 100 shares of a family member. In addition, he owns 2.0 million shares of the Company’s Series A Preferred Stock which is convertible at any time into 2.0 million shares of common stock. For the purpose of determining Mr. Wood’s direct and beneficial ownership of common stock, it has been assumed that Mr. Wood exercised the conversion privilege to convert the Series A Preferred Stock into 2.0 million shares of common stock.

(b)	Mr. Picchietti owns 4,710,014 shares of common stock and is to be issued an additional 500,000 shares of common stock at the time Mr. Wood converts his shares of Series A Preferred Stock into common stock. For the purpose of determining Mr. Picchietti’s ownership of common stock, it has been assumed that both he and Mr. Wood acquired all of the shares of common stock issuable to them as a result of converting the 2.0 million shares of the Series A Preferred Stock to common stock.
(c)	Mr. Koontz holds an option to acquire 200,000 shares of the Company’s common stock. The option became fully vested in August 2007.
(d)	Mr. Pomroy holds 1,586,000 shares of the Company’s common stock in a trust that he controls. He also beneficially owns 3,000 shares that are in the names of his minor children. In addition to the three officers disclosed in the above table, another five officers hold shares of the Company’s common stock. One officer holds 100,000 shares in a trust he controls and beneficially owns 3,000 shares of common stock owned by his minor children. The other officers all hold their shares directly and own no shares beneficially.

(e)

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

In the normal course of business, our subsidiaries enter into agency agreements with various overseas agents, pursuant to which these overseas agents provide services relating to our freight forwarding operations at both the ports of loading and the ports of destination for the shipments we arrange.

Under these agency agreements, we and our overseas agents perform our respective services at our own places of business and, for these services, earn our respective fees from each other, as well as from either the shipper or the consignee, as the case may be.

In addition, under the agency agreements, sometimes either we or the overseas agent is required to act as a "collection agent" to collect the freight revenue from customers (either the shipper or the consignee). Since the decision as to which party pays the freight cost is determined by the shipper and the consignee, we and our overseas agents act in accordance with the customers' instructions for the collection of freight revenue. In the event that the collecting party is not the party who is responsible for the payment of the freight cost to the carrier, then the collecting party must reimburse the other party to settle the freight cost.

In either case, we, or our overseas agents, are responsible for invoicing the other party, as between us, for fees owed. These amounts include the services fees earned and may also include the freight cost collected by the other party.

During the years ended December 31, 2007 and December 31, 2006, we conducted trade transactions through one agent that is deemed to be a related party. Trade transactions include revenues earned by us and amounts collected on our behalf (freight costs incurred by us and amounts collected on behalf of the related parties) in the ordinary course of business. In addition, we paid certain expenses on behalf of this related party, or vice versa. Details are as follows:

Transactions with Asean Logistics Inc ("ALI")

As of December 31, 2007 and 2006, ALI owed Christopher Wood $71,823 for funds he advanced to ALI to be used for its working capital needs.

Transactions with Wako Logistics (Thailand) Co. Ltd. ("WLT")

Mr. Wood is a director and owns 50% of the outstanding equity interests of WLT.

During the years ended December 31, 2007 and December 31, 2006, we made sales through WLT, as our agent, of none and $40,700, respectively, in the ordinary course of our freight business. The amount due from WLT as of December 31, 2006, was approximately $18,000 and no balance is due at December 31, 2007.

Transactions with Join Wing Properties Limited ("JWP")

Mr. Wood is a director and owns all of the outstanding equity interests of JWP.

JWP owns a residential property which is occupied by Christopher Wood. During the years ended December 31, 2007 and 2006, rental expenses of approximately $108,000 for each year, were paid or were payable by us to JWP. These amounts have been treated as a housing allowance to Mr. Wood in the disclosures under the section for Executive Compensation.

In connection with WLG’s acquisition of WCS, WCS, under the terms of a financing agreement with certain of its lenders (the “Debt Holders”), was obligated to repay the balance of certain debt (the “Mezzanine Debt”) and the value of warrants (the “Warrants”) held by the Debt Holders. The total amount owed to the Debt Holders, which included interest ($29,600), principal ($2,700,000) and the Warrants ($262,500) was $2,992,100. Of this amount, WLG provided cash of $2,550,000 to WCS, and WCS used $442,100 of its cash to repay the Debt Holders in full for all of their interests. Of the funds provided by WLG, $1,050,000 was from WLG’s working capital and the remaining amount of $1,500,000 was provided by WLG to WCS was by way of two loans of $750,000 each from Mr. Koontz and Mr. Wood, the Chief Financial Officer and Chief Executive Officer, respectively of WLG. As of the date of this report, the final details relating to maturity and payment of the loans provided by the two officers have not been finalized. As of the date of this report, WLG has made interest payments on the loans, at the rate of 12% per year, to Mr. Koontz and Mr. Wood of $37,500 each.

Other than the above transactions, we have not entered into any material transactions with any director, executive officer, nominee for director, beneficial owner of five percent or more of our common stock, or family members of such persons. Also, we have not had any transactions with any promoter. We are not a subsidiary of any company.

Director Independence

The Company’s board of directors reviewed the independence of the directors using the criteria established by the American Stock Exchange. As of December 31, 2007, the Board determined that none of our directors was independent based upon such criteria.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our independent accountant is Mazars CPA Limited. As reported in our Form 8-K filed on July 24, 2007, the Group appointed Mazars CPA Limited as its independent accountant effective as of July 20, 2007. Our previous independent accountant was Moores Rowland Mazars, and this firm underwent a re-organization in 2007 and did not continue as Moores Rowland Mazars. Certain members of Moores Rowland Mazars formed Mazars CPA Limited, and we hired that firm to be our independent accountant. Set forth below are the aggregate fees billed by Moores Rowland Mazars and Mazars CPA Limited for professional services rendered for the audit of the Company's annual financial statements for the years ended December 31, 2007 and 2006, and the review of the financial statements included in the Company's Forms 10-Q and 10−QSB for 2007 and 2006. (See also Part II, Item 9.)

Audit Fees
Year ended December 31, 2007:	$	101,226
Year ended December 31, 2006:	$	96,774
Audit-Related Fees (1)
Year ended December 31, 2007:	$	5,419
Year ended December 31, 2006:	$	9,032
Tax Fees (2)
Year ended December 31, 2007:	$	2,632
Year ended December 31, 2006:	$	2,310

(1)

For fiscal year 2007, the audit-related service fees were for the review of our Forms 8-K and 8-K/A filed to report the acquisition of WCS. The audit-related service fees for 2006 include $4,903 for the review of Form 8-K in connection with an acquisition, and $4,129 for assistance in responding to a request from the Securities and Exchange Committee for additional information for the Company’s Form 10-KSB filed for the year ended December 31, 2005.

(2)

Tax fees are for the preparation of the Hong Kong profit's tax returns and related tax computations for the fiscal years 2007 and 2006, respectively.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)	(1) Financial Statements.

The financial statements listed in the Index to Consolidated Financial Statements appearing on page F-1 of this Form 10-K are filed as a part of this report.

(2) Financial Statement Schedules

There are no financial statement schedules included in this annual report.

(3) The exhibits listed below are filed as part of this annual report.

Exhibit Number and Document Description

3.1	Composite Certificate of Incorporation of WLG Inc., as amended. (10)
3.2	Bylaws of Wako Logistics Group, Inc. (1)
4.1	Convertible Promissory Note, dated April 1, 2005, issued by Wako Logistics, Inc. to Christopher Wood. (2)
4.2	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock. (3)
10.1	Membership Interest Purchase Agreement dated as of March 22, 2005, among Kay O'Neill (USA Holdings) Limited, Kay O'Neill (USA) LLC and Wako Logistics Group, Inc. (2)
10.2	Subscription Agreement made as of the 1st day of April, 2005 between Wako Logistics Group, Inc. and Christopher Wood (2)
10.3	Registration Rights Agreement made as of the 1st day of April, 2005 between Wako Logistics Group, Inc. and Christopher Wood. (2)
10.4	Employment Agreement dated as of November 22, 2004, by and between Wako Logistics Group, Inc. and Phillip Forsyth. (4)
10.5	Wako Logistics Group, Inc. 2005 Stock Incentive Plan. (4)
10.6	Agreement for the Purchase and Sale of Stock dated as of October 1, 2005, between Wako Logistics Group, Inc. and Mr. Henrik Melgaard Christensen. (5)
10.7	Deed Between Vendor and Wako Logistics Group, Inc. For the Purchase and Sale of Stock dated as of October 18, 2005. (6)
10.8	Employment Agreement between David L. Koontz and Wako Logistics Group, Inc. dated November, 2005. (7)
10.9	Membership Interest Purchase Agreement, dated as of July 31, 2007 by and among Wako Logistics Group, Inc., World Commerce Services, LLC, Remo Picchietti and Mary Picchietti (nonmaterial schedules and exhibits identified in the agreement have been omitted pursuant to Item 601b.2 of Regulation S-K. Wako Logistics Group, Inc. agrees to furnish supplementally to the Commission upon request by the Commission a copy of any omitted schedule or exhibit.). (8)
10.10	Registration Rights Agreement, dated as of July 31, 2007, by and among Wako Logistics Group, Inc., Remo Picchietti and Mary Picchietti. (8)
10.11	Letter Agreement between Christopher Wood and Remo Picchietti. (8)
10.12	Escrow Agreement, dated as of July 31, 2007 by and among Wako Logistics Group, Inc., Remo Picchietti, Mary Picchietti and LaSalle Bank. (8)
10.13	Employment Agreement between Remo Picchietti and Wako Logistics Group, Inc., and World Commerce Services, LLC, dated July 31, 2007. (8)
10.14	Lease Agreement between Bredbury Limited, WLG (UK) Limited and WLG Inc. dated February 8, 2008 (10)
21.1	Subsidiaries of the Registrant. (10)
23.1	Consent of Auditors. (10)
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (10)
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (10)
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)). (10)

(1)	Incorporated by reference to our registration statement on Form SB-2/A filed on June 14, 2004.
(2)	Incorporated by reference to our Form 8-K filed on April 7, 2005.
(3)	Incorporated by reference to our Form 8-K filed on November 17, 2005.
(4)	Incorporated by reference to our transition report on Form 10-KSB filed on June 1, 2005
(5)	Incorporated by reference to our Form 8-K dated October 6, 2005.
(6)	Incorporated by reference to our Form 8-K dated October 21, 2005.
(7)	Incorporated by reference to our report on Form 10-KSB on March 30, 2006.
(8)	Incorporated by reference to our Form 8-K filed on August 3, 2007.
(9)	Incorporated by referenced to our Form 8-K filed on February 14, 2008
(10)	Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	WLG INC.


Date: March 30, 2008	By:	/s/ Christopher Wood
		Christopher Wood Chief Executive Officer and Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report on Form 10-KSB has been signed by the following person on behalf of the registrant and in the capacities and on the dates indicated.

Date: March 30, 2008		/s/ Christopher Wood
		Christopher Wood Chief Executive Officer and Director (Principal Executive Officer)

		/s/ David Koontz
		David Koontz Chief Financial Office and Director (Principal Financial Officer and Accounting Officer)

		/s/ Remo Picchietti
		Remo Picchietti Executive Vice President and Director

		/s/ Paul Pomroy
		Paul Pomroy Managing Director of Asean and Director

EXHIBIT INDEX

Exhibit Number and Document Description

3.1	Composite Certificate of Incorporation of WLG Inc., as amended. (10)
3.2	Bylaws of Wako Logistics Group, Inc. (1)
4.1	Convertible Promissory Note, dated April 1, 2005, issued by Wako Logistics, Inc. to Christopher Wood. (2)
4.2	Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock. (3)
10.1	Membership Interest Purchase Agreement dated as of March 22, 2005, among Kay O'Neill (USA Holdings) Limited, Kay O'Neill (USA) LLC and Wako Logistics Group, Inc. (2)
10.2	Subscription Agreement made as of the 1st day of April, 2005 between Wako Logistics Group, Inc. and Christopher Wood (2)
10.3	Registration Rights Agreement made as of the 1st day of April, 2005 between Wako Logistics Group, Inc. and Christopher Wood. (2)
10.4	Employment Agreement dated as of November 22, 2004, by and between Wako Logistics Group, Inc. and Phillip Forsyth. (4)
10.5	Wako Logistics Group, Inc. 2005 Stock Incentive Plan. (4)
10.6	Agreement for the Purchase and Sale of Stock dated as of October 1, 2005, between Wako Logistics Group, Inc. and Mr. Henrik Melgaard Christensen. (5)
10.7	Deed Between Vendor and Wako Logistics Group, Inc. For the Purchase and Sale of Stock dated as of October 18, 2005. (6)
10.8	Employment Agreement between David L. Koontz and Wako Logistics Group, Inc. dated November, 2005. (7)
10.9	Membership Interest Purchase Agreement, dated as of July 31, 2007 by and among Wako Logistics Group, Inc., World Commerce Services, LLC, Remo Picchietti and Mary Picchietti (nonmaterial schedules and exhibits identified in the agreement have been omitted pursuant to Item 601b.2 of Regulation S-K. Wako Logistics Group, Inc. agrees to furnish supplementally to the Commission upon request by the Commission a copy of any omitted schedule or exhibit.). (8)
10.10	Registration Rights Agreement, dated as of July 31, 2007, by and among Wako Logistics Group, Inc., Remo Picchietti and Mary Picchietti. (8)
10.11	Letter Agreement between Christopher Wood and Remo Picchietti. (8)
10.12	Escrow Agreement, dated as of July 31, 2007 by and among Wako Logistics Group, Inc., Remo Picchietti, Mary Picchietti and LaSalle Bank. (8)
10.13	Employment Agreement between Remo Picchietti and Wako Logistics Group, Inc., and World Commerce Services, LLC, dated July 31, 2007. (8)
10.14	Lease Agreement between Bredbury Limited, WLG (UK) Limited and WLG Inc. dated February 8, 2008 (10)
21.1	Subsidiaries of the Registrant. (10)
23.1	Consent of Auditors. (10)
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (10)
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (10)
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)). (10)

(1)	Incorporated by reference to our registration statement on Form SB-2/A filed on June 14, 2004.
(2)	Incorporated by reference to our Form 8-K filed on April 7, 2005.
(3)	Incorporated by reference to our Form 8-K filed on November 17, 2005.
(4)	Incorporated by reference to our transition report on Form 10-KSB filed on June 1, 2005
(5)	Incorporated by reference to our Form 8-K dated October 6, 2005.
(6)	Incorporated by reference to our Form 8-K dated October 21, 2005.
(7)	Incorporated by reference to our report on Form 10-KSB on March 30, 2006.
(8)	Incorporated by reference to our Form 8-K filed on August 3, 2007.
(9)	Incorporated by referenced to our Form 8-K filed on February 14, 2008
(10)	Filed herewith.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

(A company incorporated in Delaware)

We have audited the accompanying consolidated balance sheets of WLG Inc. and its subsidiaries (collectively, “WLG”, the “Company”, or the “Group”) as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholders' equity and cash flows for the years ended December 31, 2007 and 2006. These financial statements are the responsibility of the WLG’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. WLG is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the WLG’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Group as of December 31, 2007 and 2006 and the results of its operations and cash flows for the years ended December 31, 2007 and 2006 in conformity with U.S. generally accepted accounting principles.

Mazars CPA Limited

Certified Public Accountants

Hong Kong

Page 1 of 48

Consolidated Statements of Operations

(Dollars in thousands except share data and per share amounts)

			Year ended December 31,			Year ended December 31,
			2006			2007
	Note		US$			US$
Revenues:
Freight				58,196			106,367
Agency services				2,787			4,256
Other services				39,324			65,679

Total revenues				100,307			176,302

Operating expenses
Cost of forwarding				(84,579	)		(152,273	)
Selling and administrative expenses				(13,778	)		(20,577	)
Depreciation and amortization				(719	)		(1,164	)

Total operating expenses				(99,076	)		(174,014	)

Income from operations				1,231			2,288
Other income (expense)
Interest income				46			59
Interest expense				(392	)		(651	)
Other income, net				169			167

Income before income taxes				1,054			1,863

Provision for income taxes		3		(501	)		(748	)

Net income				553			1,115

Dividends on preferred stock				(90	)		(90	)

Income applicable to common stock				463			1,025

Net income per share:

Basic earnings per share		4		0.02			0.04

Diluted earnings per share		4		0.02			0.04

Weighted average common shares outstanding

Basic				25,390,080			28,664,415

Diluted				25,421,163			28,746,805

The financial statements should be read in conjunction with the accompanying notes.

Page 2 of 48

At December 31, 2006 and 2007

Consolidated Balance Sheets

(Dollars in thousands except share data and per share amounts)

			2006		2007
	Note		US$		US$
ASSETS
Current assets
Cash and cash equivalents				1,528		1,631
Restricted cash		5		372		649
Certificates of deposit, restricted		5		245		-
Trade receivables, net of allowance: (2007-$798, 2006-$520)				14,635		22,198
Deposits, prepayments and other current assets				687		894
Due from related parties		12		198		-
Tax prepaid				108		18

Total current assets				17,773		25,390

Property, plant and equipment, net		6		927		1,396
Deposits and other non-current assets				216		208
Deferred tax assets		3		231		246
Intangible assets, net		7, 8		4,052		5,505
Goodwill		7, 8		3,888		9,328

Total assets				27,087		42,073

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank overdrafts		9		616		471
Trade payables				8,006		11,650
Accrued charges and other payables				3,534		3,868
Bank loans - maturing within one year		9		3,383		7,854
Current portion of capital lease obligation		10		138		102
Due to directors		12		439		1,710
Income tax payable				287		314

Total current liabilities				16,403		25,969

Non-current liabilities
Non-current portion of capital lease obligations		10		38		163
Other non-current liabilities				28		232
Deferred tax liabilities		3		-		9
Bank loans - maturing after one year		9		800		-

Total non-current liabilities				866		404

Commitments and contingencies		11

The financial statements should be read in conjunction with the accompanying notes.

