UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  FORM 10-Q  xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2009  or  oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____  Commission File Number: 0-51105


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|ALCO, INC.                                            
|(Exact name of registrant as specified in its charter)




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|Nevada                                                         | 11-3644700                          
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)




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|Suite 501, Bank of America Tower
12 Harcourt Road, Central
Hong Kong
|(Address of principal executive offices)                            




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|852-2521-0373                                       
|(Registrants telephone number, including area code)




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|None                                                                              
|(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                      Yes x   No o  Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                            N/A  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


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|Large accelerated filer
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|Non-accelerated filer
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(Do not check if a smaller reporting company) | Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No x  1      APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o  No o  APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.  As of September 30, 2009, there were 10,150,000 shares of the registrants common stock, $0.001 par value, outstanding   TABLE OF CONTENTS PART 1 - FINANCIAL INFORMATION 3 ITEM 1.  FINANCIAL STATEMENTS 3 CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 4 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 20085 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 6 STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 20087 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2008 9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 10 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25 ITEM 4(T). CONTROLS AND PROCEDURES 26 PART II - OTHER INFORMATION 27 ITEM 1. LEGAL PROCEEDINGS 27 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 27 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 27 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 27 ITEM 5. OTHER INFORMATION 27 ITEM 6. EXHIBITS 28    2     PART 1 - FINANCIAL INFORMATION    ITEM 1.  FINANCIAL STATEMENTS  The consolidated financial statements of ALCO, Inc. and subsidiaries (collectively, the "Company"), included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission.  Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the Company as included in the Company's Form 10-K for the year ended December 31, 2008.   3     ALCO, INC  CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 September 30, 2009December 31, 2008(unaudited)ASSETSCurrent Assets:Cash and cash equivalents (Note 3)$6,767,742$5,564,247Commissions receivable, net (Note 5)689,925360,757Enrolment fee receivable1,499699Total current assets7,459,1665,925,703Property, plant and equipment, net (Note 6)107,136128,934Other assets:Deposit and prepayments69,93971,046Restricted Cash (Note 4)335,6841,444,178Equity investment (Note 7)368,694143,621Other receivable473,689436,648Total other assets1,248,0062,095,493Total Assets$8,814,308$8,150,130LIABILITIESCurrent Liabilities:Trade accounts payable594,7221,425,946Claim payable32,51799,652Other payable97,065208,293Accrued expenses5,07558,022Due to directors (Note 9)15,09115,496Due to Minority shareholders (Note 8)-41,025Income tax payable275,082405Deferred revenue5,4171,917Current portion of obligation from Hire Purchase lease (Note 10)2,5342,342Total Current Liabilities1,027,5031,853,098Long term portion of obligation from hire purchases lease (Note 10)1,3593,284Commitments and contingencies (Note 15)--Total Liabilities1,028,8621,856,382EQUITYALCO, Inc. shareholders' equity:Preferred stock, par value $0.01, 5,000,000 shares authorized;no shares issued and outstanding--Common stock, par value $0.001, 50,000,000 shares authorized;10,150,000 shares issued and outstanding (Note 14)10,15010,150Additional Paid-in capital60,36360,363Subscription receivable(192)(192)Accumulated other comprehensive income122,102(5,943)Retained earnings7,507,1386,200,607Total ALCO, Inc. shareholders' equity7,699,5616,264,985Noncontrolling interest85,88528,763Total equity7,785,4466,293,748Total Liabilities and Equity$8,814,308$8,150,130See Notes to Financial Statements  4     ALCO, INC  CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) Three Months Ended
September 30,Nine Months Ended
September 30,2009200820092008RevenuesCommission income$1,320,181$1,091,367$3,616,316$3,410,066Consulting income21,50065,444115,882126,360Website advertising3,5003,50010,50013,583Enrollment fee income1,6414,0142,0946,181Total revenues1,346,8221,164,3253,744,7923,556,190Operating ExpensesSalaries401,558342,5641,219,2881,042,016Travel expenses65,78384,812180,923237,389Rents121,303123,483366,522358,485Bad debt expenses---12,507Depreciation8,6418,25525,81722,949Exchange loss4,8322,23313,6973,328Other general and administrative90,46699,481340,913359,644Total Operating Expenses692,583660,8282,147,1602,036,318Income from Operations654,239503,4971,597,6321,519,872Other Income (Expense)Interest income93812,8674,25651,607Other Income14,0358,15229,50527,285Investment income (Note 7)2,543-7,259-Interest expense(92)(156)(322)(515)Total Other Income17,42420,86340,69878,377Income before provision forIncome Taxes and Noncontrolling Interest671,663524,3601,638,3301,598,249Provision for Income Taxes (Note 12)113,65679,158274,677268,783Net Income558,007445,2021,363,6531,329,466Less: Net income attributable tothe noncontrolling interest(24,411)(14,042)(57,122)(40,010)Net Income attributable to ALCO, Inc.533,596431,160$1,306,531$1,289,456Basic and Fully Diluted Earnings per ShareNet income attributable to ALCO, Inccommon shareholders0.050.04$0.13$0.13Weighted average shares outstanding10,150,00010,150,00010,150,00010,150,000See Notes to Financial Statements   5     ALCO, INC  CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)