Page 3 of 48

At December 31, 2006 and 2007

Consolidated Balance Sheets

(Dollars in thousands except share data and per share amounts)

			2006		2007
	Note		US$		US$

Stockholders' equity
Preferred stock, $0.001 par value, 5 million shares authorized and none issued				-		-
Convertible redeemable preferred stock, $0.001 par value, 2.0 million shares authorized and issued (Redemption and liquidation value $1,500)		13		2		2
Common stock, $0.001 par value, 55 million shares authorized, 31,400,094 (2006: 25,390,080) shares issued and outstanding		13		25		31
Additional paid-in capital				8,014		12,760
Accumulated other comprehensive income Foreign currency translation adjustments				115		220
Retained earnings				1,662		2,687

Total stockholders' equity				9,818		15,700

Total liabilities and stockholders' equity				27,087		42,073

The financial statements should be read in conjunction with the accompanying notes.

Page 4 of 48

Consolidated Statements of Stockholders’ Equity

Year ended December 31, 2006 and 2007

(Dollars in thousands except share data and per share amounts)

	Convertible and redeemable preferred stock				Common stock				Additional paid-in capital			Accumulated other comprehensive income		Employee benefit compensation			Retained earnings			Total
	Number		US$		Number		US$		US$			US$		US$			US$			US$

Balance as of January 1, 2006		2,000,000		2		25,390,080		25		6,714			19		(8	)		1,199			7,951
Comprehensive income:
- net income		-		-		-		-		-			-		-			553			553
- foreign currency translation adjustment		-		-		-		-		-			96		-			-			96
Total comprehensive income																					649
Common stock to be issued as earn-out payment (Note #)		-		-		-		-		1,300			-		-			-			1,300
Dividend paid		-		-		-		-		-			-		-			(90	)		(90	)
Employee compensation		-		-		-		-		-			-		8			-			8

Balance as of December 31, 2006		2,000,000		2		25,390,080		25		8,014			115		-			1,662			9,818

Comprehensive income:
- net income		-		-		-		-		-			-		-			1,115			1,115
- foreign currency translation adjustment		-		-		-		-		-			105		-			-			105
Total comprehensive income																					1,220
Issue of new common shares:
- earn-out payment (Note #)		-		-		1,300,000		1		(1	)		-		-			-			-
- acquisition of subsidiary		-		-		4,710,014		5		4,705			-		-			-			4,710
Dividends paid		-		-		-		-		-			-		-			(90	)		(90	)
Employee compensation – stock options		-		-		-		-		42			-		-			-			42

Balance as of December 31, 2007		2,000,000		2		31,400,094		31		12,760			220		-			2,687			15,700

Note:

According to the terms of the purchase agreement for the acquisition of Asean, in addition to the 3.5 million restricted shares as mentioned in Note 1 to the financial statements, the Sellers of Asean had the ability to earn, as contingent consideration, 1.3 million restricted shares of WLG common stock. As of December 31, 2006, the Sellers of Asean had met the requirements to earn the 1.3 million shares, and the shares were issued to them in 2007.

The financial statements should be read in conjunction with the accompanying notes.

Page 5 of 48

Consolidated Statements of Cash Flows

(Dollars in thousands except share data and per share amounts)

	Note		Year ended December 31,			Year ended December 31,
			2006			2007
			US$			US$
Cash flows from operating activities:
Net income				553			1,115

Adjustments to reconcile net income to net cash (used in) provided by operating activities
Depreciation				283			382
Bad debts				242			331
Amortization of intangible assets				436			782
Share-based amortization				8			42
Loss on disposal of property, plant and equipment				8			-

Changes in working capital:
Trade receivables				(3,350	)		(2,391	)
Deposits and prepayments				(279	)		157
Due from related parties				271			198
Trade payables				1,572			2,311
Accrued charges and other payables				510			(574	)
Due to related parties				(45	)		-
Due to a director				(144	)		(229	)
Income tax payable				67			110

Net cash provided by operating activities				132			2,234

Cash flows from investing activities:
Acquisitions of property, plant and equipment				(305	)		(459	)
Acquisition of the following:
MSA				(797	)		-
U.K. business				(163	)		-
WCS		8		-			(2,550	)
Proceeds from disposal of property, plant and equipment				8			-

Net cash used in investing activities				(1,257	)		(3,009	)

Cash flows from financing activities:
Certificates of deposit				-			245
Restricted cash				(90	)		(277	)
Bank overdrafts				32			(145	)
Bank loans – net				1,313			(267	)
Repayment of capital lease obligations				(95	)		(88	)
Dividend on preferred stock				(90	)		(90	)
Due from related parties				113			-
Loans from directors				258			1,500

Net cash provided by financing activities				1,441			878

Net increase in cash and cash equivalents				316			103

Cash and cash equivalents at beginning of year				1,212			1,528

Cash and cash equivalents at end of year				1,528			1,631

The financial statements should be read in conjunction with the accompanying notes.

Page 6 of 48

(Dollars in thousands except share data and per share amounts)

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES

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 authorised and outstanding share capital of 100 million shares of common stock, par value of $0.001 per share. All outstanding common stock was issued to Mr. Christopher Wood (“Mr Wood”).

On January 8, 2004, WLG changed its name to Wako Logistics Group, Inc. On the same date, its authorized number of shares was reduced to 60 million shares, of which 55 million shares are common stock, and 5 million shares are preferred stock. WLG functions as a holding company.

Pursuant to the Share Exchange Agreements entered into between WLG and Mr. Wood (and his nominee) on January 18, 2004, WLG consummated a combination with Wako Express (H.K.) Company Limited (“WEHK”) and Wako Air Express (H.K.) Company Limited (“WAE”) (collectively, Operating Subsidiaries”) by the issuance of 20,000,900 shares of common stock in WLG 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 WLG.

The transfer of Mr. Wood’s interest 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. During the periods covered by these financial statements, its authorized capital stock consists of 1,000,000 shares of common stock, par value of HK$1 per share. WEHK’s principal activity is the provision of sea freight forwarding services.

WAE was incorporated in Hong Kong on February 24, 1989. During the periods covered by these financial statements, its authorized capital stock consists of 10,000 shares of common stock, par value of HK$100 per share. WAE’s principal activity is the provision of air freight forwarding services.

During the period from May 1, 2001, to December 19, 2003, Mr. Wood owned 75% of the Operating Subsidiaries’ issued and outstanding capital stock. On December 19, 2003, Mr. Wood acquired the remaining 25% equity interests in each of WEHK and WAE and became the sole shareholder of each. For accounting purposes, the acquisition of this additional 25% equity interest was treated as a private transaction between shareholders.

During the months of February and March 2004, WLG issued an aggregate of 440,000 shares of its common stock, of which 122,800 shares were to consultants, 66,500 shares were to its employees and 250,700 shares were to independent parties.

Page 7 of 48

(Dollars in thousands except share data and per share amounts)

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

The shares issued to consultants were for professional services rendered to WLG and were valued at $61, which was the aggregate fair value of the shares issued. The fair value of these shares was determined by WLG’s board of directors. The board believes that this value is comparable to the value of similar services offered by other service providers in the market. The amount recorded as consideration and compensation was expensed as the services were rendered.

The WLG shares of common stock were sold to employees and independent third parties at a price of $0.50 per share. Proceeds of $159 from the issuance of these issues are recorded as common stock and additional paid-in capital.

In July and November 2004, the Group established two new 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. WECCL had not commenced business as of December 31, 2007. The authorized capital stock of WECCL consists of 10,000 shares of common stock with a par value of HK$1 per share, which was fully paid as of December 31, 2004. WE China commenced business in February 2006 and provides freight forwarding services in the PRC. As of December 31, 2006, the registered capital of WE China is RMB 6,000 and was paid in full. During 2007, the registered capital of WE China was increased to RMB 6,500, and was paid in full as of December 31, 2007.

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 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.

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 pursuant to the terms of an agreement for the purchase and sale of stock between WLG and the seller. Concurrent with the acquisition, WLG, by way of a contribution to capital, transferred all of the shares of ALI to WLG (USA).

ALI is a non-asset based freight forwarding company and provides freight forwarding services to its customers who ship products primarily between Asia and the United States. Prior to and as of the effective date of the acquisition of ALI, WLG and ALI were parties to an agency agreement pursuant to which each agreed to jointly handle certain shipments of customers of both companies at the ports of loading and destination. 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. In addition to the 3.5 million restricted shares, the sellers of Asean were issued 1.3 million additional restricted shares of WLG common stock in 2007 as a result of Asean achieving certain financial goals during the fifteen-month period ended December 31, 2006.

Page 8 of 48

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1.	ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

Asean is a non-asset based freight forwarding and logistics company and has been in the freight forwarding and logistics business for over 20 years. Based in Sydney, Australia, and with an office in Melbourne and representative 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 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). Prior to this acquisition, the Group and UK Co. had worked together in a limited capacity on several mutual customers.

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. 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.

On July 31, 2007, the Group acquired all of the membership interests in World Commerce Services LLC. WCS is based in Schaumburg, Illinois and has offices in New York, Atlanta, Los Angeles and San Francisco. It is a non-asset based freight forwarding company and also has a customs practice. WCS provides a full range of logistics and brokerage services to its customers, specializing in freight imports from Asia, mostly by sea, and with an emphasis on imports from China.

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. The amendment was approved by written consent of the Company’s board of directors and holders of all of the Company’s Series A Convertible Redeemable Preferred Stock and holders of approximately 78% of the Company’s Common Stock. A Certificate of Amendment to the Company’s Restated Certificate of Incorporation was filed with the Delaware Secretary of State on December 3, 2007. The amendment to the Company’s Restated Certificate of Incorporation became effective December 21, 2007.

Page 9 of 48

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting principles

The consolidated financial statements and accompanying notes are prepared in accordance with US generally accepted accounting principles.

Basis of consolidation

The consolidated financial statements include the financial information of WLG and its subsidiaries. The financial information of each of the companies is included in the Group’s audited consolidated financial statements beginning with the effective date that each company was formed or joined the Group. As of December 31, 2007, all subsidiaries are wholly owned, and all material intercompany balances and transactions have been eliminated on consolidation.

Comprehensive income

The Group adopted SFAS No. 130, “Reporting Comprehensive Income” which establishes standards for reporting and disclosure of comprehensive income and its components in a full set of general purpose financial statements. During the year ended December 31, 2007, the Group recorded other comprehensive income of $105, being the translation difference arising from the consolidation of its overseas subsidiaries’ financial statements.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment includes its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Repairs and maintenance are recorded as an expense during the year in which they are incurred.

Depreciation is provided to write off the cost, less accumulated impairment losses, of property, plant and equipment over their estimated useful lives from the date on which they become fully operational and after taking into account their estimated residual values, using the straight-line method. Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of the item is allocated on a reasonableness basis and depreciated separately.

Computer equipment	3 years
Office equipment	5 years
Furniture and fixtures	5 years
Motor vehicles	3 years
Leasehold improvements	over the shorter of estimated useful lives or leased period

Assets held under capital leases are depreciated over the shorter of their expected useful lives or the term of the leases.

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounting for the impairment of long-lived assets

Long-lived assets held and used by the Group are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is accomplished by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets. Impairment losses, if any, are measured as the excess of the carrying amounts of the assets over their estimated fair values. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less the costs to dispose of such assets.

Leasing

Leases are classified as capital leases whenever the terms of the lease transfers substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under capital leases are recognised as assets of the Group at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a capital lease obligation. Finance charges implicit in the purchase payment are charged to the statement of operations over the term of the relevant lease so as to produce a charge at a constant periodic rate on the remaining balance of the obligations for each accounting period.

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.

Revenue recognition

The Group derives its revenues from three principal sources: air freight, ocean freight and customs brokerage.

As a non-vessel operating common carrier, the Group does not own transportation assets. Rather, the Group generates the major portion of its air and ocean freight revenues by purchasing transportation services from direct (asset-based) carriers and reselling those services to its customers. The sell rate is the rate the Group bills to customers and the buy rate is the rate the Group pays to the carriers. By consolidating shipments from multiple customers and concentrating its buying power, the Group may be able to negotiate favorable buy rates from the direct carriers, while at the same time offering lower sell rates than its customers would otherwise be able to negotiate for themselves.

Air freight revenues include income earned by the Group when it acts as a freight consolidator. Ocean freight revenues include income earned when the Group acts as a non-vessel operating common carrier. In each case, the Group acts as an indirect carrier. When acting as an indirect carrier, revenues related to shipments are recognized when freight is received from the shipper (for import freight) or when freight leaves the carrier’s terminal (for export freight) with accrual of the estimated direct costs to complete delivery of the freight.

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue recognition (continued)

The Group recognizes revenue gross as a principal rather than net as an agent. The Group recognizes revenue in this manner because the Group, as a freight forwarder, as distinguished from other logistics forwarders that are required to recognize revenues net as an agent, is subject to credit risk, inventory / cargo risk and insurance risk.

Revenues realized in other capacities, for instance, when the Group acts as an agent for the shipper, include only the commissions earned for the services performed. These revenues are recognized upon completion of the services.

Other services include performing customs brokerage, arranging delivery of goods, performing warehousing and distribution services and preparing and transmitting terminal and shipping documents. Revenues are recognized upon completion of the respective services, and upon the clearance of goods for customs brokerage.

Recognition of cost of forwarding

The billing for the cost of forwarding is usually delayed until after a shipment is completed. As a result, the Group has to estimate the cost of purchased transportation and services and accrue an amount on a load-by-load basis in a manner that is consistent with revenue recognition. Such estimates are based on past trends and on the judgment of management. Historically, upon completion of the payment cycle (receipt and payment of transportation bills), the actual, aggregate transportation costs are not materially different than the amounts accrued. However, in any case in which the actual cost varies significantly from the accrual, a revision to the accrual is recorded.

Income taxes

Provision for income and other related taxes has been provided in accordance with the tax rates in effect on the income arising in each of the jurisdictions where the Group carries on business.

The Group provides for deferred income taxes using the liability method, by which deferred income taxes are recognized for all significant temporary differences between the tax and financial statement bases of assets and liabilities. The tax consequences of those differences are classified as current or non-current based upon the classification of the related assets or liabilities in the financial statements.

Uses of estimates

The preparation of the Group’s consolidated financial statements in conformity with US GAAP requires WLG’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the report periods. Actual amounts could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, taxes and contingencies.

Page 12 of 48

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign currency translation

Transactions involving currencies other than the US dollar are translated at the approximate rates of exchange existing at the transaction dates. Translation differences are included in the consolidated statement of operations.

The reporting currency of the Group is the US dollar. The consolidated financial statements consolidate the financial statements of all foreign subsidiaries. These foreign subsidiaries use their local currencies as the functional currency. For Group consolidation purposes, assets and liabilities of subsidiaries whose functional currency is not the US dollar are translated into US dollars at the rate in effect at the balance sheet date. Revenue and expenses are translated at the average exchange rates during the year. The effects of translation adjustments are recorded in accumulated other comprehensive income.

Allowance for doubtful accounts and concentration of credit risk

The Group reviews its allowance for doubtful accounts throughout the year and provides an allowance equal to the estimated uncollectible amounts. The Group’s estimate is based on historical collection experience, existing economic conditions and a review of the current status of trade accounts receivable. It is reasonably possible that the Group’s estimate of the allowance for doubtful accounts will change. Accounts receivable is presented net of an allowance for doubtful accounts of $520 as of December 31, 2006 and $798 as of December 31, 2007.

Cash and cash equivalents

Cash equivalents include all highly liquid investments, generally with original maturities of three months or less, which are readily convertible to a determinable amount of cash and are so near maturity that the risk of loss in value will be insignificant because of changes in interest rates.

Net income per share

According to the requirements of SFAS No. 128, “Earnings Per Share” (“EPS”), basic earnings per share are computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the weighted-average number of shares outstanding is adjusted to include estimates of additional shares that would be issued if potentially dilutive common shares had been issued. In addition, income available to common stockholders is adjusted to include any changes in income or loss that would result from the assumed issuance of the dilutive common shares.

Page 13 of 48

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Segment reporting

The Group adopted SFAS No. 131, “Disclosure about Segments of an Enterprise and Related Information”. The Group’s results of operations and financial position were affected by the implementation of SFAS No. 131 as it operates in more than one line of business. Segment information is disclosed in Note 18 to the consolidated financial statements.

Consolidation of variable interest entities

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) which applies to variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after December 15, 2003, to variable interest entities in which an enterprise holds an interest that it acquired before February 1, 2003.

In December 2003, the FASB issued a revision to FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46R”) to clarify some of the provisions of FIN 46 issued in January 2003 and to exempt certain entities from its requirements. Under the new guidance, the effective dates vary depending on the type of reporting company and the type of entity with which that company is involved. A Variable Interest Entity ("VIE") does not share economic risks and rewards through typical equity ownership arrangements; instead, contractual or other relationships re-distribute economic risks and rewards among equity holders and other parties. Once an entity is determined to be a VIE, the party with the controlling financial interest, the primary beneficiary, is required to consolidate it. FIN 46R also requires disclosures about VIEs that the Company is not required to consolidate but in which it has a significant variable interest.

A major shareholder of the Group has an interest in certain other companies with which the Group has agency agreements for the performance of freight forwarding services. These agreements and the transactions thereunder are based on normal commercial terms. Transactions with these entities are regarded as “related party transactions” which have been fully disclosed in Note 12 to the consolidated financial statements. Under the terms of FIN46R, these entities are considered as “businesses”. FIN46R paragraph 4(h) stipulates that an entity that is a business is not required to be evaluated by a reporting enterprise to determine if the entity is a VIE. Accordingly, the adoption of FIN 46R does not have an impact on the Group’s consolidated financial statements.

Page 14 of 48

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Share-Based Payment

Effective April 1, 2006, the Company accounts for stock-based compensation in accordance with SFAS No. 123(R), “Share-Based Payment (revised 2004)”. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the value of the award granted and recognized over the vesting period. Stock-based compensation expense is included in selling, general and administrative expenses.

On April 19, 2005, the Company adopted the Wako Logistics Group 2006 Stock Incentive Plan (the "Incentive Plan"). As of December 31 2007, WLG’s board had approved the award of stock options to certain employees to allow them to purchase an aggregate of 220,000 shares of WLG’s common stock.

Recent accounting pronouncements

In September 2006, the FASB issued FAS No. 157, Fair value Measurements (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of this Statement is not expected to have a material effect on the Company’s consolidated financial statements.

In February 2007, the Financial Accounting Standards Board (“FASB”) issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“FAS 159”), which gives entities the option to measure eligible financial assets, and financial liabilities at fair value under other instrument basis, that are otherwise not permitted to be accounted for at fair value under other accounting standards. The election to use the fair value option is available when an entity first recognizes a financial asset or financial liability. Subsequent changes in fair value must be recorded in earnings. This statement is effective as of the beginning of a company’s first fiscal year after November 15, 2007. The Company is currently evaluating the impact of adopting this Statement.

Page 15 of 48

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2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recent accounting pronouncements (Continued)

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations, which replaces SFAS No 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for us beginning January 1, 2009 and will apply prospectively to business combinations completed on or after that date. While the Company has not yet evaluated this statement for the impact, if any, that SFAS 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after December 31, 2008.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as non-controlling interests and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. SFAS No. 160 is effective for us from the beginning January 1, 2009 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. The Company does not expect the adoption of SFAS No. 160 will have material impact on its financial statements.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, or SFAS No. 161. SFAS No. 161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The adoption of SFAS No. 161 is not expected to have a material impact on our consolidated financial statements.

On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. The first step is recognition, whereby a determination is made whether it is more-likely-than-not that a tax position will be sustained upon examination based on the technical merits of the position. The second step is to measure a tax position that meets the recognition threshold to determine the amount of benefit to recognize. The Company does not believe there are significant unrecognized tax benefits, and the adoption of FIN 48 does not have a material impact on the Company's financial position.

Page 16 of 48

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3.	INCOME TAXES

(a)	The Group is subject to income taxes on an entity basis on income arising in or derived from multiple jurisdictions in which it does business.

Income tax expense is comprised of the following:

	Year ended December 31,			Year ended December 31,
	2006			2007
	US$			US$

Current tax
United States		(13	)		25
Hong Kong		231			299
PRC		165			145
Australia		85			273
United Kingdom		32			6
Deferred tax
Australia		1			(8	)
United States		-			8

		501			748

(b)	A reconciliation of the effective tax rate computed using the principal income tax rates during the following respective periods is summarized below:

	Year ended December 31,			Year ended December 31,
	2006			2007
	%			%

Statutory tax rate		40.0			40.0
Effect of permanent differences		18.0			15.3
Effect of foreign tax rate		(31.4	)		(29.3	)
Increase in valuation allowance		23.4			15.6
Others		(2.5	)		(1.4	)

Effective rate		47.5			40.2

The statutory rate for the years ended December 31, 2006 and 2007, refers to the US statutory tax rate, including state taxes.

Page 17 of 48

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3.	INCOME TAXES (CONTINUED)

As of December 31, 2007, the parent company, WLG, had U.S. federal and state consolidated income tax loss carryforwards of approximately $291 that may be used to reduce future taxable income. These carryforwards expire for U.S. federal tax purposes in various years beginning in 2024 and ending in 2027. In addition, the Group has a foreign tax credit carryforward of $301, which will expire in 2017.

(d)	The temporary differences that give rise to a significant portion of the deferred income tax assets and liabilities as of December 31, 2006 and 2007 are as follows:

	Assets				Liabilities
	2006		2007		2006		2007
	US$		US$		US$		US$

Other receivables and accrued expenses		231		246		-		-
Others		-		-		-		9

Net deferred tax		231		246		-		9

Page 18 of 48

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4.	EARNINGS PER SHARE

Earnings per share (EPS) were computed as follows:

	Year ended December 31, 2006
	Income			Weighted average number of shares		Per share amount
	US$					US$
Net income		553
Dividends on convertible redeemable preferred stock		(90	)		2,000,000		0.05

Basic earnings per share
Income available to common stockholders		463			25,390,080		0.02

Effect of dilutive securities
Warrant		-			31,083
Convertible redeemable preferred stock (Note #)		-			-

Diluted earnings per share
Income available to common stockholders assuming conversion		463			25,421,163		0.02

	Year ended December 31, 2007
	Income			Weighted average number of shares		Per share amount
	US$					US$
Net income		1,115
Dividends on convertible redeemable preferred stock		(90	)		2,000,000		0.05

Basic earnings per share
Income available to common stockholders		1,025			28,664,415		0.04

Effect of dilutive securities
Employee stock options		-			82,390
Warrant (Note #)		-			-
Convertible redeemable preferred stock (Note #)		-			-

Diluted earnings per share
Income available to common stockholders assuming conversion		1,025			28,746,805		0.04

For 2006, common stock is not increased by the 2,000,000 shares related to the convertible redeemable preferred stock. In 2007, common stock is not increased by the 2,000,000 shares related to the convertible redeemable preferred stock, the 500,000 shares issuable to the sellers of WCS upon conversion of the convertible redeemable preferred stock, or the conversion of the 100,000 outstanding warrants granted to a consultant in exchange for services rendered because the effect of increasing the outstanding common stock by 2.0 million and 2.6 million shares would be anti-dilutive for 2006 and 2007, respectively.

Page 19 of 48

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5.	PLEDGE OF ASSETS

As of the balance sheet dates, the Group had pledged the following assets for loan and guarantee facilities granted by banks:

Certificates of deposit and restricted cash.

	2006		2007
	US$		US$

Certificates of deposit		245		-
Restricted cash		372		649

		617		649

Accounts receivable and all other assets of Asean, which as of December 31, 2007, were approximately $7,561.

Accounts receivable and all other assets of WLG (USA) and MSA Group, which as of December 31, 2007, were approximately $7,023.

(iv)

Accounts receivable and all other assets of WCS, which as of December 31, 2007, were approximately $7,421.

6.	PROPERTY, PLANT AND EQUIPMENT, NET

	2006			2007
	US$			US$

Computer equipment		914			1,353
Office equipment		584			995
Furniture and fixtures		166			367
Motor vehicles		102			83
Leasehold improvements		651			587

		2,417			3,385
Less: Accumulated depreciation		(1,490	)		(1,989	)

Net book value		927			1,396

The capital lease assets included above are as follows:

	2006			2007
	US$			US$

Cost		373			690
Accumulated depreciation		(88	)		(187	)

Net book value		285			503

Page 20 of 48

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7.	ACQUIRED INTANGIBLE ASSETS AND GOODWILL

The carrying amount and accumulated amortization of intangible assets at December 31, 2006 and 2007, were:

2006

2007

US$

Amortized intangible assets

Non-contractual customer list

Amortization expense for the year ended December 31, 2007, is $782, which included an impairment loss of $21 related to the decline in fair value of the customer list of ALI. The balance of the customer list of ALI is nil after giving effect in 2007 to the impairment of this asset. Amortization expense for the year ended December 31, 2006, was $436, which included an impairment loss of $92 related to the decline in fair value of the customer list of ALI. During the year ended December 31, 2007, the Group recorded a purchase price adjustment to reflect the remaining potential earn-out liability to the former stockholders of MSA. This adjustment resulted in the reduction of the customer list and accrued earn-out payment liability of $600.

Estimated amortization expense for each of the following five years is:

	US$

2008		868
2009		868
2010		791
2011		751
2012		599

The change in the carrying amount of goodwill is as follows:

	US$

Balance as of January 1, 2007		3,888
Acquisition of subsidiary - WCS		5,440

Balance as of December 31, 2007		9,328

Page 21 of 48

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8.	ACQUISITION OF SUBSIDIARIES

(i)

Acquisition of business of UK Division

On September 15, 2006, WLG’s wholly owned second-tier UK subsidiary, WLG (UK), entered into a Purchase Agreement (“Agreement”) with the Administrators acting for a U.K. company (“UK Co.”) pursuant to which WLG (UK) acquired, in an all cash transaction, (the “Transaction”) certain of the assets of UK Co’s business located in Manchester, United Kingdom (“UK Division”).

WLG (UK) acquired the assets of UK Division on an “as is” and “where is” basis and received no warranties or other representations customarily provided in normal purchase transactions. On September 11, 2006, UK Co. had been placed in administration under United Kingdom law, which is similar to an involuntary bankruptcy filing in the United States, and, at the time of the Transaction, was under the legal control of the Administrators, who were acting for UK Co. As such, the Administrators made no representations nor provided any warranties of substance to WLG (UK). Moreover, the acquisition of UK Division was made without the benefit of due diligence or having access to the books and records of UK Division or its parent company. Negotiations were commenced with the Administrator, and the Transaction closed within one week. WLG wished to obtain an operating business with personnel experienced in freight forwarding and logistics that could serve as its first owned location in Europe. Purchasing the UK Division accomplished this goal.

At closing, WLG (UK) paid GBP 80 (approximately US$150, the “Purchase Price”) for the acquisition of certain tangible assets, work-in-progress (“WIP”) and intangible assets including the customer list of UK Division. Except for certain liabilities related to the WIP, which included “duress” liabilities to creditors and past due employee salaries and wages, WLG (UK) did not assume any other liabilities of UK Division. As part of the Agreement, WLG (UK) is to be paid a fee to collect the outstanding receivables of UK Co., all of which were retained by the Administrators for the benefit of the creditors of UK Co.

Following the Transaction, all of UK Division’s management and key employees joined WLG (UK), including one employee that worked in UK Co.’s London headquarters. At the time of the Transaction, WLG made an oral financial commitment to certain of UK Division’s employees in exchange for their assistance to help WLG obtain information about the business prospects of UK Division and in negotiating the terms of sale and purchase with the Administrators. As contemplated, the arrangement will provide these key employees the right to receive WLG shares based on the profitability of UK Division, measured annually beginning January 1, 2007 to December 31, 2009.

UK Co. began business in February 2006, and is the successor to a UK company that ceased business in February 2006, also as a result of being placed in administration. The UK Division provides a full range of supply chain management and logistics services, including freight-forwarding, customs clearances and warehousing, with a large concentration of its business in the trade lanes that run to the UK from Asia and the Indian subcontinent. WLG and UK Division had worked together prior to the Transaction on a limited basis, providing freight forwarding and logistics services to the customers of each. WLG (UK) now carries on the business of UK Division.

Page 22 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(i)

Acquisition of business of UK Division (Continued)

The acquisition of UK Division has been recorded using the purchase method of accounting in accordance with SFAS No. 141. WLG (UK) has allocated the Purchase Price to the tangible assets, liabilities and intangible assets acquired, based on the fair value of the net assets at the effective date of the acquisition. At September 15, 2006, the fair value of identifiable assets, less the fair value of liabilities of UK Division, was approximately $760, which comprised gross assets of approximately $923, including an intangible asset for customer relationships of $833, less total liabilities of about $163. The intangible asset is being amortized over a period of five years. Based on the retention of and expected cash flow from UK Division’s pre-acquisition customers, a fair value of $833 has been assigned to the customer list of UK Division. Of this amount, approximately $597 has been accrued as a potential earn-out obligation that may be payable to certain former executives of UK Division. The final amount to be paid is to be measured by the after-tax earnings of WLG (UK) for the three years beginning January 1, 2007, and ending December 31, 2009. No goodwill has been recorded for the acquisition of UK Division.

	US$
Net assets acquired of:

Property, plant and equipment, net		38
Work in process		52
Trade and other payables		(163	)
Intangible assets		833

Net assets		760

Consideration:

Cash		152
Accrual of contingent earn-out payment		597
Other costs capitalized		11

		760

Goodwill arising from acquisition		-

Page 23 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(ii)

Acquisition of Mares - Shreve & Associates, Inc

On December 1, 2006, WLG’s wholly owned subsidiary, WLG (USA) acquired all of the voting shares of Mares-Shreve & Associates, Inc. (“MSA”) and its wholly owned subsidiary, Sea Systems Ocean Line, Inc, (“Sea Systems”, and collectively, the “MSA Group”). At closing, WLG (USA) made a cash payment of $1,150 to the shareholders (“Sellers”), and placed $50 in a six month escrow account to cover potential claims, if any, that may arise against the MSA Group or the Sellers.

The final purchase price (“Final Purchase Price”) for the MSA shares is the lesser of $2,000 or 4 times MSA Group’s Earnings Before Taxes (“EBT”) for the year ended August 30, 2006. The right to receive the difference in cash between the Final Purchase Price and $1,200 (“Cash Earn-Out Payments”) shall be dependent upon the MSA Group achieving certain financial targets over the three calendar years, beginning on January 1, 2007 and ending December 31, 2009. Also, if certain targets are achieved, WLG may be obligated to issue shares of its restricted common stock (“WLG Shares”) to the Sellers, (together, the” Purchase Price”). In addition to the WLG Shares, the Sellers are potentially entitled to receive the Cash Earn-Out Payments over the next three calendar years as follows: (i) if the EBT of MSA Group, determined on a cumulative basis over the next three calendar years, meets certain agreed targets, WLG (USA) shall pay to the Sellers three annual cash payments, which in the aggregate may not exceed $800; and (ii) if MSA Group’s EBT for the calendar year ending December 31, 2007 exceeds 2006 EBT by at least $25, Sellers shall receive an additional earn-out payment in WLG Shares equal to the lesser of $600 or four times the difference between adjusted net earnings before taxes for fiscal year ending December 31, 2007 and 2006 EBT. The number of WLG shares to be issued to the Sellers is to be valued at their fair market value as of December 31, 2007, with a floor value of $1.00 per share. If the fair market value of WLG’s Shares is less than $1.00, WLG (USA) shall have the right to make payment in cash.

WLG (USA), the Sellers and the MSA Group provided representations and warranties that are typical and consistent for a Transaction of this size and scope. Sellers also warranted that the net worth of the MSA Group at closing shall be at least $1,050 and have warranted that 100% of the MSA Group’s trade receivables on hand as of the closing date will be collected within 150 days. Any shortfall in the collection of the trade receivables must be paid by the Sellers to the MSA Group within 10 days following the termination of the 150 day collection period. WLG has provided a guarantee to the Sellers for the payment obligations undertaken by WLG (USA) in connection with the Transaction.

The underlying assets of the MSA Group consist of its work-in-process inventory, trade receivables, office furniture and equipment, computer hardware and software, certain minor prepaid assets and its customer list. MSA Group’s customer base has been very stable with many customers being with the MSA Group for over 15 years.

Page 24 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(ii)

Acquisition of Mares - Shreve & Associates, Inc (Continued)

The MSA Group provides custom brokerage and freight forwarding services from its offices in Seattle, Washington, and Long Beach, California. MSA, which was incorporated on May 15, 1979, in Washington state, provides 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 a full range of air and sea freight forwarding and related logistics services to its customers. The MSA Group mainly serves customers that ship product 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 business. Prior to completion of the Transaction, WLG and the MSA Group had not worked together.

Acquiring the MSA Group achieved several objectives for WLG, including the following:

Obtaining two “gateway city” offices in the US, namely in Seattle, Washington, and Long Beach, California,

Adding in-house customs capabilities for the Group’s US business,

Acquiring additional freight customers with the majority of their shipments originating in China, and

Adding additional freight volumes to the Group in the Asia-Pacific trade lanes.

The acquisition of MSA has been recorded using the purchase method of accounting in accordance with SFAS No. 141. WLG (USA) has allocated the Purchase Price to the tangible assets, liabilities and intangible assets acquired, based on the fair value of the net assets at the effective date of the acquisition. At December 1, 2006, the fair value of identifiable assets, less the fair value of liabilities of MSA Group, was approximately $2,543, which comprised gross assets of approximately $3,050, including an intangible asset for customer relationships of $1,550, tangible assets of $33, trade and other receivables of $1,121 and cash and cash equivalent of $346, less total liabilities of about $507. The intangible asset is being amortized over a period of ten years. No goodwill has been recorded in connection with the acquisition of MSA. The potential cash earn-out payment of $800 and the obligation to issue WLG shares in the amount of $600 were accrued as a contingent purchase obligation as of the closing date

Page 25 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(ii)

Acquisition of Mares - Shreve & Associates, Inc (Continued)

	US$
Net assets acquired:

Property, plant and equipment, net		33
Cash and cash equivalents		346
Trade and other receivables		1,121
Trade and other payables		(507	)
Intangible assets		1,550

Net assets		2,543

Consideration:

Cash		1,143
Accrual of contingent earn-out payment		1,400

		2,543

Goodwill arising from acquisition		-

Acquisition of business of WCS

On July 31, 2007, (the “Closing Date”) WLG acquired all of the membership interests (the “Membership Interests”) of World Commerce Services LLC (“WCS”) (the “Acquisition”) from the two holders of all of WCS's Membership Interests (“Sellers”).