| |                                                    |  |   |                   |   |           | 
| | -------------------------------------------------- |  | - | ----------------- | - | --------- | 
| |                                                    |  |   | Nine Months Ended |  
| |                                                    |  |   | September 30,     |  
| |                                                    |  |   | 2009              |   | 2008      | 
| | Operating Activities                               |  |   |                   |   |           | 
| | Net income                                         |  | $ | 1,363,653         | $ | 1,329,466 | 
| | Adjustments to reconcile net income to             |  |   |                   |   |           | 
| | net cash provided by operating activities:         |  |   |                   |   |           | 
| | Depreciation                                       |  |   | 25,817            |   | 22,949    | 
| | Fixed asset written off                            |  |   | 119               |   | 64        | 
| | Changes in operating assets and liabilities:       |  |   |                   |   |           | 
| | (Increase)/Decrease in commission receivable (net) |  |   | (329,168)         |   | (81,291)  | 
| | (Increase)/Decrease in restricted cash             |  |   | 1,108,494         |   | (210,321) | 
| | (Increase)/Decrease in enrolment fee receivable    |  |   | (800)             |   | 591       | 
| | (Increase)/Decrease in deposit and prepayment      |  |   | 1,107             |   | 14,596    | 
| | (Increase)/Decrease in other receivable            |  |   | (37,041)          |   | (422,398) | 
| | Increase/(Decrease) in accounts payable            |  |   | (831,224)         |   | 435,710   | 
| | Increase/(Decrease) in claims payable              |  |   | (67,135)          |   | 14,260    | 
| | Increase/(Decrease) in other payable               |  |   | (111,228)         |   | (49,066)  | 
| | Increase/(Decrease) in accrued expenses            |  |   | (52,947)          |   | (38,882)  | 
| | Increase/(Decrease) in deferred income             |  |   | 3,500             |   | 5,417     | 
| | Increase/(Decrease) in income tax payable          |  |   | 274,677           |   | 268,783   | 
| | Net cash provided by operating activities          |  |   | 1,347,824         |   | 1,289,878 | 
| |                                                    |  |   |                   |   |           | 
| | Investing Activities                               |  |   |                   |   |           | 
| | Purchase of fixed assets                           |  |   | (4,138)           |   | (86,905)  | 
| | Purchase of equity investment                      |  |   | (97,028)          |   | -         | 
| | Net cash (used) by investing activities            |  |   | (101,166)         |   | (86,905)  | 
| |                                                    |  |   |                   |   |           | 
| | Financing Activities                               |  |   |                   |   |           | 
| | Loan of amount due to director                     |  |   | -                 |   | 550       | 
| | Repayment of obligations under finance leases      |  |   | (1,733)           |   | (1,540)   | 
| | Repayment of amount due to minority shareholders   |  |   | (41,025)          |   | (41,025)  | 
| | Repayment of amount due to director                |  |   | (405)             |   | -         | 
| | Net cash (used) by financing activities            |  |   | (43,163)          |   | (42,015)  | 
| |                                                    |  |   |                   |   |           | 
| | Increase in cash                                   |  |   | 1,203,495         |   | 1,160,958 | 
| |                                                    |  |   |                   |   |           | 
| | Cash at beginning of period                        |  |   | 5,564,247         |   | 4,341,015 | 
| | Cash at end of period                              |  | $ | 6,767,742         | $ | 5,501,973 | 
| |                                                    |  |   |                   |   |           | 
| | Supplemental Disclosures of Cash Flow Information: |  |   |                   |   |           | 
| | Cash paid / (receive) during year for:             |  |   |                   |   |           | 
| | Interest                                           |  | $ | 322               | $ | 515       | 
| | Income taxes                                       |  | $ | -                 | $ | -         | 
| |                                                    |  |   |                   |   |           | 
| | See Notes to Financial Statements                  | 

6





ALCO, INC  STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED) Three Months Ended September 30,Nine Months Ended September 30,2009200820092008Net Income$558,007$445,202$1,363,653$1,329,466Other comprehensive incomeUnrealized holding gain on available-for-sale securities99,353-128,045-Comprehensive Income657,360445,2021,491,6981,329,466Comprehensive income attributable to the noncontrolling interest(24,411)(14,042)(57,122)(40,010)Comprehensive Income attributable to ALCO, Inc.632,949$431,160$1,434,576$1,289,456


7


ALCO, INC  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 (UNAUDITED)


|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|------------------------------------- | - | --------- | ------------- | --------- | ------------- | ---------------------- | ----------- | ------- | ------------ | -------------- | - | ------- | ---------- | -------- | - | ------
|                                      |   |           |               |           |               | ALCO, Inc Shareholders |             |        
|                                      |   |           |               |           |               |                        | Accumulated |         |              |                |   |         |            |         
|                                      |   |           |               |           |               |                        |             | Other   |              |                |   |         |            |          |   |       
|                                      |   |           | Comprehensive | Retained  | Comprehensive | Common                 |             | Paid-in | Subscription | Noncontrolling
|                                      |   | Total     |               | Income    |               | Earnings               |             | Income  |              | Stock          |   | Capital | Receivable | Interest
|Balance at December 31, 2008          | $ | 6,293,748 | $             | -         | $             | 6,200,607              | $           | (5,943) | $            | 10,150         | $ | 60,363  | $          | (192)    | $ | 28,763
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|Comprehensive income:                 |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|Net income (loss)                     |   | 1,363,653 |               | 1,363,653 |               | 1,306,531              |             |         |              |                |   |         |            |          |   | 57,122
|Other comprehensive income            |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|Unrealized holding gain on securities |   | 128,045   |               | 128,045   |               |                        |             | 128,045 |              |                |   |         |            |          |   |       
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|Comprehensive income                  |   | 1,491,698 | $             | 1,491,698 |               |                        |             |         |              |                |   |         |            |          |   |       
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|Dividend paid                         |   | -         |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       
|Balance at September 30, 2009         | $ | 7,785,446 |               |           | $             | 7,507,138              | $           | 122,102 | $            | 10,150         | $ | 60,363  |            | (192)    | $ | 85,885
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |       




8


ALCO, INC  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2008 (AUDITED)