At closing, WLG issued 4,710,014 shares of its restricted common stock (“Consideration Shares”) as initial consideration for the purchase of the Membership Interests, of which 2,943,759 Consideration Shares were delivered to the Sellers and 1,766,255 Consideration Shares were placed in escrow to cover potential claims. WCS, under the terms of a financing agreement with certain lenders (the “Debt Holders”), was obligated to repay the balance of certain debt (the “Mezzanine Debt”) and to redeem all warrants (the “Warrants”) held by the Debt Holders. The total amount owed for the principal and the Warrants were $2,700 and $263, respectively. In completing the Acquisition, WLG provided cash of $2,550 to WCS, and WCS used $413 of its funds to repay the Debt Holders in full for the Mezzanine Debt and to redeem all outstanding Warrants.

Page 26 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(iii)

Acquisition of business of WCS (Continued)

The Consideration Shares paid to the Sellers were valued at $1.00 per share. The per share value for the Consideration Shares was negotiated between WLG and the Sellers on an arm’s length basis, and gave effect to a number of factors, including the value of WCS, the lack of a meaningful daily trading volume and active market for WLG’s common stock (“WLG Shares”) and other acquisitions completed by WLG. During the three months preceding the Closing Date, there was minimal trading in WLG Shares. During this period, less than ¼ percent of WLG Shares were traded daily, and the average price for the shares traded was about $1.35. On the three trading days preceding the announcement of the Acquisition and the four trading days immediately following the announcement of the Acquisition, no WLG Shares were traded. Both WLG and the Sellers agreed that, in the absence of an active market for WLG Shares and given the value of WCS, the price of $1.00 per share for the Consideration Shares issued to the Sellers represented a good faith effort to establish the fair market value of WLG Shares as of the Closing Date.

In addition to the Consideration Shares, WLG may be required to issue up to 1,962,506 shares (“Earn-Out Shares”) of its restricted common stock to the Sellers if certain financial results are achieved by WCS for the 24 months ending July 31, 2009. The Earn-Out Shares are to be issued in increments to the Sellers based on the trailing 12 months earnings of WCS before depreciation, amortization interest and taxes (“Rolling EBITDA) measured as of July 31, 2008, December 31, 2008, and July 31, 2009. From each Earn-Out payment, WLG shall withhold 25% of the Earn-Out Shares as security for the payment of potential claims. The Sellers also have the right to receive up to 500,000 restricted shares (the “Conversion Shares”) of WLG Shares in the event that any shares of WLG Series A convertible redeemable preferred stock, outstanding as of the Closing Date, are later converted into WLG Shares. If the Sellers receive the maximum Earn-Out Shares and the full number of Conversion Shares, they will have received 7,172,520 WLG Shares. As of the Closing Date, it is not possible to determine if all, or any, of the Earn-Out Shares will be issued to the Sellers, or whether the Sellers will be entitled to receive any Conversion Shares. In computing the Purchase Price in accordance with SFAS No. 141, it was determined that the value of the Earn-Out Shares and/or the Conversion Shares should not be accrued as an element of the Purchase Price. Accordingly, the Purchase Price for the Membership Interests is $7,335, and such amount is stated in accordance with SFAS No. 141.

WLG, the Sellers and WCS provided representations, warranties and indemnities that are typical and consistent for an acquisition of this size and scope. In particular, the Sellers and WCS have warranted and provided an indemnity to WLG that 100% of WCS’s trade receivables on hand as of the Closing Date will be collected within six months of closing. In addition, the Sellers and WCS have provided an indemnity to WLG to cover all losses arising from litigation outstanding as of the Closing Date or which may relate to events prior to the Closing Date. The Sellers maximum liability for warranty and indemnification claims is limited to the number of WLG shares received by them. WLG has the right to deliver its shares of common stock to the Sellers in satisfaction of obligations it may have because of a breach of any of its representations or warranties.

Page 27 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(iii)

Acquisition of business of WCS (Continued)

The underlying assets of WCS consist of its work-in-process inventory, trade receivables, office furniture and equipment, computer hardware and software, certain minor prepaid assets and its customer list.

WCS is based in Schaumburg, Illinois and has offices in New York, Atlanta, Los Angeles and San Francisco. It provides a full range of custom brokerage and freight forwarding services to its customers, specializing in freight imports from Asia, mostly by sea, and with an emphasis on imports from China. WCS does not own or lease any transportation assets or warehouse facilities, but contracts for space on ships and aircraft as well as for warehouse facilities to meet the needs of its customers. Prior to completion of the Acquisition, WLG and WCS had not worked together.

WLG’s acquisition of WCS achieved several objectives for the Group. These objectives include the following factors, and WLG believes that each factor contributed to the goodwill recorded in connection with the Acquisition:

Obtained three “gateway city” offices in the US, namely in San Francisco, California, Long Island, New York and Atlanta, Georgia. Adding these offices will allow WLG to provide a wider range of services in key locations in the US market.

Obtained WCS’s expertise for import transactions. Prior to the acquisition, much of WLG’s US business was focused on export transactions. Adding WCS’s expertise and customer base is expected to help WLG increase its freight forwarding business to and from the US.

Gained additional freight customers with a majority of shipments originating in China, which WLG believes will allow greater utilization of its offices in China.

By adding increased freight volumes in the Asia-Pacific trade lanes, WLG may become more competitive in this market by being able to negotiate lower shipping rates.

The acquisition of WCS has been recorded using the purchase method of accounting in accordance with SFAS No. 141. WLG has allocated the Purchase Price to the assets, liabilities, intangible assets and goodwill acquired, based on the fair value of the net assets at the effective date of the Acquisition. At July 31, 2007, the fair value of identifiable assets, less the amount of liabilities of WCS, was approximately $1,490, which comprised gross assets of approximately $9,305, including an intangible asset for customer relationships of $2,835, less total liabilities of about $7,140. The intangible asset is being amortized over a period of nine years on a straight- line basis. Goodwill of approximately $5,845 was recorded as part of the Acquisition. This amount represented the excess of the Purchase Price over the net assets acquired. The goodwill is not being amortized, but will be tested annually for impairment in accordance with SFAS No. 142. The results of operations for WCS from August to December 2007 have been included in the consolidated results of operations of WLG for the year ended December 31, 2007.

Page 28 of 48

(Dollars in thousands except share data and per share amounts)

8.	ACQUISITION OF SUBSIDIARIES (CONTINUED)

(iii) Acquisition of business of WCS (Continued)

	US$
Net assets acquired:

Property, plant and equipment, net		343
Other assets		354
Trade and other receivables		5,503
Trade and other payables		(7,140	)
Intangible asset - customer list		2,835

Net assets		1,895

Consideration:

Cash - repayment of debt and redemption of warrants		2,550
WLG common stock		4,710
Accrual of transaction expenses		75

		7,335

Goodwill arising from WCS acquisition		5,440

The following unaudited pro forma information assumes the acquisition of WCS occurred at the beginning of each period presented. The unaudited pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of the future results of WLG’s operations.

	Year ended December 31,
	2006		2007
	(Unaudited)		(Unaudited)
	US$		US$

Revenue		180,741		219,784

Net income		432		1,472

Net income per share of common stock

- Basic		0.01		0.05

- Diluted		0.01		0.05

Page 29 of 48

(Dollars in thousands except share data and per share amounts)

9.	BANKING FACILITIES

The Group has obtained bank facilities from creditworthy commercial banks as follows:

	At December 31, 2006		At December 31, 2007
	US$		US$
Facilities granted
- bank guarantees		784		1,148
- overdraft facilities		459		591
- bank loans		5,266		12,778
- foreign exchange facilities		-		219
- lease facilities		-		235

Total bank facilities		6,509		14,971

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 $628 will expire within one year from December 31, 2007, but may be renewed, provided the Group makes available the cash required by the banks to collateralize each guarantee. A bank guarantee of $120 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 $400 has no fixed expiration date and is cancelable and/or renewable at the option of the bank.

The bank loans mature on various dates as follows: (i) $276 on October 17, 2008, (ii) $1,000 revolving line of credit on April 15, 2008, (iii) $7,000 revolving credit facility in May 2008 and (iv) $1,000 term loan, which originally expires in November 2011. On March 12, 2008, WLG (USA) received a notice from the bank terminating the term loan facility and requiring settlement for the outstanding balance of principal and accrued interest, which was approximately $751. This amount has been fully settled in March 2008 from WLG’s working capital and by a director loan. The remaining loan facility of $3,502 is an ongoing facility that may be terminated by either the bank or WLG giving 30 days notice to the other party.

The bank loans and revolving credit facilities of $12,778 are secured as follows: (i) term loan of $276 is unsecured and repayable within one year by monthly installments, (ii) the $1,000 revolving line of credit and the $1,000 five year term loan are secured by a first position blanket lien on substantially all of the assets of WLG (USA) and the MSA Group and a guarantee provided by the Group’s parent company, (iii) $3,502 is secured by Asean’s accounts receivable and a registered mortgage charge over the assets of Asean, (iv) $7,000 is secured by WCS’s accounts receivables and a guarantee provided by the Group’s parent company. As of December 31, 2007, these bank loans and revolving credit facilities carried interest rates from 6.00% to 10.65% per annum.

Page 30 of 48

(Dollars in thousands except share data and per share amounts)

9.	BANKING FACILITIES (CONTINUED)

Certain of the bank guarantees, totaling $628, are collateralized by cash of $649. In addition, a bank guarantee of $120 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 $400 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 $591 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 $219, which at December 31, 2007, had not been utilized. Asean has a leasing facility of $235, and $36 was outstanding as of December 31, 2007, and this facility is secured by the assets under lease. In addition, both the foreign exchange and leasing facility are secured by a comfort letter from the Group’s parent company. As of December 31, 2007, the leasing facility carried interest rates of 7.00% to 8.44% per annum. As of December 31, 2006 and 2007, the weighted average interest rate of the Group’s short-term bank borrowings was 10.15% and 8.50% per annum, respectively.

	At December 31, 2006		At December 31, 2007
	US$		US$
Utilized
Committed lines
- bank guarantees		784		1,148
- overdraft facilities		459		471
- bank loans		4,183		7,854
- foreign exchange facilities		-		-
- lease facilities		-		36

Total bank facilities utilized		5,426		9,509

Page 31 of 48

(Dollars in thousands except share data and per share amounts)

10.

CAPITAL LEASE OBLIGATION

The following is a schedule, by year, of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2007:

	Total
	US$

Year ending Dec 31,
2008		125
2009		87
2010		83
2011		14

		309
Less amount representing interest		(44	)

Present value of future minimum lease payments		265
Less current liabilities		(102	)

Non-current portion		163

11.

COMMITMENTS AND CONTINGENCIES

Commitments under operating leases

The Group rents office and warehouse space, staff quarters and certain office equipment under non-cancelable operating leases. The following table summarizes the approximate future minimum lease payments for obligations in effect as of December 31, 2006 and 2007:

	2006		2007
	US$		US$

Within one year		790		1,358
Over one year but not exceeding two years		543		968
Over two years but not exceeding three years		300		466
Over three years but not exceeding four years		122		250
Over four years but not exceeding five years		8		60

Total operating lease commitments		1,763		3,102

Rental expense under operating leases for the years ended December 31, 2006 and 2007, was $752 and $1,544, respectively.

Page 32 of 48

(Dollars in thousands except share data and per share amounts)

11.

COMMITMENTS AND CONTINGENCIES (CONTINUED)

Cargo space commitments

The Group in the course of its business enters into agreements with various airlines and shipping lines pursuant to which the Group is committed to utilize a minimum amount of cargo space each year. As of December 31, 2007, the obligation for the minimum amount of such cargo space to be utilized in the coming 12 months was $3,245.

Contingencies – outstanding claims

The Group is subject to claims that arise primarily in the ordinary course of business. In general, such claims are covered by insurance policies issued for the Group’s businesses.

As of December 31, 2007, 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.

WCS has been named as a third-party defendant in pending proceedings filed in the United States District Court for the Southern District of New York and the United States District Court, Central District of California relating to claims arising out of the derailment of a Union Pacific train at Tyrone, Oklahoma on April 21, 2005. The total amount of damages sought equals approximately $6,800 including an unspecified amount for costs of delay, lost profit and lost revenue. The Group intends to vigorously defend each of the foregoing actions. WCS has been advised by its legal counsel that it has been named as a third-party defendant for technical reasons and that the likelihood of any liability being assigned to WCS is minimal, but subject to the normal risks of litigation. Management believes that the disposition or ultimate resolution of this pending litigation will not have a material adverse effect on the financial position of the Group.

Page 33 of 48

(Dollars in thousands except share data and per share amounts)

12.

RELATED PARTY TRANSACTIONS

Name and relationship of related parties

Name		Relationship with the Group

Christopher Wood (“CW”)		Shareholder, director and officer of WLG

David Koontz (“DK”)		Director and officer of WLG

Yip King Lin, Paul (“PY”)		Director of the Group’s subsidiaries until April 2006

Paul Pomroy (“PP”)		PP is a director and officer of Asean and a director of WLG (Aust) and a director of WLG

Wako Logistic (Thailand) Co. Ltd (“WLT”)		CW is a shareholder and director of WLT

Join Wing Properties Limited (“JWP”)		CW is a shareholder and director of JWP

Angus International Freight Pty Limited (“AIFP”)		PP was a director of AIFP until May 1, 2006

Warehouse Solutions International Pty Limited (“WSIP”)		PP was a director of WSIP until May 1, 2006

Asean Cargo Services (Qld) Pty Limited (“ACSQ”)		PP is a director of ACSQ

Bettervale Pty Limited (“BPL”)		PP was a director of BPL until May 1, 2006

Page 34 of 48

(Dollars in thousands except share data and per share amounts)

12.

Details of related parties

Name	Principal activities	Ownership (as of December 31, 2007)
		Name of owner	% held

WLT	Provision of sea and air freight forwarding services in Thailand #	CW Others	50 50	% %

JWP	Leases property to CW	CW	100	%

# :

In the normal course of business, the Group enters into agency agreements with various overseas agents so that both the Group and the overseas agents can jointly handle customer shipments on behalf of the other in both the port of loading and the port of destination.

Under these agency agreements, the Group and the overseas agents are obliged to perform their respective services at their own places of business and, in return, earn their respective service fees from the other party and either the shipper or the consignee.

In addition to the above, under these agency agreements, sometimes either the Group or the overseas agent is obliged to act as a “collection agent” to collect the freight revenue from customers (either the shipper or the consignee). Since the decision as to who is to pay the freight cost is determined by either the shipper and/or the consignee, both the Group and the overseas agent only act in accordance with the customers’ instructions in the collection process. In the case that the collecting party is not the party who pays the freight cost to the carrier, the collecting party has to reimburse the other party to enable it to settle the freight cost.

In both cases, either the Group or the overseas agent has to issue an invoice to the other party for an amount attributable to it. The amounts include the service fees earned and may also include the freight cost collected by the other party.

During the years ended December 31, 2006 and 2007, one overseas agent was a related party. In identifying the related party transactions for accounting disclosure purposes, only the handling fee income earned by the Group from the related party overseas agent and the handling fees paid by the Group to the related party overseas agent are disclosed as related party transactions. The amounts that the Group billed to the related party overseas agent, who only acted as a collection agent, are not shown as related party transactions. Similarly, the amounts that the related party overseas agent billed to the Group, who only acted as a collection agent, are not shown as related party transactions.

Page 35 of 48

(Dollars in thousands except share data and per share amounts)

12.

The following is a summary of the amounts included in the accompanying balance sheets:

	2006		2007
	US$		US$
Due from related parties (Note (i))
WLT		18		-
ACSQ		169		-
PP		11		-

		198		-

Due to directors (Note (ii))

CW		439		960
DK		-		750

		439		1,710

Notes:

The amounts due from related parties were unsecured, interest-free and fully repaid during 2007. Transactions in these accounts during the periods covered by these financial statements represented mainly:

amounts paid/collected on behalf of related parties; and

handling income receivable/handling fee payable/rental payable and related settlements.

Amounts due to directors are unsecured, interest-free and repayable on demand except two director loans of $750 each to the Company, which were used as part of the consideration for the acquisition of 100% of the membership interests of WCS. The loans carry an interest rate of 12% per annum and have no fixed repayment term.

Page 36 of 48

(Dollars in thousands except share data and per share amounts)

12.

Summary of transactions with related entities:

	WSIP			BPL			PP			ACSQ			AIFP			WLT			Total
	US$			US$			US$			US$			US$			US$			US$

January 1, 2006		124			7			7			155			190			13			496
Trade transactions		-			-			-			-			-			41			41
Net settlements		(124	)		(4	)		4			14			(190	)		(36	)		(336	)
Reclassified as non-related parties		-			(3	)		-			-			-			-			(3	)

December 31, 2006		-			-			11			169			-			18			198
Net settlements		-			-			(11	)		(169	)		-			(4	)		(184	)
Charged to income statement		-			-			-			-			-			(14	)		(14	)

December 31, 2007		-			-			-			-			-			-			-

Notes:

Net settlements are the amounts that the Group paid (or received).

Additional details of transactions

	Year ended December 31,		Year ended December 31,
	2006		2007
	US$		US$
Handling fee paid/payable
WLT		2		-

Rental paid/payable
JWP		108		108

Page 37 of 48

(Dollars in thousands except share data and per share amounts)

12.

Summary of transactions for the years ended December 31, 2006 and 2007, with directors / stockholders:

	CW			DK			Total
	US$			US$			US$

January 1, 2006		325			-			325
Advances		258			-			258
Expenses/draws		(144	)		-			(144	)

December 31, 2006		439			-			439

Loans from directors		750			750			1,500
Interest accrued		38			38			76
Interest paid		(38	)		(38	)		(76	)
Expense paid		(229	)		-			(229	)

December 31, 2007		960			750			1,710

Notes:

Expenses / loan repayments include amounts that were either paid directly to or for the benefit of CW or DK.

13.