|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|------------------------------------- | - | --------- | ------------- | --------- | ------------- | ---------------------- | ----------- | ------- | ------------ | -------------- | - | ------- | ---------- | -------- | - | --------
|                                      |   |           |               |           |               | ALCO, Inc Shareholders |             |        
|                                      |   |           |               |           |               |                        | Accumulated |         |              |                |   |         |            |         
|                                      |   |           |               |           |               |                        |             | Other   |              |                |   |         |            |          |   |         
|                                      |   |           | Comprehensive | Retained  | Comprehensive | Common                 |             | Paid-in | Subscription | Noncontrolling
|                                      |   | Total     |               | Income    |               | Earnings               |             | Income  |              | Stock          |   | Capital | Receivable | Interest
|Balance at December 31, 2007          | $ | 4,654,917 | $             | -         | $             | 4,572,024              | $           | -       | $            | 10,150         | $ | 60,363  | $          | (192)    | $ | 12,572  
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|Comprehensive income:                 |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|Net income (loss)                     |   | 1,685,799 |               | 1,685,799 |               | 1,628,583              |             |         |              |                |   |         |            |          |   | 57,216  
|Other comprehensive income            |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|Unrealized holding loss on securities |   | (5,943)   |               | (5,943)   |               |                        |             | (5,943) |              |                |   |         |            |          |   |         
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|Comprehensive income                  |   | 1,679,856 | $             | 1,679,856 |               |                        |             |         |              |                |   |         |            |          |   |         
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|Dividend paid                         |   | (41,025)  |               |           |               |                        |             |         |              |                |   |         |            |          |   | (41,025)
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         
|Ending Balance at December 31, 2008   | $ | 6,293,748 |               |           | $             | 6,200,607              | $           | (5,943) | $            | 10,150         | $ | 60,363  |            | (192)    | $ | 28,763  
|                                      |   |           |               |           |               |                        |             |         |              |                |   |         |            |          |   |         




9


ALCO, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 1  ORGANIZATION AND OPERATIONS  Description of Business  ALCO, Inc. (ALCO, we, us, the Company) was incorporated under the laws of the State of Nevada on June 7, 1999 as Seahorse, Inc. and changed its name to Lotus Capital Corp. (Lotus) on September 20, 2004.  The Company changed its name to ALCO, Inc. on February 13, 2006.  The Company is principally engaged in the marine insurance brokerage business in the Asia Pacific region, through its wholly owned subsidiary, AL Marine Holdings (BVI), Ltd., a British Virgin Islands corporation ("AL Marine").  Under the terms of the Agreement for the Share Exchange, Lotus has agreed to acquire all of the issued and outstanding stock of AL Marine and $50,000 in a share exchange transaction, in return for the issuance of 9,766,480 shares of stock of Lotus.  Upon closing under the Agreement for Share Exchange, AL Marine would become a wholly-owned subsidiary of Lotus.  AL Marine is the 100% owner of Andrew Liu and Co., Ltd., a corporation principally engaged in the business of marine insurance brokerage in Asia.  AL Marine owns 60% of Chang An Consultants Ltd., a joint venture with China Changjiang National Shipping Corporation (CSC Group) that serves as a vehicle for the provision of marine insurance brokerage and other marine business services by AL Marine.  AL Marine owns 85% of EdushipAsia Ltd.  In 2005 and 2004, EdushipAsia Ltd was appointed as an exclusive agent by the Institute of Chartered Shipbrokers (UK) (ICS) to set up ICSs first distant learning centre in Shanghai, PRC.  As a result of the Agreement, the transaction was treated for accounting purposes as a capital transaction and reverse merger by the accounting acquirer (AL Marine) and as a reorganization of the accounting acquiree (Lotus).  Accordingly, the financial statements include the following:  n The balance sheet consists of the net assets of the acquirer at historical cost and the net assets of the acquiree at historical cost; and  n The statements of operations include the operations of the acquirer for the years presented and the operations of the acquiree from the date of the merger.  ALCO, Inc. and AL Marine are hereafter referred to as the Company.  Control by Principal Stockholders  The directors, executive officers, their affiliates and related parties own, beneficially and in the aggregate, the majority of the voting power of the outstanding share capital of the Company.  Accordingly, directors, executive officers and their affiliates, if they voted their shares uniformly, would have the ability to control the approval of most corporate actions, including approving significant expenses, increasing the authorized capital stock and the dissolution, merger or sale of the Company's assets.  10     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 2  SIGNIFICANT ACCOUNTING POLICIES  Economic and Political Risks  The Company faces a number of risks and challenges since its assets are located in Hong Kong, a Special Administrative Region of the People's Republic of China ("PRC"), and its revenues are derived from its operations therein.  The PRC is a developing country with an early stage market economic system, overshadowed by the state.  Its political and economic systems are very different from the more developed countries and are in a state of change.  The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States.  Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.  Basis of Presentation  The consolidated financial statements include the accounts of the Company and all its majority-owned subsidiaries which require consolidation.  Inter-company transactions have been eliminated in consolidation.  The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP").  This basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the "Hong Kong Accounting Standard" ("HKAS").  The consolidated financial statements have been prepared in accordance with US GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation SX.  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (which include normal recurring adjustments) considered necessary to present fairly the financial position, results of operations and cash flows at September 30, 2009 and for all periods presented have been made.  Operating results for the nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.  Certain accounting principles, which are stipulated by US GAAP, are not applicable in the HKAS.  The difference between HKAS accounts of the Company and its US GAAP financial statements is immaterial.  The Company maintains its books and accounting records in Hong Kong dollar ("HK$"), which is determined as the functional currency.  Assets and liabilities of the Company are translated at the prevailing exchange rate at each year end.  Contributed capital accounts are translated using the historical rate of exchange when capital is injected.  Income statement accounts are translated at the average rate of exchange during the year.  Translation adjustments arising from the use of different exchange rates from period to period are included in the cumulative translation adjustment account in shareholders' equity.  Gain and losses resulting from foreign currency transactions are included in operations.  The Company has evaluated subsequent events through the date that the financial statements were issued, which was November 16, 2009, the date of the Companys Quarterly Report on Form 10-Q for the period ended September 30, 2009.  Concentration of Credit Risk  Financial instruments which subject the Company to concentrations of credit risk consist principally of accounts receivable and cash.  Exposure to losses on receivables is dependent on each customer's financial condition.  The Company controls its exposure to credit risk through a process of credit approvals, credit limits and monitoring procedures, establishing allowances for anticipated losses.  11     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Use of Estimates  The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period.  Actual results, when ultimately realized could differ from those estimates.  Significant Estimates  Several areas require significant management estimates relating to uncertainties for which it is reasonably possible that there will be a material change in the near term.  