STOCKHOLDERS’ EQUITY

Issuances of Common Stock:

During September and October 2005, WLG, through a private transaction received subscriptions for the sale of 928,080 shares of its common stock at a price of $1.00 per share, and received the full proceeds of $928 for all of the subscribed shares as of December 31, 2005.

WLG, as part of the agreements and/or understandings with certain of its employees, issued 63,000 shares of its common stock to such employees as compensation for services as of December 31, 2005. The fair market value of the shares has been recorded as an addition to paid-in-capital and common stock as of December 31, 2005, and the employee benefit is recorded in the stockholders’ equity section of the accompanying consolidated financial statements. Compensation expense is amortized and recorded in each period the services are rendered, and the related employee benefit account is reduced by a like amount. All amounts of compensation expense for these shares have been fully amortized to expense as of December 31, 2006.

Page 38 of 48

(Dollars in thousands except share data and per share amounts)

13.

STOCKHOLDERS’ EQUITY (CONTINUED)

In addition, a consultant was issued 10,000 shares of WLG’s common stock as payment for services in the year ended December 31, 2005. The issuance of these shares is recorded as an expense and as an addition to common stock and additional paid-in capital.

As of December 31, 2006, the terms of an earn-out provision measured by the earnings before interest and taxes of Asean for the 15 months ended December 31, 2006, obligated the Company to issue an additional 1.3 million shares of the Company’s restricted common stock to the former shareholders of Asean. At December 31, 2006, goodwill and additional paid-in capital were increased by $1,300 to record the fair value, as determined by the Board of Directors, of these shares. In 2007, all of the 1.3 million shares of common stock were issued to the former shareholders of Asean.

During 2007, the Company issued 4,710,014 shares of its restricted common stock as part of the consideration for the acquisition of WCS. Under the terms of the Purchase Agreement with the Sellers of WCS, the Company may be required to issue up to 1,962,506 shares of its restricted common stock to the Sellers if certain financial results are achieved by WCS over the 24 months ending July 31, 2009. In addition, the Company is obligated to issue, on a pro-rata basis, up to 500,000 shares of its restricted common stock to the Sellers in the event that the holder of WLG’s Series A convertible redeemable preferred stock, outstanding as of the Closing Date of WCS, converts the Series A convertible redeemable preferred stock into WLG common stock.

Issuances of Preferred Stock:

In September 2005, WLG approved the designation of a new series of preferred stock, which consists of 2.0 million shares of preferred stock designated as Series A Convertible Redeemable Preferred Stock, par value $0.001 (the “Series A Preferred Stock”). Effective as of September 30, 2005, WLG’s controlling shareholder (the “Holder”) subscribed to all of the Series A Preferred Stock in exchange for $1,500 in debt represented by a Promissory Note in the face amount of $1,000 and other debt of $500 owed to the Holder by the Company. At the option of the Holder, the Note was convertible into shares of WLG’s common stock at a price per share equal to the lesser of (i) the fair market value of the common stock, or (ii) $0.50. Thus, the minimum number of shares of common stock the Holder could have received on conversion of the Note would have been 2.0 million shares.

The Series A Preferred Stock has a stated, liquidation and redemption value of $0.75 per share. The Series A Preferred Stock shall pay a 6% annual cumulative dividend, and for purposes of determining the amount of the 6% dividend, the Series A Preferred Stock shall be deemed to have a stated value of $0.75 per share. The Series A Preferred Stock has a conversion price of $0.50 per share and may be converted, at any time at the option of the Holder into a maximum number of 2.0 million shares of common stock.

Page 39 of 48

(Dollars in thousands except share data and per share amounts)

13.

STOCKHOLDERS’ EQUITY (CONTINUED)

The Series A Preferred Stock may be redeemed solely by and in the sole discretion of WLG at any time or from time to time commencing on the date twenty four (24) months from the date of issuance of the Series A Preferred Stock, provided, at the time of redemption, WLG has at least three (3) Directors on its Board of Directors, of which the majority of such Directors are “independent” (as such term is defined in Section 121(a) of the American Stock Exchange Company Guide). In addition, WLG has the right to require the Holder to convert all of the Series A Preferred Stock to common stock in the event of certain change of control transactions. As of December 31, 2007, a majority of the directors were not independent and the conditions for a redemption had not been met. No Series A Preferred Stock has been converted or redeemed.

14.

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

	Year ended December 31,		Year ended December 31,
	2006		2007
	US$		US$

Cash paid for:
Interest expense		392		651
Income tax		434		643

Other non-cash transactions:

On December 31, 2006, additional paid-in capital was increased by $1,300 to give effect to the 1.3 million shares of restricted common stock subsequently issued in 2007 in finalization of an earn-out provision in connection with the purchase of Asean.

On December 31, 2006, additional contingent purchase price consideration of $597 and $1,400 was accrued in connection with the acquisitions of the UK Division and MSA, respectively. During the year ended December 31, 2007, the Group recorded a purchase price adjustment to reflect the remaining potential earn-out liability to the former shareholders of MSA. This adjustment resulted in the reduction of the customer list and accrued earn-out payment liability of $600.

On July 31, 2007, WLG acquired all of the outstanding membership interests of WCS by the issuance of 4,710,014 WLG shares of its restricted common stock valued at $4,710.

Page 40 of 48

(Dollars in thousands except share data and per share amounts)

15.

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, 2007, the number of shares reserved under the Plan was increased to 5,078,016.

In general, stock options awarded under the Plan vest over three years and expire in a maximum of ten years from their effective dates. However, the Plan permits 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. To date, the board has not yet formally approved the award, but it has approved the employment agreement containing the terms of the option commitment. As such, the Company views approval of this option to be a formality and has established August 2005 as the grant date for this option. Effective January 15, 2007, the board approved and awarded stock options to three employees to purchase an aggregate of 20,000 shares of the Company’s common stock. The vesting periods for the August 2005 and January 2007 options were 2 and 3 years, respectively.

The fair value of each option granted during the year ended December 31, 2007, and the option granted in August 2005, was estimated as of the grant date for each option using the Black-Scholes option-pricing model. The assumptions used for the model were as follows: (1) expected life of 2 and 3 years for the August 2005 and January 2007 options, which is the same as the vesting period of these options, respectively; (2) zero dividend yield; (3) volatilities of 45% and 57.7% for the August 2005 and January 2007 options, respectively, which is based on the volatility of the underlying share price of WLG’s shares and a comparison to the volatility of the share price of peer companies; (4) no post vesting terminations; and (5) a risk free interest rate of 4.6%. The weighted average grant-date fair value of the options granted in August 2005 and January 2007 was $0.28 and $1.22 per share, respectively.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R) using the modified prospective transition method. Under this method, the compensation expense related to the fair value of stock options charged to the consolidated statement of operations for the year ended December 31, 2007, was $42. As of December 31, 2007, the compensation expense related to non-vested options totaled $16 and is expected to be recognized over 24 months. The total intrinsic value of the options outstanding and options exercisable as of December 31, 2007, was $90. No tax benefit was recognized for the stock option expense recorded for the year ended December 31, 2007.

Page 41 of 48

(Dollars in thousands except share data and per share amounts)

15.

SHARE-BASED PAYMENT (CONTINUED)

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		1.00

Outstanding at December 31, 2005		200,000		1.00		9.58
Granted in 2006		-		-

Outstanding at December 31, 2006		200,000		1.00		8.58
Granted in 2007		20,000		2.85

Outstanding at December 31, 2007		220,000		1.17		7.71

Exercisable at December 31, 2007		206,667		1.06		7.63

Page 42 of 48

(Dollars in thousands except share data and per share amounts)

16.

RETIREMENT PLAN

The Group participates in a number of Mandatory Provident, Retirement and Pension Schemes in each of the jurisdictions that it does business. With the exception of the US, all Schemes are mandatory and contributions are based on the statutory requirements of each jurisdiction. The assets for each of these schemes are held and managed by either the government or separate trustees unrelated to the Company. The contributions by the Company to each scheme are charged to expense as incurred.

The expense for all Mandatory Provident, Retirement and Pension Schemes incurred for the years ended December 31, 2006 and 2007, was $723 and $964, respectively.

WLG (USA) and the MSA Group each operate a 401(k) plan for their personnel. Both 401(k) plans allow substantially all of WLG (USA) and MSA’s employees to elect to make tax-deferred contributions to their respective plans, subject to statutory limitations. One employee has elected not to participate in such plan. WLG (USA) does not contribute to its 401(k) plan, but the MSA Group matches up to 4% of the amounts contributed by its employees.

17.

OPERATING RISKS

a)	Credit risk and its concentration

The Group provides freight forwarding, customs brokerage and other services to its customers, and it is required to set forth the details of individual customers accounting for more than 10% of the Group’s sales. As of December 31, 2006 and 2007, no customer accounted for more than 10% of the Group’s trade receivables.

Certain aspects of the freight forwarding industry and customs brokerage business involve significant credit risks. It is standard practice for exporters and importers to expect freight forwarders to offer 30 days or more credit on payment of their invoices from the time cargo has been delivered for shipment. Competitive conditions require that the Group offer 30 days or more credit to many of its clients. In the customs brokerage business, normal credit terms are from 7 to 15 days. In order to avoid cash flow problems and bad debts, the Group attempts to maintain tight credit controls through the use of credit checks, credit limits and periodic account reviews. However, the Group may not be able to avoid periodic cash flow problems or be able to avoid losses in the event customers to whom the Group has extended credit either delay their payments or become unable or unwilling to pay their invoices after the Group has completed shipment of their goods, cleared the goods through customs or performed other services on their behalf.

Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed to perform as contracted. Concentration of credit risk (whether on or off balance sheet) arises from the Group’s major customers and related companies, but the management, in its opinion, consider that the risk of recoverability of the unreserved receivable is minimal.

Page 43 of 48

(Dollars in thousands except share data and per share amounts)

17.

OPERATING RISKS (CONTINUED)

b)	Concentration of suppliers

The Group sourced forwarding services from a number of suppliers, and is required to set forth the details of individual suppliers accounting for more than 10% of the Group’s cost of sales. Details of individual suppliers accounting for more than 10% of the Group’s cost of sales appear in note 18(b).

As of December 31, 2006 and 2007, no supplier accounted for more than 10% of the Group’s trade payables.

c)	Geographical concentrations

The Group's customers ship freight to and from many countries including Australia, China, the UK, the US and several European and Asian countries. It is possible that in the near term, customers in these geographical areas could experience disruptions in their operations, as a result of events such as changes in the economy or political events. As a result, there is a possibility that such events may have a severe impact on the Group’s revenues and receivables derived from activities in these and other countries. Approximate percentages of revenues and receivables in the respective geographic areas are as follows:

	Year ended December 31,		Year ended December 31,
	2006		2007
	%		%
Revenues
Americas		14		38
Asia and others		42		27
Australia		39		27
Europe		5		8

		100		100

	2006		2007
	%		%

Trade Receivables
Americas		18		41
Asia and others		25		13
Australia		43		31
Europe		14		15

		100		100

Page 44 of 48

(Dollars in thousands except share data and per share amounts)

18.

MAJOR CUSTOMERS AND SUPPLIERS

(a)	There are no individual customers that account for more than 10% of the Group's revenues.

(b)	Details of individual suppliers accounting for more than 10% of the Group's cost of forwarding are as follows:

	Year ended December 31,		Year ended December 31,
	2006		2007
	%		%
Major suppliers
L		12		<10
P		23		13

19.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, trade and other receivables, trade and other payables, bank overdraft and bank loans approximate their fair values because of the short-term nature of these amounts.

Page 45 of 48

8 months ended December 31, 2004 and years ended December 31, 2006 and 2007

20.

SEGMENTS OF THE BUSINESS

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 analyzed by air forwarding, sea forwarding and customs brokerage services:

During the years ended December 31, 2006 and 2007

	Air forwarding						Sea forwarding						Customs brokerage						Total
	Year ended December 31,			Year ended December 31,			Year ended December 31,			Year ended December 31,			Year ended December 31,			Year ended December 31,			Year ended December 31,			Year ended December 31,
	2006			2007			2006			2007			2006			2007			2006			2007
	US$			US$			US$			US$			US$			US$			US$			US$

Revenues		29,957			34,110			42,904			96,480			27,446			45,712			100,307			176,302
Cost of forwarding		(25,588	)		(28,615	)		(33,606	)		(81,802	)		(25,385	)		(41,856	)		(84,579	)		(152,273	)
Depreciation		(100	)		(76	)		(292	)		(247	)		(30	)		(59	)		(422	)		(382	)
Interest income		28			29			17			26			1			4			46			59
Interest expense		(88	)		(93	)		(193	)		(342	)		(111	)		(141	)		(392	)		(576	)
Other segment income, net		30			40			86			81			14			47			130			168
Other segment expenses		(3,871	)		(4,464	)		(7,473	)		(12,256	)		(1,775	)		(3,255	)		(13,119	)		(19,975	)
Taxation		(105	)		(170	)		(361	)		(480	)		(35	)		(98	)		(501	)		(748	)

Segment income		263			761			1,082			1,460			125			354			1,470			2,575
Corporate expenses																				(917	)		(1,460	)

Net income																				553			1,115

Segment assets		6,696			6,765			9,905			15,472			2,527			4,997			19,128			27,234

Unallocated assets																				7,959			14,839

Total assets																				27,087			42,073

Property, plant and equipment – additions		53			77			219			255			33			127			305			459

Page 46 of 48

Report of Independent Registered Public Accounting Firm

Audited Consolidated Financial Statements

WLG Inc.

(Formerly known as Wako Logistics Group, Inc.)

Years ended December 31, 2006 and 2007

Report of Independent Registered Public Accounting Firm

Audited Consolidated Financial Statements

WLG Inc.

(Formerly known as Wako Logistics Group, Inc.)

Years ended December 31, 2006 and 2007

EX-3.1 2 v107666_ex3-1.htm

Exhibit 3.1

COMPOSITE

CERTIFICATE OF INCORPORATION

WLG INC.

(As of December 21, 2007)

First: The name of the Corporation is WLG Inc.

Second: The address of its registered office in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle, 19808. The name of its registered agent at such address is The Corporation Service Company.

Third: The nature of the business or purposes to be conducted or promoted is: To engage in any lawful act activity of which corporations may be organized under the General Corporation Law of Delaware.

Fourth: The total number of shares of stock which the Corporation shall have authority to issue is sixty million (60,000,000), of which stock fifty-five million (55,000,000) shares of the par value of one-tenth of one cent ($.001) each, shall be Common Stock, and five million (5,000,000) shares of the par value of one-tenth of one cent ($.001) each, shall be Preferred Stock.

The powers, preferences and rights, and the qualifications, limitations and restrictions of the Corporation’s Common Stock and Preferred Stock are as follows:

(a) holders of the Corporation’s Common Stock as a class, have equal ratable rights to receive dividends when, as and if declared by the Board of Directors, out of funds legally available therefore and are entitled upon liquidation of the Company to share ratably in the net assets available for distribution, are not redeemable and have no pre-emptive or similar rights; and holders of the Corporation’s Common Stock have one non-cumulative vote for each share held of record on all matters to be voted on by the Corporation’s stockholders.

(b) The shares of the Preferred Stock may be issued in series, and shall have such voting powers, full or limited, or no voting powers, and such designations preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions hereof, as shall be stated and expressed in the resolution or resolutions providing for the issuance of such stock adopted from time to time by the Board of Directors. The Board of Directors is hereby expressly vested with the authority to determine and fix in the resolution or resolutions providing for the issuances of Preferred Stock the voting powers, designations, preferences and rights, and the qualifications, limitations or restrictions thereof, of each such series to the full extent now or hereafter permitted by the laws of the State of Delaware.

Fifth: The Corporation is to have perpetual existence.

Sixth: Whenever a compromise or arrangement is proposed between this Corporation and its Creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequences of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

Seventh: The personal liability of the directors of the corporation is hereby eliminated to the fullest extent permitted by the provisions of paragraph (7) of subsection (b) of 102 of the general Corporation Law of the State of Delaware, as the same may be amended and supplemented.

Eighth: The Corporation shall, to the fullest extent permitted by the provisions of the 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, and shall continue as to a person has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such person.

Ninth: From time to time any of the provisions of this certificate of incorporation may be amended, altered, or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this certificate of incorporation are granted subject to the provisions if this Article NINTH.

IN WITHNESS WHEREOF, the Corporation has caused this Certificate to be signed by its duly authorized officer, this 8th day of January 2004.

By: /s/ Christopher Wood

Name: Christopher Wood

Title: President

EX-10.14 3 v107666_ex10-14.htm Unassociated Document

LR1. Date of Lease	8^th February 2008
LR2. Title number(s)	LR2.1 Landlord’s title number GM946142 LR2.2 Other title numbers None
LR3. Parties to this Lease	Landlord BREDBURY LIMITED (a company incorporated in Jersey with registration number 83754) whose registered office is at First Island House, Peter Street, St. Helier, Jersey, Channel Islands and having an address for service in the UK c/o Leach & Co, 30 St. George Street, London W1S 2FH (ref. AKJ/L76-9) Tenant WLG INC (a company incorporated in England with registration number 05663215) whose registered office is at Unit A3, Greeba Road, Roundthorn Industrial Estate, Wythenshawe, Manchester, M23 9RA Other parties WLG (USA) LLC (a company incorporated in Delaware with registration number 3734306) whose registered office is at 920 East Algonquin Road, Suite 120 Schaumberg, IL 60173, USA and having an address for service in the UK at c/o Unit A3, Greeba Road, Roundthorn Industrial Estate, Wythenshawe, Manchester, M23 9RA
LR4. Property	In the case of a conflict between this clause and the remainder of this lease then, for the purposes of registration, this clause shall prevail Unit A, Site 1, Horsfield Way, Bredbury, Stockport as more particularly described in Schedule 1
LR5. Prescribed statements etc.	None
LR6. Term for which the Property is leased	From and including 4^th February 2008 to and including 3^rd February 2018
LR7. Premium	None

LR8. Prohibition or restrictions on disposing of this lease	This lease contains a provision that prohibits or restrictions dispositions
LR9. Rights of acquisition etc.	LR9.1 Tenant’s contractual rights to renew this lease, to acquire the reversion or another lease of the Property, or to acquire an interest in other land None LR9.2 Tenant’s covenant to (or offer to) surrender this lease None LR9.3 Landlord’s contractual rights to acquire this lease None
LR10. Restrictive covenants given in this lease by the Landlord in respect of land other than the Property	None
LR11. Easements	LR11.1 Easements granted by this lease for the benefit of the Property None LR11.2 Easements granted or reserved by this lease over the Property for the benefit of other property Schedule 2
LR12. Estate rent charge burdening the Property	None
LR13. Application for standard form restriction	None
LR14. Declaration of trust where there is more than one person comprising the Tenant	None - not applicable

LEASE PARTICULARS

DATE:		The 8th day of February 2008
LANDLORD:		BREDBURY LIMITED (a company incorporated in Jersey with registration number ) whose registered office is at First Island House, Peter Street, St. Helier, Jersey, Channel Islands and having an address for service in the UK c/o Leach & Co, 30 St. George Street, London W1S 2FH (ref. AKJ/L76-9)
TENANT:		WLG (UK) LIMITED (a company incorporated in England with registration number 05663215) whose registered office is at Unit A3, Greeba Road, Roundthorn Industrial Estate, Wythenshawe, Manchester, M23 9RA
GUARANTOR		WLG INC (a company incorporated in Delaware with registration number 3734306) whose registered office is at 920 East Algonquin Road, Suite 120 Schaumberg, IL 60173, USA and having an address for service in the UK at c/o Unit A3, Greeba Road, Roundthorn Industrial Estate, Wythenshawe, Manchester, M23 9RA
PREMISES:		Unit A, Site 1, Horsfield Way, Bredbury, Stockport as more particularly described in Schedule 1
TERM COMMENCEMENT DATE:		4^th February 2008
TERM EXPIRY DATE:		3^rd February 2018
RENT:		For the first two years of the term £100,170 per annum plus VAT and thereafter subject to review
RENT REVIEW DATES:		The second and the fifth anniversaries of the Term Commencement Date in the years 2010 and 2013.
PERMITTED USE:		Storage, distribution and ancillary offices or any use within Classes B1(c), B2 and B8 of the Schedule to the Town and Country Planning (Use Classes) Order 1987 as originally enacted
LANDLORD'S/TENANT'S OPTION TO BREAK:		No
LANDLORD AND TENANT ACT 1954:		Not excluded

INTEREST ON LATE PAYMENTS:		4% above base rate of National Westminster Bank plc
NTEREST ON SHORTFALL OF RENT REVIEW:		The base rate of National Westminster Bank plc

LAND REGISTRY

LAND REGISTRATION ACTS 2002

LESSOR’S TITLE NUMBER:	GM946142
PROPERTY LEASED:	Unit A, Site 1, Horsfield Way, Bredbury, Stockport as more particularly described in Schedule 1
PREMIUM:	None
YEARLY RENT:	Years 1-2: £100,170 plus VAT and subject thereafter to review
DATE:	8th day of February 2008

THIS LEASE is made BETWEEN:-

(1)

BREDBURY LIMITED (a company incorporated in Jersey with registration number 83754) whose registered office is at First Island House, Peter Street, St. Helier, Jersey, Channel Islands and having an address for service in the UK c/o Leach & Co, 30 St. George Street, London W1S 2FH (ref. AKJ/L76-9) ("the Landlord") and

(2)	WLG (UK) LIMITED (a company incorporated in England with registration number 05663215) whose registered office is at Unit A3, Greeba Road, Roundthorn Industrial Estate, Wythenshawe, Manchester, M23 9RA ("the Tenant")

(3)

WLG INC (a company incorporated in Delaware with registration number 3734306) whose registered office is at 920 East Algonquin Road, Suite 120 Schaumberg, IL 60173, USA and having an address for service in the UK at c/o Unit A3, Greeba Road, Roundthorn Industrial Estate, Wythenshawe, Manchester, M23 9RA (“the Guarantor”)

WITNESSES as follows:

1	DEFINITIONS

In this lease the following expressions have the respective specified meanings (unless otherwise required by clause 2):

"Development"	has the meaning given by Planning Law
"Enactment"	means every Act of Parliament directive and regulation and all subordinate legislation which at any relevant time during the Term has legal effect in England and Wales
"Group Company"	means any company which is either the holding company of the Tenant or a wholly-owned subsidiary of the Tenant or of the Tenant's holding company as those expressions are defined in section 736 Companies Act 1985
“Headlease”	means the lease details of which are set out in Schedule 5 or such other lease or leases as shall be the reversion immediately expectant upon the Term hereby demised
"Insurance Cost"	means the annual sum of all the money which the Landlord properly and reasonably expends on:
	(a) effecting and maintaining insurance against the Insured Risks in relation to the Premises for whatever amount the Landlord reasonably considers represents the full replacement cost with such allowance as the Landlord reasonably considers appropriate for related liabilities and expenses (including without limitation liability to pay proper fees or charges on the submission of an application for planning permission and costs which might be incurred in complying with any Enactment in carrying out any replacement works and sums for proper professional fees and incidental expenses which might be incurred on any debris removal and replacement and all VAT)

	(b) effecting and maintaining any insurance relating to the Landlord's property owners' liability in relation to the Premises and anything done in it and
	(c) reasonable and proper professional fees relating to insurance including fees for insurance valuations carried out at reasonable intervals PROVIDED THAT any such valuations shall not be carried out more than once in every year unless specifically required by the Landlord’s insurers
"Insurance Rent"	means for any Insurance Cost period all of:
	(a) the Insurance Cost for the relevant period
	(b) the amount which the Landlord properly expends on effecting and maintaining insurance against not less than three years loss of the rents first reserved by this lease having regard to increases of rent pursuant to Schedule 4 and with any addition to the amount insured as the Landlord may reasonably decide in respect of VAT

	(c) (without prejudice to all other provisions of this lease relating to the use of the Premises and the vitiation of any policy of insurance) any amount which the Landlord properly expends on all additional premiums and loadings on any policy of insurance required as a result of anything done or omitted by the Tenant and
	(d) an amount equal to the total of all excess sums which the insurers are not liable to pay out on any insurance claim (where such excesses are generally or widely imposed in the insurance market for properties such as the Premises) in respect of the Premises and which the Landlord may have paid in replacing the damaged or destroyed parts of the Premises
"Insured Risks"	means loss damage or destruction whether total or partial caused by:-
	(a) fire lightning explosion riot civil commotion strikes labour and political disturbances and malicious damage aircraft and aerial devices (other than hostile aircraft and devices) and articles accidentally dropped from them storm tempest flood bursting or overflowing of water tanks and pipes impact earthquake and accidental damage to underground water oil and gas pipes or electricity wires and cables subsidence ground slip and heave breakdown and sudden and unforeseen damage to engineering plant and equipment damage caused to the Premises by theft; and

	(b) such other risks or perils against which the Landlord acting reasonably may insure; and
	(c) (subject always to such risk being available in the relevant insurance market) terrorism
	in all cases subject to such exclusions and limitations as are generally or widely imposed by the insurers in the insurance market for properties such as the Premises
"Permitted Use"	Storage, distribution and ancillary offices or for any other purposes within Classes B1(c), B2 and B8 of the schedule to the Town and Country Planning (Use Classes) Order 1987
"Planning Law"	means every Enactment and to the extent they relate to the Premises every planning permission statutory consent and agreement made pursuant to any Enactment for the time being in force relating to the use development and occupation of the land and buildings
"Plan"	means the plan annexed to this lease
"Premises"	means the premises described in schedule 1

"Public Authority"	means any government department public local regulatory fire and any other authority any institution having functions which extend to the Premises or their use or occupation any court of law any company or authority responsible for the supply of utilities and any of their duly authorised officers
"Rent Commencement Date"	means 4^th February 2008
“Road”	means the roadway shown coloured pink on the Plan
"Service Media"	means pipes, wires, cables, sewers, drains, watercourses, trunking, ducts, flues, gutters, gullies, channels, conduits and other media
"Stipulated Rate"	means a yearly rate of interest calculated on a daily basis four per cent above the base rate of National Westminster Bank plc or of such other bank (being generally recognised as a clearing bank in the London money market) as the Landlord may nominate at any time
"Term"	means 10 years calculated from 4^th February 2008
"VAT"	means Value Added Tax as referred to in the Value Added Tax Act 1994 (or any tax of a similar nature which may be substituted for or levied in addition to it)

2	INTERPRETATION

In this lease:

2.1	The singular includes the plural and vice versa and one gender includes both genders

2.2	Where a party comprises more than one person obligations of that party take effect as joint and several obligations

2.3	An obligation by the Landlord or the Tenant not to do (or omit) any act or thing also operates as an obligation to use reasonable endeavours not to permit or suffer it to be done (or omitted) and to prevent (or as the case may be) to require it being done

2.4	References to:

(a)	any clause or schedule are references to the relevant clause or schedule of this lease and any reference to a clause or paragraph is a reference to that clause or paragraph of the clause or schedule in which the reference appears and headings shall not affect the construction of this lease

any right of (or obligation to permit) the Landlord to enter the Premises shall also be construed (subject to clause 4.10) as entitling the Landlord to remain on the Premises so far as is necessary with or without equipment and permitting such right to be exercised by all persons authorised by the Landlord

any consent or approval of the Landlord or words to similar effect mean a consent in writing signed by or on behalf of the Landlord and where necessary the consent of the superior landlord pursuant to the Headlease and given before the act requiring consent or approval and any such reference which states that consent or approval will not be unreasonably withheld by the Landlord also means that it will not be unreasonably delayed by the Landlord

(d)	the Premises (except in the definition of Premises and in clause 4.16) extend where the context permits to any part of the Premises

(e)

a specific Enactment includes every statutory modification consolidation and re-enactment and statutory extension of it for the time being in force except in relation to the Town and Country Planning (Use Classes) Order 1987 which shall be interpreted exclusively by reference to the original provisions of Statutory Instrument 1987 No 764 whether or not it may have been revoked or modified

(f)	the last year of the Term includes the final year of the Term if this lease determines otherwise than by passing of time and references to the expiry of the Term include that type of determination

(g)	rents or other sums being due from the Tenant to the Landlord mean that they are exclusive of any VAT and

(h)	the Tenant’s obligations means the Tenant’s obligations under this lease and under every agreement which is supplemental or collateral to this lease

2.5	The information contained in the “Lease Particulars” shall not affect the construction of this lease and has been included for convenience only

3	DEMISE AND RENTS

3.1

The Landlord at the request of the Guarantor demises to the Tenant with full title guarantee except and reserved to the Landlord and other persons authorised by it at any time during the Term or otherwise entitled to exercise them the rights specified in schedule 2 to hold the Premises to the Tenant for the Term subject to the rights obligations and other matters affecting the Premises as referred to in the documents described in schedule 5

3.2	The Tenant paying to the Landlord:

3.2.1

yearly and proportionately for any part of a year the rent specified in schedule 3 by equal quarterly payments in advance by standing order if the Landlord so requires on the usual quarter days in every year the first such payment or a proportionate part of it (being a proportionate part of the rent specified in paragraph 2 of schedule 3 from the Rent Commencement Date to the next quarter day thereafter) to be made on the date of this lease

3.2.2

as additional rent payable within 14 days of written demand the Insurance Rent

3.2.3

as additional rent payable on demand interest at the Stipulated Rate on any sum owed by the Tenant to the Landlord pursuant to the Tenant's obligations whether or not as rent which is not received by the Landlord within 14 days of the due date (or in the case of money due only on demand within 14 days after the date of demand) calculated for the period commencing on the due payment date and ending on the date the sum (and the interest) is received by the Landlord and

3.2.4

as additional rent all VAT for which the Landlord is or may become liable on the supply by the Landlord to the Tenant under or in connection with this lease or the interest created by it and of any other supplies whether of goods or services such rent to be paid at the same time as the other rents or sums to which it relates subject to the prior delivery of a valid VAT invoice properly addressed to the Tenant

4	TENANT'S OBLIGATIONS

The Tenant agrees with the Landlord:

4.1	Headlease

To observe and comply with the covenants and obligations in the Headlease insofar as they relate to this Lease other than the payment of rent (or other obligations that specifically remain the responsibility of the Landlord as lessee under the Headlease)

4.2

Rent

To pay the rents reserved by this lease on the days and in the manner set out in clause 3 without deduction or set off (except as required at law) and (unless the Landlord agrees otherwise) to pay the rent first reserved (together with any VAT on it) by banker's standing order to such current bank account in Jersey The Channel Islands as the Landlord may nominate at any time

4.3

VAT

If the Tenant is required to pay any amount to the Landlord under this lease by way of reimbursement or indemnity also to pay the Landlord an amount equal to any VAT incurred by the Landlord on the amount being reimbursed or indemnified (subject to the Landlord issuing a VAT invoice) except to the extent the Landlord obtains credit for such VAT pursuant to sections 24 25 and 26 Value Added Tax Act 1994 or any regulations made under them

4.4	Outgoings

4.4.1

To pay all rates and other outgoings assessed on the Premises or on their owner or occupier during the Term excluding without prejudice to clause 4.2 any tax payable by the Landlord as a direct result of any actual or implied dealing with the reversion of this lease or of the Landlord's receipt of income

4.4.2

To pay all charges for water gas and electricity (including meter rents) consumed in the Premises during the Term

4.5	Compliance with Enactments

To comply with all Enactments and with the requirements of every Public Authority affecting the Premises their use occupation employment of people in them and any work being carried out to them (whether the requirements are imposed upon the owner lessee or occupier) and not to do or omit anything by which the Landlord may incur any liability under any Enactment or requirement of a Public Authority

4.6	Official communications

As soon as practicable to supply the Landlord with a certified copy of any official communication received from or proposal made by any Public Authority and to comply fully with its provisions at the Tenant's cost except that (if requested by and at the cost of the Landlord) the Tenant shall make such reasonable representations as the Landlord may require against any communication or proposal so long as the representations do not conflict with the Tenant's rights under this lease

4.7	Repair

Well and substantially to repair the Premises and maintain and keep them in good and substantial repair and condition (damage by any of the Insured Risks excepted to the extent that the Landlord is obliged under this lease to insure against them and to the extent that the insurance money is not rendered irrecoverable or insufficient because of some act or default of the Tenant or of any person deriving title from it or their respective servants or agents) but subject to the provisions of Schedule 6

4.8	Decoration and general condition

To keep the Premises maintained to a good standard of decorative order and properly clean at least once in every third year as to the exterior of the Premises and once in every fifth year as to the interior of the Premises and also in the last year of the Term to redecorate and treat the Premises with appropriate materials in a good and workmanlike manner (and during the last year of the Term in a colour scheme and with materials approved by the Landlord not to be unreasonably withheld or delayed) but the Tenant shall not be obliged to redecorate or treat the Premises if the need to do so is caused by any of the Insured Risks to the extent that the insurance money is not rendered irrecoverable or insufficient because of some act or default of the Tenant or of any person deriving title from it or their respective servants or agents but subject to the provisions of Schedule 6

4.9	Refuse

Not to deposit any refuse other than inside the Premises and to ensure the removal of refuse from the Premises on a regular basis

4.10	Entry by the Landlord

To permit the Landlord during the normal business hours of the Tenant on not less than two working days’ prior written notice (except in emergency) and where strictly necessary to enter the Premises in order to:

4.10.1

investigate whether the Tenant has complied with its obligations

4.10.2

take any measurement or valuation of the Premises

4.10.3

affix and retain on the Premises without interference but in a position which does not materially affect their amenity a notice for their re-letting or disposal (such notice to specify that the business of the Tenant shall be unaffected by any such disposal) and during the last six months of the Term to allow the Landlord to show the Premises to prospective purchasers or tenants and their agents

4.10.4

to exercise the rights described in schedule 2

PROVIDED THAT the Landlord shall cause as little interference as is reasonably possible with the Tenant's use of the Premises for its business (except where it is necessary to do so in order to comply with any obligations to the Tenant) and if the Landlord exercises any of the rights by carrying out works on the Premises it shall straight away make good any damage caused to them and to any of the Tenant's fixtures fittings goods plant and machinery unless the right has been exercised because of some breach of the Tenant's obligations and subject to any reasonable regulations the Tenant may make and are notified to the Landlord in writing

4.11	Remedying breaches

4.11.1

To comply with any notice requiring the Tenant to remedy any breach of its obligations under clauses 4.7 and 4.8 of this Lease

4.11.2

If the Tenant does not commence to comply with any such notice within two months of receipt of notice of the breach and thereafter diligently proceed with such compliance to permit the Landlord to enter the Premises to remedy the breach as the Tenant's agent

4.11.3

To pay to the Landlord as a debt and on demand all the costs and expenses properly incurred by the Landlord in exercising its rights under this clause

4.12	Preserving rights

4.12.1

To preserve all rights of light and other easements belonging to the Premises and not to give any acknowledgement that they are enjoyed by consent PROVIDED THAT the Tenant shall not be prevented from installing security bars or displaying temporary trade posters over the windows of the Premises (in the latter case which comply with clause 4.15)

4.12.2

Not to do or omit anything which might subject the Premises to any new easement and to notify the Landlord without any delay of any encroachment which might have that effect

4.13	Alterations and reinstatement

4.13.1

Not to carry out any alterations or works which adversely affect the structural integrity of the Premises and not to commit any waste