The more significant areas requiring the use of management estimates relate to the valuation of accounts receivable and payable, equipment, accrued liabilities, and the useful lives for amortization and depreciation.  Revenue Recognition  Commission revenue is recognized as of the effective date of the insurance policy or the date the customer is billed, whichever is later.  At that date, the earnings process has been completed and the Company can reliably estimate the impact of policy cancellations based upon historical cancellation experience adjusted by known circumstances.  The policy cancellation reserve is periodically evaluated and adjusted as necessary.  Subsequent commission adjustments are recognized upon notification from the insurance companies.  Commission revenues are reported net of commissions paid to sub-brokers.  Fee income is recognized as services are rendered.  Cash and Cash Equivalents  The Company invests idle cash primarily in money market accounts, certificates of deposit and short-term commercial paper.  Money market funds and all highly liquid debt instruments with an original maturity of three months or less are considered cash equivalents.  Commissions and Other Receivables  Commissions and other receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts.  An estimate for doubtful accounts is made when collection of the full amount becomes questionable.  We made allowance for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  We analyze the aging of receivable balances, historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms.  Significant changes in customer concentration or payment terms, deterioration of customer credit-worthiness or weakening in economics trends could have a significant impact on the collectability of receivables and the allowance.  If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances will be made.  Allowances are applied to commissions and other receivables where events or changes in circumstance indicate that the balances may not be collectible.  The identification of doubtful debts requires the use of judgment and estimates as mentioned above.  Where the expectation on or the actual recoverability of commissions and other receivables is different from the original estimate, such difference will impact the carrying value of commissions and other receivables and doubtful debts expenses in the periods in which such estimate is changed or the receivable are collected.  12     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Property, Plant and Equipment  Property, plant and equipment are carried at cost.  The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.  When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in the income statement in the year of disposition.  Depreciation is calculated on a straight-line basis over the estimated useful life of the assets.  The annual percentages applied are:  Motor vehicles 20% Furniture and fixtures 15% Office equipment 15% Leasehold improvements 20%  Accounts Payable and Claims Payable  In its capacity as an insurance agent or broker, the Company collects premiums from customers and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers on behalf of customers.  Unremitted insurance premiums and claims are held in a fiduciary capacity.  The obligation to remit premiums is recorded as accounts payable and the obligation to remit claims and refunds is recorded as claims payable on the balance sheet.  Pension Costs  Mandatory contributions are made to the Hong Kong's Mandatory Provident Fund (MPF), based on a percentage of the employees' basic salaries.  The cost of these payments are charged to the profit and loss accounts as they become payable in accordance with the rule of the MPF Scheme.  The employer contributions vest fully with the employees when contributed into the MPF Scheme.   Income Taxes  Income tax expense is based on reported income before income taxes.  Deferred income taxes reflect the effect of temporary differences between assets and liabilities that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes.  In accordance with the standard "Accounting for Income Taxes, codified within ASC 740 these deferred taxes are measured by applying currently enacted tax laws.  The effective tax rate was 16.5% in 2008 and 2009.  The Company did not provide any current or deferred income tax provision or benefit for any period presented to date because book income is substantially equal to taxable income, with only minor timing differences with regard to the depreciation of fixed assets.  Management has determined that any deferred tax asset or liability is inconsequential, and not material to the financial statements.  13     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Fair Value of Financial Instruments   The Company adopted the standard Fair Value Measurements codified within ASC 820 and effective January 1, 2008.  The provisions of ASC 820 are to be applied prospectively.  ASC 820 clarifies that fair value is an estimate of the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date).  Under ASC 820, fair value measurements are not adjusted for transaction cost.  ASC 820 provides for use of a fair value hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three levels:  Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities  Level 2: Input other than quoted market prices that are observable, either directly or indirectly, and reasonably available.  Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company.  Level 3: Unobservable inputs.  Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability.  An asset or liabilitys level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Availability of observable inputs can vary and is affected by a variety of factors.  The Company uses judgment in determining fair value of assets and liabilities and Level 3 assets and liabilities involve greater judgment than Level 1 and Level 2 assets or liabilities.  Valuation of Long-Lived assets  The Company accounts for impairment of plant and equipment and amortizable intangible assets in accordance with the standard Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of, codified with ASC 360 which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstance that indicate the carrying value of the asset may not be recoverable.  An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the assets (or asset groups) fair value.  