4.13.2

Subject to the other provisions of this clause not to make any alteration or addition to the Premises without the Landlord's consent which shall not be unreasonably withheld but the installation and removal of demountable partitioning and minor electrical and plumbing works shall not require the Landlord's consent

4.13.3

To provide the Landlord without any delay on making any alteration or addition to the Premises for which the Landlord has insurance obligations with a written independent current insurance (VAT inclusive) valuation of the works for replacement purposes

4.13.4

At the expiry of the Term if and to the extent reasonably required by the Landlord by written notice served not later than three months before the expiry of the Term to remove all alterations and additions made to the Premises and anything which may have been installed under clause 4.13 at any time by the Tenant or by any person deriving title from it and to restore and make good the Premises in a proper and workmanlike manner to the condition and design which existed before the relevant work was carried out to the Landlord's reasonable satisfaction

4.14

Use

Not to use the Premises:

4.14.1

for any purpose which causes a nuisance to any person or property

4.14.2

for any public auction or public meeting or for any noxious noisy or immoral activity or for residential purposes or

4.14.3

(without prejudice to the preceding paragraphs of this clause) except for the Permitted Use

4.15	Signs aerials etc

4.15.1

Not to erect any pole antenna or other apparatus on the outside of the Premises save for the purpose of the Tenant’s own business communications and the erection of one totem or flagpole for displaying a sign or banner in accordance with the Tenant’s corporate image subject to clause 4.15.3

4.15.2

Not to display any type of sign or advertisement so as to be visible from outside the Premises

4.15.3

Notwithstanding the foregoing the Tenant shall be entitled:-

(a) without the necessity to obtain the Landlord’s consent to exhibit temporary trade signs and promotional posters on the inside of the windows of the Premises or signs which the Tenant is obliged by statutory provision to display; and

(b) subject to the prior written consent of the Landlord (which shall not be unreasonably withheld or delayed) to exhibit its usual trading name or sign in conformity with the Tenant’s national or corporate identity from time to time on a location (previously approved by the Landlord) on the exterior of the Premises

4.16	Dealings with the lease

4.16.1

In clause 4.16 any reference to a transfer includes an assignment

4.16.2

Not to transfer mortgage charge hold on trust for another underlet or otherwise part with possession of part only (as opposed to the whole) of the Premises nor agree to do so

4.16.3

Not to transfer hold on trust for another underlet or otherwise part with possession of the whole of the Premises or to agree to do so except that the Tenant may transfer or underlet the whole of the Premises if before the transfer or underletting is completed the Tenant complies with the conditions described in clause 4.16.4 or clause 4.16.5 as applicable

(Assignment)

4.16.4

The conditions (which are specified for the purposes of section 19(1A) of the Landlord and Tenant Act 1927 and which operate without prejudice to the Landlord's right to withhold consent on any reasonable ground) applying to a transfer of the whole of the Premises are:

(a)	that the Tenant enters into an authorised guarantee agreement as defined in section 16 of the Landlord and Tenant (Covenants) Act 1995 with the Landlord in a form which the Landlord reasonably requires and

if it is reasonable in the circumstances that any guarantor of the Tenant's obligations guarantees to the Landlord that the Tenant will comply with the authorised guarantee agreement in a form which the Landlord reasonably requires Provided Always that the obligations of the Guarantor (here meaning WLG INC) under this clause are limited to a sum no greater than three times the Rent payable at the date the authorised guarantee agreement is enforced by the Landlord and

(c)	that subject as provided in clause 4.16.4(d) and if the Landlord so reasonably requires the proposed assignee procures the following:

(i)	(that if the proposed assignee is a limited company) an additional guarantor or guarantors (but not more than two) approved by the Landlord (who shall act reasonably in giving its approval) in the terms contained in schedule 4;

(ii)	a deposit with the Landlord of an amount in cleared funds equal to half of the then current yearly rent first reserved by this lease and an amount equal to VAT on that amount on terms which the Landlord reasonably requires

(d)	if the proposed transfer is to a Group Company and

(i)	if the Tenant's obligations or any of them are guaranteed by another Group Company that such Group Company covenants with the Landlord in the terms contained in schedule 4 or

(ii)	whether or not clause 4.16.4(a)(i) applies if the Tenant's obligations or any of them are secured by a security deposit the proposed transferee procures a deposit with the Landlord of the amount and on terms described in clause 4.16.4(c)(ii) and

that the Landlord’s consent which will not be unreasonably withheld is obtained to and within three months before the transfer

(Underletting)

4.16.5

Not to underlet the whole of the Premises without the consent of the Landlord (which consent shall not be unreasonably withheld) except:

(a)	to a person who has covenanted with the Landlord:

(i)	to observe the Tenant's obligations in the Lease (other than the payment of rents)

(ii)	not to transfer the Premises without the Landlord's consent (which shall not be unreasonably withheld if the conditions which are referred to in clause 4.16.4 are first satisfied) and

not to transfer or underlet part of the Premises or otherwise part with possession or share the occupation of the Premises or any part of them

by reserving as a yearly rent without payment of a fine or premium an amount equal to the then open market rack rental value of the Premises and to be payable by equal quarterly instalments in advance on the usual quarter days and by reserving as additional rents amounts equal to and payable at the same times as the other rents reserved by this lease

by a form of underlease (which does not express any sum to be payable by reference to a percentage or proportion of the rent or any other sum payable under this lease but which requires it to be payable and assessed in accordance with the same principles as are required by this lease) to be approved by the Landlord such approval not to be unreasonably withheld

(d)	by a form of underlease which requires:

(i)	the principal rent reserved by it to be reviewed upwards only at the Review Dates which will occur during the sub-term in accordance with the same principles which apply to rent review under this lease

(ii)	the underlessee to observe the Tenant's obligations (other than the obligation to pay rents) under this lease and containing:

a condition for re-entry by the underlessor on breach of any obligation by the underlessee

a qualified covenant not to transfer the whole of the Premises (subject to prior compliance with conditions as set out in clause 4.16.4) and an unqualified covenant not to transfer part of the Premises or to underlet or otherwise part with possession or share the occupation of the Premises or any part of them

an agreement excluding sections 24 to 28 inclusive of the Landlord and Tenant Act 1954 in relation to the underlease and

(e)	with the Landlord's consent issued within three months before completion of the underletting which consent (subject to compliance with the foregoing conditions precedent) shall not be unreasonably withheld

4.16.6

To use reasonable endeavours to enforce the observance by every underlessee of the provisions of the underlease and not expressly or impliedly to waive any breach of them nor (without the prior approval of the Landlord such approval not to be unreasonably withheld by reference to the terms of this Lease) to vary the terms of any underlease

4.16.7

Not to rely upon or use in evidence on any review of rent under this lease any reviewed rent payable under an underlease unless the Landlord acting reasonably has previously approved:-

(a) the reviewed rent payable under such underlease; or

(b) if the rent review is to be determined by an independent person the appointment of such person

PROVIDED THAT the Tenant shall procure that in any determination by such independent person any reasonable and proper representations which the Landlord may wish to make in relation to the rent review are duly submitted to the independent person and to provide the Landlord promptly when the same are available with copies of any representations made on the Tenant's or the underlessee's behalf in relation to the rent review

(Sharing occupation)

4.16.8

Not to part with or share the occupation of the Premises or any part of them except that the Tenant may share occupation with or part with possession to a company which is but only for so long as it remains a Group Company provided the Tenant does not grant the company sharing occupation exclusive possession nor create any relationship of landlord and tenant nor otherwise transfer or create a legal estate and the Tenant shall notify the Landlord of the identity of each company in occupation

4.17	Notifying Landlord of dealings with the lease

4.17.1

Within one month after any disposition or devolution of this lease or of any estate or interest in or derived out of it to give the Landlord notice of the relevant transaction with a certified copy of the relevant document and to pay the Landlord a fair and reasonable fee of not less than twenty five pounds for registering each notice

4.17.2

To notify the Landlord of particulars of the determination of every rent review under any underlease of the Premises within one month after the date of determination

4.18	Payment of cost of notices consents etc

To pay the Landlord within 7 days of written demand all reasonable and proper expenses (including bailiffs' and consultants' fees) incurred by it in connection with:

4.18.1

the preparation and service of a notice under section 146 Law of Property Act 1925 or in proper contemplation of any proceedings under section 146 or 147 of that Act notwithstanding that forfeiture is avoided otherwise than by relief granted by the court

4.18.2

every step taken during or within three months after the expiry of the Term in connection with the enforcement of the Tenant's obligations including the service or proposed service of all notices and schedules of dilapidations served within 3 months of the expiry of the Term and reasonable consultants' fees incurred in monitoring any action taken to remedy any breach of the Tenant's obligations PROVIDED THAT schedules of dilapidations shall be served no more frequently than once every three years during the Term and

4.18.3

every application for consent or approval under this lease even if the application is withdrawn or properly refused except where consent is unreasonably withheld or delayed

4.19	Installing machinery in the Premises

4.19.1

No plant or machinery shall be installed or operated in the Premises and nothing shall be done or omitted in them which may cause any nuisance to nearby property or persons outside the Premises (subject always to the proviso at clause 4.14)

4.20	Obstruction/overloading

4.20.1

Not to obstruct:

(a)	access to nearby property nor exercise any of the rights granted by this lease in a way which causes a nuisance

(b)	any means of escape

(c)	or discharge any deleterious matter into

(i)	any conduit serving the Premises and to the extent they lie within the Premises to keep them clear and functioning properly or

(ii)	any Service Media

4.20.2

or stop up or obscure any openings of the Premises

4.20.3

any notice erected on the Premises including any erected by the Landlord in accordance with its powers under this lease

nor to overload or cause undue strain to the Premises or the Service Media

4.21	Complying with Planning Law and compensation

4.21.1

Not without the Landlord's consent (such consent not to be unreasonably withheld or delayed) to apply for planning permission relating to the Premises PROVIDED THAT no such consent shall be required where consent has already been given (or is not actually required) for the subject matter of such application under other provisions of this Lease

4.21.2

Not to implement any planning permission before the Landlord acting reasonably and expeditiously has acknowledged that its terms are acceptable and

4.21.3

Unless the Landlord directs otherwise to complete before the expiry of the Term all works on the Premises required as a condition of any planning permission implemented by the Tenant or by any person claiming under or through it

4.22	Indemnifying the Landlord

To indemnify the Landlord against all consequences of any breach of any of the Tenant's obligations under this lease (including all costs reasonably incurred by the Landlord in an attempt to mitigate any such breach)

4.23	Notifying defects in the Premises

4.23.1

To notify the Landlord as soon as reasonably practicable about any defect in the Premises which becomes known to the Tenant and which might give rise to:

(a)	an obligation on the Landlord to do or refrain from doing anything in relation to the Premises or

(b)	any duty of care or the need to discharge such duty imposed by the Defective Premises Act 1972

and always to display such notices as the Landlord may at any time reasonably require to be displayed at the Premises relating to their state of repair and condition pursuant to any relevant Enactment

4.24	Insurance and fire fighting equipment

4.24.1

Not to do or omit anything by which any insurance policy (particulars of which shall have been provided to the Tenant) relating to the Premises or any part thereof becomes void or voidable or by which the rate of premium on such policy may be increased (unless the Tenant agrees to bear the whole of such increase)

4.24.2

To comply with all requirements of the insurers which the Tenant has been notified of and to provide and maintain unobstructed appropriate operational fire fighting equipment and fire notices on the Premises

4.24.3

To notify the Landlord as soon as reasonably practicable of any incidence of an Insured Risk on the Premises and of any other event which ought reasonably to be brought to the insurers' attention

4.24.4

If the Tenant or any person claiming title from it is entitled to the benefit of any insurance of the Premises to cause all money paid under such insurance to be applied in making good the loss or damage for which it was paid

4.24.5

If the whole or any part of the Premises are damaged or destroyed by any of the Insured Risks during the Term and the insurance money under any insurance policy effected by the Landlord is rendered wholly or partially irrecoverable because of some act or default of the Tenant or any person deriving title from it or their respective servants or agents to pay the Landlord within 14 days of demand the whole of the irrecoverable insurance money

4.24.6

If there is any deficiency in any insurance money received by the Landlord in respect of the replacement of any damage or destruction referred to in clause 5.4.3 because the Tenant has failed to comply with its obligations under clause 4.13.3 to pay the Landlord the amount of the deficiency in the insurance money

4.25	Dangerous and contaminative materials

Not to keep produce or use any noise noxious or hazardous material on the Premises nor cause any environmental damage and if there is any breach of that obligation to remove all trace of the material from the affected land and to leave it in a clean and safe condition

4.26	Returning the Premises to the Landlord

At the expiry of the Term to return all keys of the Premises to the Landlord and to remove all chattels and (to the extent the Landlord may reasonably require) tenant's fixtures and to vacate the Premises reinstated and restored and made good in accordance with clause 4.13.5 and in the state of repair and condition otherwise required by this lease and any licences or consents issued pursuant to it under which the Tenant was permitted to carry out alterations to the Premises subject to a liability to reinstate

4.27	Matters affecting the Premises

To comply with all covenants and other matters affecting the Premises as disclosed by the Land Registry title of the Estate as set out in schedule 5 in so far as the same affect the Premises and are still subsisting (save for any charges of a financial nature)

4.28	Electricity sub-station

To maintain to the satisfaction of the Landlord 1.8 metre high steel palisade fencing (with a gateway therein) on the boundaries of the electricity sub-station site and if such maintenance is carried out by the Landlord or others authorised by it in default on the part of the Tenant then the Tenant will reimburse the Landlord on demand with the costs of such maintenance

5	LANDLORD'S OBLIGATIONS

The Landlord agrees with the Tenant:

5.1	Quiet enjoyment

That if the Tenant observes and performs its obligations the Tenant may lawfully and peaceably hold and enjoy the Premises without any lawful interruption by the Landlord or any person rightfully claiming through under or in trust for it by title paramount

5.2	Headlease

The Landlord shall:-

5.2.1

pay the rent reserved by the Headlease as and when it falls due and shall observe and perform the lessee’s covenants in the Headlease (except in so far as the Tenant covenants to do so under this lease)

5.2.2

at the request properly made and at the cost of the Tenant use all reasonable endeavours to enforce the covenants on the part of the superior landlord contained in the Headlease relating to quiet enjoyment and/or to the extent such enforcement can properly be required by the Tenant for purposes connected with the rights granted to the Tenant in this Lease

5.2.3

at the cost of the Tenant seek and use all reasonable endeavours to obtain the consent of any superior landlord where it is required under the Headlease when the Tenant has applied for consent under this Lease

5.3	Insurance

5.3.1

To keep the Premises (except any demountable partitioning window blinds and wall or floor surface coverings not installed by or at the cost of the Landlord and fixtures which are strictly tenant's trade fixtures) insured against the Insured Risks in a sum which in the Landlord's reasonable opinion is their full replacement cost

5.3.2

On request to supply the Tenant (but not more frequently than once in any period of twelve months) with evidence of such insurance and of payment of the most recent premium

5.3.3

If during the Term the Premises (except as aforesaid) including the means of access to the Premises are damaged or destroyed by an Insured Risk and to the extent that payment of the insurance money is not refused because of any act or default of the Tenant or of any person deriving title from the Tenant or their respective servants or agents the Landlord will (subject to clause 6.6) with all due expedience take the necessary steps to obtain any requisite planning permissions and consents and if they are obtained to lay out the insurance money received (except sums for public liability and employer's liability and loss of rent) towards replacing the damaged or destroyed parts of the Premises as soon as reasonably practicable and will make up any deficiencies out of its own resources but:

(a)	the Landlord's obligation to insure does not extend to any alteration or addition referred to in clause 4.13.3 in respect of which the Tenant has failed to comply with that clause

the Landlord shall not be liable to carry out the replacement if it is unable having used reasonable endeavours to obtain every permission and consent necessary to execute the relevant work in which event the Landlord shall subject to clause 5.3.3(c) be entitled to retain all the insurance money received by it and

if the Landlord shall not be liable to carry out the replacement and if the Tenant has complied with clause 4.13.3 the Landlord shall pay the Tenant that proportion of any received insurance money which is referable to any damage or destroyed works of alteration or addition to which clause 4.13.3 relates such proportion to be agreed between the Landlord and the Tenant or if they cannot agree to be determined by a single arbitrator to be appointed by the President of the Royal Institution of Chartered Surveyors on the application of either party

5.3.4

To notify the Tenant of any material change to the risks covered by the policy from time to time

6	OTHER AGREEMENTS AND DECLARATIONS

6.1	Forfeiture and re-entry

Without prejudice to any other remedies and powers available to the Landlord if:

6.1.1

any rent is unpaid for 21 days after becoming payable or

6.1.2

there is any other breach of the Tenant's obligations or

6.1.3

the guarantee by any guarantor of the Tenant's obligations is or becomes wholly or partly unenforceable for any reason or

6.1.4

if the Tenant or the Guarantor of the Tenant's obligations (or if more than one person any one of them):

being a company enters into liquidation whether compulsory or voluntary (except for the purpose of amalgamation or reconstruction) or has a provisional liquidator appointed or suffers a receiver or manager to be appointed (including an administrative receiver) or becomes subject to an administration order or becomes subject to a company voluntary arrangement under Part 1 Insolvency Act 1986 or a scheme of arrangement under section 425 Companies Act 1985

(b)	being a company incorporated outside the United Kingdom is the subject of any proceedings or event analogous to those referred to in this clause in the country of its incorporation or

(c)	being an individual is the subject of a bankruptcy order or of any order or appointment under Part VIII Insolvency Act 1986 relating to individual voluntary arrangements under section 273 or section 286 Insolvency Act 1986 or otherwise becomes bankrupt or insolvent or dies or