Related Party Transactions  The Company rents office space in Hong Kong and quarter in Shanghai from a director and the companies owned by directors of the Company.  The rental payments to them are of the opinion that the agreement was entered into in the normal course of business and on mutually agreed terms.     14     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Foreign Currency and Other Comprehensive Income  The accompanying financial statements are presented in United States (US) dollars.  The functional currency is the Hong Kong dollar (HK$).  The financial statements are translated into US dollars from HK$ at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses.  Capital accounts are translated at their historical exchange rates when the capital transactions occurred.  The Hong Kong Monetary Authority (HKMA), Hong Kong's central bank, maintains a Linked Exchange Rate System since 1983.  The HKMA operates Convertibility Undertakings on both the strong side and the weak side of the Linked Rate of US$1: HK$7.8.  In fact, the exchange rate for HK$ to US dollars has varied by only 100ths during 2009 and 2008.  Thus, the consistent exchange rate used has been 7.80 HK$ per each US dollar.  Since there have been no greater fluctuations in the exchange rate, there is no gain or loss from foreign currency translation and no resulting other comprehensive income or loss.  Foreign currency transactions are those that required settlement in a currency other than HK$.  Gain or loss from foreign currency transactions, or exchange loss, are recognized in income in the period they occur.  Earnings (Loss) Per Share  Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  Since the Companys common stock currently does not trade, the dilutive effect of any warrants or convertible notes outstanding cannot be determined.  Recently Accounting Pronouncements  In June 2009, the Financial Accounting Standards Board (FASB) issued a standard that established the FASB Accounting Standards Codification TM (ASC) and amended the hierarchy of generally accepted accounting principles (GAAP) such that the ASC became the single source of authoritative nongovernmental U.S. GAAP. The ASC did not change current U.S. GAAP, but was intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All previously existing accounting standard documents were superseded and all other accounting literature not included in the ASC is considered non-authoritative. New accounting standards issued subsequent to June 30, 2009 are communicated by the FASB through Accounting Standards Updates (ASUs). For the Company, the ASC was effective July 1, 2009. This standard did not have an impact on the Companys consolidated results of operations or financial condition. However, throughout the notes to the consolidated financial statements references that were previously made to various former authoritative U.S. GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.  In December 2008, the FASB issued an accounting standard regarding a companys disclosures about postretirement benefit plan assets.  This standard requires additional disclosures about plan assets for sponsors of defined benefit pension and postretirement plans including expanded information regarding investment strategies, major categories of plan assets, and concentrations of risk within plan assets. Additionally, this standard requires disclosures similar to those required for fair value measurements and disclosures under ASC 820 with respect to the fair value of plan assets such as the inputs and valuation techniques used to measure fair value and information with respect to classification of plan assets in terms of the hierarchy of the source of information used to determine their value. The disclosures under this standard are required for annual periods ending after December 15, 2009. The Company is currently evaluating the requirements of these additional disclosures.   15     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 2  SIGNIFICANT ACCOUNTING POLICIES (continued)  Recently Accounting Pronouncements (continued)  In April 2009, the FASB issued an accounting standard which modifies the requirements for recognizing other-than-temporarily impaired debt securities and changes the existing impairment model for such securities. The standard also requires additional disclosures for both annual and interim periods with respect to both debt and equity securities. Under the standard, impairment of debt securities will be considered other-than-temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the securitys entire amortized cost basis (even if the entity does not intend to sell). The standard further indicates that, depending on which of the above factor(s) causes the impairment to be considered other-than-temporary, (1) the entire shortfall of the securitys fair value versus its amortized cost basis or (2) only the credit loss portion would be recognized in earnings while the remaining shortfall (if any) would be recorded in other comprehensive income. The standard requires entities to initially apply its provisions to previously other-than-temporarily impaired debt securities existing as of the date of initial adoption by making a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The cumulative-effect adjustment potentially reclassifies the noncredit portion of a previously other-than-temporarily impaired debt security held as of the date of initial adoption from retained earnings to accumulated other comprehensive income. For the Company, this standard was effective beginning April 1, 2009. The adoption of this standard did not have a material impact on the Companys consolidated results of operations or financial condition.  In May 2009, the FASB issued a new accounting standard regarding subsequent events. This standard incorporates into authoritative accounting literature certain guidance that already existed within generally accepted auditing standards, with the requirements concerning recognition and disclosure of subsequent events remaining essentially unchanged. This guidance addresses events which occur after the balance sheet date but before the issuance of financial statements. Under the new standard, as under previous practice, an entity must record the effects of subsequent events that provide evidence about conditions that existed at the balance sheet date and must disclose but not record the effects of subsequent events which provide evidence about conditions that did not exist at the balance sheet date. This standard added an additional required disclosure relative to the date through which subsequent events have been evaluated and whether that is the date on which the financial statements were issued. For the Company, this standard was effective beginning April 1, 2009. The additional disclosures required by this standard are included in Note 1.  