(d)	being a company or an individual enters into or makes any proposal to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs

the Landlord may notwithstanding the waiver of any previous right of re-entry re-enter on any part of the Premises and on such re-entry this lease shall absolutely determine but without prejudice to any Landlord's right of action for any prior breach of the Tenant's obligations

6.2	Service of notices

6.2.1

In addition to any other method of service any notice which is served under this lease shall be validly served if it is served in accordance with section 196 Law of Property Act 1925 as amended by the Recorded Delivery Service Act 1962

6.2.2

If the Tenant or any guarantor comprises more than one person it shall be sufficient if notice is served on one of them but a notice duly served on the Tenant shall not need to be served on any guarantor

6.3	Relief from liability to pay rent

If during the Term:

6.3.1

the Premises (other than the Tenant's plant and equipment and trade fixtures) or access to the Premises are damaged or destroyed by any of the Insured Risks so that the Premises are incapable of occupation and use or are no longer accessible for the purposes of the business lawfully carried on at the Premises and

6.3.2

the insurance of the Premises or the payment of any insurance money has not been vitiated by the act or default of the Tenant or of any person deriving title from the Tenant or their respective servants or agents

the rent first reserved by this lease under clauses 3.2.1 and 3.2.5 or a fair proportion of it according to the nature and extent of the damage sustained shall cease to be payable from the date of destruction or damage until whichever is the earlier of the date on which the Premises (other than as aforesaid) are made fit for occupation and use or are accessible again for the purposes of the business lawfully carried on at the Premises and the date of expiry of the period for which insurance of loss of rent is effected (not being less than 3 years) and any dispute about such cessation shall be referred to the award of a single arbitrator to be appointed in default of agreement on the application of the Landlord or the Tenant to the President for the time being of The Royal Institution of Chartered Surveyors in accordance with the Arbitration Act 1996

6.4	Ending of the lease following major damage - Insured Risks

6.4.1

If the Premises are damaged or destroyed by any of the Insured Risks and as a result are substantially unfit for occupation and use for the purposes of the business lawfully carried on at the Premises either the Landlord or the Tenant may subject to the conditions set out in clause 6.4.2 determine this lease

6.4.2

The conditions referred to in clause 6.6.1 are:

(a)	the Tenant may not determine this lease if:

(i)	the Landlord has within 24 months after the date of damage or destruction made a substantial start on site of the works to replace the damaged or destroyed parts of the Premises and will procure that the same are completed within 36 months after the date of damage or destruction or

(ii)	payment of the insurance money is refused because of any act or default of the Tenant or of any person deriving title from the Tenant or their respective servants or agents or

the Tenant owes the Landlord any debt under clauses 4.24.5 or 4.24.6 and

(b)	the Landlord may not determine this lease if the Landlord has within 24 months after the date of damage or destruction made a substantial start on site of the works to replace the damaged or destroyed parts of the Premises or has failed to comply with its obligations contained in clause 5.3.3(b)

(c)	subject to clause 6.6.2(a) the Tenant may determine this lease only by serving the Landlord with not less than one month’s prior notice served at any time after the expiry of 30 months and before the expiry of 35 months from the date of damage or destruction and

(d)	the Landlord may determine this lease only by serving the Tenant with not less than one month’s prior notice served at any time after the expiry of 30 months and before the expiry of 35 months from the date of destruction or damage

6.4.3

With effect from the service of a notice under clauses 6.6.2(c) or 6.6.2(d) the Landlord's obligations under clause 5.4.3 shall cease and on the expiry of the notice this lease shall determine without prejudice to any rights or remedies which may then have accrued in respect of any breach of this lease and the Landlord shall be entitled to retain the insurance money

6.4.4

Time is of the essence of the periods referred to in this clause

6.5	Arbitration fees

The fees of any arbitrator incurred in any arbitration proceedings arising out of this lease may be paid to the arbitrator by the Landlord or by the Tenant notwithstanding any direction or prior agreement as to liability for payment and if either party chooses to do so it shall be entitled to an appropriate repayment by the other party on demand

6.6	Rent review memorandum

As soon as possible after any increase in rent is agreed or determined pursuant to schedule 4 a memorandum recording the increase shall be signed on behalf of the Landlord and the Tenant respectively and exchanged between them (each party to bear their own costs in connection with the preparation and exchange of such memorandum)

6.7	Compensation

Except where any Enactment prohibits the right to compensation being reduced or excluded by agreement neither the Tenant nor any occupier of the Premises shall be entitled on quitting them to claim from the Landlord any compensation under the Landlord and Tenant Act 1954

6.8	Construction (Design and Management) Regulations 2007

6.8.1

In this clause the expression:

"Regulations" means the Construction (Design and Management) Regulations 2007 and any expressions appearing in this clause which are defined in the Regulations have the same meaning and

"relevant work" means any construction work which is undertaken by the Tenant or by a person claiming under it pursuant to an obligation or a right (whether or not requiring the Landlord's consent) under this lease and for the purposes of the Regulations the Tenant irrevocably acknowledges that it and not the Landlord arranges the design carrying out and construction of relevant work

6.8.2

The Tenant irrevocably acknowledges that it will be the only client in respect of any relevant work

6.8.3

Before any relevant work is commenced the Tenant shall make a declaration in accordance with Regulation 4(4) and shall forthwith serve it on the Executive and a copy of it on the Landlord

6.8.4

The Tenant shall comply with its obligations as client in respect of any relevant work

6.8.5

The Tenant shall promptly provide the Landlord with a complete copy of the health and safety file for all relevant work and (no later than the expiry of the Term) the original health and safety file

6.8.6

The provisions of this clause 6.11 shall apply notwithstanding that any consent issued by the Landlord in respect of any relevant work does not refer to the said provisions or to the Regulations

6.9	Jurisdiction

This lease is governed by and construed in accordance with the law of England and the Tenant submits to the exclusive jurisdiction of the English courts and agrees that any process may be served on it by leaving a copy of the relevant document at the Premises and each party to this lease undertakes to notify the others in advance of any change from time to time of such address for service and to maintain an appropriate address at all times

6.10	Overriding lease

If during the Term the Landlord grants a tenancy of the reversion immediately expectant on the determination of this lease pursuant to Section 19 Landlord and Tenant (Covenants) Act 1995 any obligation of the Tenant to obtain the consent of the Landlord under this lease to any dealing shall be deemed to include a further obligation also to obtain the consent of the lessor under such tenancy to such a dealing PROVIDED THAT the terms of any such overriding lease shall be no more materially onerous to the Tenant than the terms of this Lease

6.11	Contamination

The Tenant shall have no liability in respect of contamination or pollution present in the soil, the sub-surface or groundwater at or beneath the Premises to the extent such contamination or pollution was present at the date of this Lease

6.12	Application of Landlord and Tenant (Covenants) Act 1995

This lease is a new tenancy for the purposes of the Landlord and Tenant (Covenants) Act 1995

7	CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

Unless the right of enforcement is expressly provided it is not intended that a third party should have the rights to enforce any term of this lease pursuant to the Contracts (Rights of Third Parties) Act 1999

8	GUARANTEE AND GUARANTOR'S INDEMNITY

The Guarantor at the request of the Tenant and in consideration of the grant of this Lease agrees with the Landlord that during such period (including any period of holding over continuation or extension of the Term whether by any Enactment common law or otherwise) as this Lease is vested in the Tenant:

8.1

all the Tenant's obligations will be performed and that if there is any breach of those obligations (notwithstanding any time or indulgence allowed by the Landlord or compromise neglect or forbearance in enforcing the Tenant's obligations or any refusal by the Landlord to accept tendered rent) the Guarantor will perform the obligations and will on demand and pay the Landlord an amount equal to the rents or other amounts not paid and any loss or any other liability suffered by the Landlord as a result of the breach (and following any non-payment shall pay interest at the Stipulated Rate from the date of demand to the Guarantor until the date of payment) and will otherwise indemnify the Landlord against all consequences arising from the breach

8.2

if any liquidator or other person having power to do so disclaims this Lease or if it is forfeited or if the Tenant ceases to exist (each a "Trigger Event") and if the Landlord notifies the Guarantor within 3 months from and including the date of the Trigger Event that it requires the Guarantor to accept a lease of the Premises for a term calculated from the date of the Trigger Event to the date on which the Term would have expired by the passing of time and at the same rents and subject to the same obligations and provisions (except that the Guarantor shall not be required to procure that any other person is made party to the lease as guarantor) as are reserved by and contained in this Lease immediately before the Trigger Event and with coincidental Review Dates (the said new lease and the rights and liabilities under it to take effect as from the date of the Trigger Event) the Guarantor shall immediately accept such lease accordingly and execute and deliver to the Landlord a counterpart of it and indemnify the Landlord upon demand against the costs so incurred

8.3	the Guarantor's obligations under this clause shall not be affected by:

8.3.1

any variation or waiver of the terms of this Lease or any of them agreed between the Landlord and the Tenant (provided that the Guarantor’s obligations shall not thereby increase) or

8.3.2

any partial surrender of this Lease (and the Guarantor's liability shall continue but only in respect of the Tenant's continuing obligations) or

8.3.3

any legal limitation immunity disability incapacity insolvency or the winding-up of the Tenant or

8.3.4

(without limitation to the foregoing) any other act by which but for this provision the Guarantor would have been discharged or released (whether in whole or in part) from liability

or any combination of any two or more of such matters

8.4

if a Trigger Event occurs and for any reason the Landlord does not require the Guarantor to accept a new lease of the Premises the Guarantor shall pay the Landlord on demand (in addition to any other loss damage costs charges expenses or other liability which the Guarantor may be required to make good and without prejudice to any other rights of the Landlord) such demand to be made within three months from and including the date of the Trigger Event an amount equal to the rents which would have been payable under this Lease but for the Trigger Event (so far as such rents do not otherwise continue to be payable) for the period commencing on the date of the Trigger Event and ending on the earlier of the first anniversary of the Trigger Event and any date upon which rent is first payable for the whole of the Premises on a reletting of them all the date upon which the Premises are occupied whether pursuant to a lease or other form of letting document

8.5

without prejudice to the rights of the Landlord against the Tenant the Guarantor shall be a principal obligor in respect of its obligations under this clause and not merely a surety and accordingly the Guarantor shall not be discharged nor shall its obligations be affected by any act or thing or means whatsoever by which its obligations would have been discharged if it had not been a primary obligor

8.6	the Guarantor shall pay all charges (including legal and other costs) on a full indemnity basis incurred by the Landlord in relation to the enforcement of this guarantee and indemnity

8.7	the Landlord may at its option enforce the Guarantor's obligations without having first either enforced the Tenant's obligations or pursued any other rights which the Landlord may have obtained in relation to this Lease

8.8	the Guarantor shall not be entitled to participate in any security held by the Landlord for the Tenant's obligations or to any right of subrogation in respect of any such security until all the Tenant's and the Guarantor's obligations have been fully and unconditionally complied with

8.8.1

the Guarantor shall not claim in any liquidation bankruptcy composition or scheme of arrangement of the Tenant in competition with the Landlord and if and to the extent that it receives the same shall remit to (and until remission shall hold in trust for) the Landlord all money received from any liquidator trustee or receiver or out of any composition or arrangement or from any supervisor until all the Tenant's and Guarantor's obligations have been fully and unconditionally complied with and

8.8.2

this guarantee and indemnity shall enure for the benefit of the Landlord's successors in title under this Lease without the necessity for any assignment

IN WITNESS whereof this deed has been executed by the parties hereto and is intended to be and is hereby delivered on the date first above written

SCHEDULE 1

(The Premises)

The land and buildings shown delineated and edged red on the Plan and registered at the Land Registry under Title No GM946124

SCHEDULE 2

(Exceptions and reservations)

The following rights and easements are reserved out of the Property unto the Landlord and the occupiers of any adjoining or neighbouring land and all other persons authorised by the Landlord:

1.	The right at any time but (except in emergency) after giving reasonable prior notice to enter (or in an emergency or after the giving of reasonable prior notice during the Tenant’s absence to break and enter) the Property in order to:

a.	inspect or view the condition of the Property;

b.	carry out work upon any adjacent premises; and

c.	to carry out any repairs or other work which the Landlord must or may carry out under the provisions of this Lease or to do any other thing which under the said provisions the Landlord may do

A right of way at all times and for the purposes with or without vehicles of any description over and along the Road and the right after giving reasonable notice being not less than 10 working days written notice to make connections with and construct access roads into such Road and all such parts of the Property as may separate the adjoining land comprised in title number GM732033 and such Road at their most convenient or practical point or elsewhere as may be agreed provided that the Landlord or those authorised by it shall have the right to enter upon so much of the Property as may be necessary for the purpose of connecting up and maintaining such roads causing as little damage and inconvenience as possible and making good any damage caused thereby

The right after giving reasonable notice being not less than 10 working days written notice to enter upon so much of the Property as may be necessary for the purposes of laying pipes wires cables ducts and other conducting media and apparatus for the supply of services (“Service Installations”) to the adjoining land comprised in title number GM732033 and making connections thereto (causing as little damage and inconvenience as possible and making good any damage caused thereby) and to the free and uninterrupted passage of water soil gas electricity and telephone and any other services to and from all parts of the adjoining land comprised in title number GM732033 through any Service Installations which are now or may hereafter during the Term be in or under the Property

The right and liberty at any time hereafter during the Term to erect and maintain on any part of the adjoining land comprised in title number GM732033 any buildings and other erection of such height or extent as the Landlord may think fit notwithstanding that the access of light and air over the Property to any window or other opening in any building erected thereon may by such building or erection so erected by wholly or partially obstructed prejudiced reduced or interfered with

5.	All other rights and easements as may be required during the Term to enable the Landlord to construct any building or erection on the adjoining land comprised in title number GM732033

6.	All other rights easements and quasi-easements appurtenant to or capable of benefiting the adjoining land comprised in title number GM732033

All necessary rights over the Property to Norweb Plc pursuant to its lease of the electricity sub-station dated 9 January 1997 and all necessary rights over the Property in order for the Landlord to comply with the covenants on the part of the Landlord in the said Lease to Norweb Plc and to enable it to enforce the covenants on the part of the tenant in the said Lease

SCHEDULE 3

(Rent and Rent Review)

1	In this schedule the following expressions have the respective specified meanings:

"Current Rent" means the amount of the yearly rent first reserved by this lease payable immediately before each of the Review Dates

"Review Dates" means:

the Rent Review Dates specified in the Particulars and

any date so stipulated by virtue of paragraph 7

"Revised Rent" means the yearly open market rental value which might reasonably be expected to be payable following the expiry of any period at the beginning of the term which might be negotiated in the open market for the purposes of fitting out during which no rent or a concessionary rent is payable (and on the assumption that the lessee has had the benefit of such rent free or concessionary rent period) if the Premises had been let in the open market by a willing lessor to a willing lessee with vacant possession on the relevant Review Date without fine or premium for a term equivalent to the Term computed from the Review Date and otherwise upon the provisions (save as to the amount of the rent first reserved by this lease but including the provisions for rent review at the second and fifth years) contained in this lease and on the assumption if not a fact that the said provisions have been fully complied with and on the further assumptions that:

the Permitted Use and the Premises comply with Planning Law and every other Enactment and that the lessee may lawfully implement and carry on the Permitted Use

the Premises are ready to receive the fitting out works of the willing lessee

no work has been carried out to the Premises which has diminished their rental value

(d)

in case the Premises or any part thereof have been destroyed or damaged they have been fully restored

but disregarding any effect on rent of:

the fact that the Tenant or any lawful underlessee or other lawful occupier or their respective predecessors in title has been or is in occupation of the Premises

any goodwill attached to the Premises by the carrying on in them of the business of the Tenant or any lawful underlessee or their respective predecessors in title or other lawful occupier

any works carried out to the Premises during the Term by the Tenant or any permitted underlessee in either case at its own expense in pursuance of a licence granted by the Landlord (where necessary) and otherwise than in pursuance of any obligation to the Landlord (but not an obligation arising out of or contained in any licence for alterations);

(iv)

any estimate of open market rental value made for the purposes of insuring loss of rent

"Review Surveyor" means an independent chartered surveyor appointed pursuant to paragraph 5 and if he is to be nominated by or on behalf of the President of the Royal Institution of Chartered Surveyors the President shall be requested to nominate an independent chartered surveyor having not less than ten years practice next before the date of his appointment and recent substantial experience in the letting and valuation of premises of a similar character and quality to those of the Premises and who is a partner or director of a leading firm or company of surveyors having specialist market and valuation knowledge of such premises

The yearly rent first reserved and payable under this Lease for each of the first two years of the Term is £100,170 (one hundred thousand one hundred and seventy pounds) The Tenant acknowledges that the open market rental value of the Premises at the date hereof is £200,340 per annum, and that the parties have agreed to apply one year’s rent free by reducing the first two years’ rent

3	The yearly rent first reserved and payable from the first Review Date until the second Review Date, and from the Second Review Date until the expiry of the Term shall be the higher of:

3.1

the Current Rent; and

3.2

the Revised Rent

4	If the Landlord and the Tenant shall not have agreed the Revised Rent by the date three months before each of the Review Dates it shall (without prejudice to the ability of the Landlord and the Tenant to agree it at any time) be assessed as follows:

4.1

the Review Surveyor shall (in the case of agreement about his appointment) be appointed by the Landlord or the Tenant to assess the Revised Rent or (in the absence of agreement at any time about his appointment) be nominated to assess the Revised Rent by or on behalf of the President for the time being of The Royal Institution of Chartered Surveyors on the application of the Landlord or the Tenant;

4.2

the Review Surveyor shall act as an expert; and shall be required:

4.2.1

to give written notice to the Landlord and the Tenant inviting each of them to submit to him within such time limits as he shall reasonably stipulate a proposal for the Revised Rent supported by any or all of:

a statement of reasons;

a professional rental valuation;