In June 2009, the FASB issued a new standard regarding the accounting for transfers of financial assets amending the existing guidance on transfers of financial assets to, among other things, eliminate the qualifying special-purpose entity concept, include a new unit of account definition that must be met for transfers of portions of financial assets to be eligible for sale accounting, clarify and change the derecognition criteria for a transfer to be accounted for as a sale, and require significant additional disclosure. For the Company, this standard is effective for new transfers of financial assets beginning January 1, 2010. Because the Company historically does not have significant transfers of financial assets, the adoption of this standard is not expected to have a material impact on the Companys consolidated results of operations or financial condition.  In August 2009, the FASB issued ASU No. 2009-05, Measuring Liabilities at Fair Value, which provides additional guidance on how companies should measure liabilities at fair value under ASC 820. The ASU clarifies that the quoted price for an identical liability should be used. However, if such information is not available, a entity may use, the quoted price of an identical liability when traded as an asset, quoted prices for similar liabilities or similar liabilities traded as assets, or another valuation technique (such as the market or income approach). The ASU also indicates that the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer and indicates circumstances in which quoted prices for an identical liability or quoted price for an identical liability traded as an asset may be considered level 1 fair value measurements. For the Company, this ASU is effective October 1, 2009. The Company is currently evaluating the impact of this standard, but would not expect it to have a material impact on the Companys consolidated results of operations or financial condition.  16     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 3  CASH  Cash consists of the following:September 30,December 31,20092008Cash on hand$5,783$6,991Cash in Bank  Saving & Checking-
China Construction Bank (Asia)4,216,2243,014,960-
Bank of China4,2535,254-
United Overseas Bank7,5035,657-
Sun Hung Kai Financial45--
Cash in bank  Fixed Deposit2,533,9342,513,385$6,767,742$5,564,247 Cash balances are held principally at one financial institution and are not insured.  The Company believes it mitigates its risk by investing in or through major financial institutions.  Recoverability is dependent upon the performance of the institution.  Although the cash balances are not insured, however, starting in September 2006, cash balances (except accounts with overdraft facilities) are protected by the Deposit Protection Scheme which is maintaining by the Hong Kong Deposit Protection Board, an independent statutory body established under the Deposit Protection Scheme Ordinance (Cap. 581).  Under the scheme, compensation up to a limit of HK$100,000 (approximately US$12,821) will be paid from the scheme to depositor if the bank with which the depositor holds his/her eligible deposits fails.  In addition, on October 14, 2008, the Hong Kong Government announced that they would use the Exchange Fund to guarantee the repayment of all customer deposits held in authorized institutions in Hong Kong, following the principles of the Deposit Protection Scheme.  This action began on October 14, 2008 and will remain in force until the end of 2010.  Note 4  RESTRICTED CASH  Restricted cash are cash balances held by the company, mainly consisting of premiums collected from customers and payable to insurers, and claims received from insurers and payable to policyholders.  When the Company receives a premium from a customer, it debits the lump sum amount into one bank account and establishes a schedule to keep track of the amount of premium payable to the insurer.  At the monthly closing, the Company reclassifies the amount of premium payable to insurers as restricted cash.  Also, when the Company receives a claim on behalf of a policyholder, it debits restricted cash and credits claims payable and other payables, if necessary.  The restricted cash balance for September 30, 2009 and December 31, 2008 are as follows:


|                |   |               |   |             
|--------------- | - | ------------- | - | ------------
|                |   | September 30, |   | December 31,
|                |   | 2009          |   | 2008        
|                |   |               |   |             
|Restricted cash | $ | 335,684       | $ | 1,444,178   

17     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 5  COMMISSIONS RECEIVABLE


|                                                 |   |                    |   |                  
|------------------------------------------------ | - | ------------------ | - | -----------------
|Commissions receivable consist of the following: |   | September 30,
2009 |   | December 31,
2008
|                                                 |   |                    |   |                  
|Commissions receivable                           | $ | 974,557            | $ | 663,649          
|Less: allowances for doubtful accounts           |   | 284,632            |   | 302,892          
|                                                 | $ | 689,925            | $ | 360,757          

Note 6  PROPERTY, PLANT AND EQUIPMENT


|                                                         |   |                    |   |                  
|-------------------------------------------------------- | - | ------------------ | - | -----------------
|Property, Plant and Equipment consists of the following: |   | September 30,
2009 |   | December 31,
2008
|                                                         |   |                    |   |                  
|Furniture and fixtures                                   | $ | 164,605            | $ | 164,403          
|Office equipment                                         |   | 157,173            |   | 153,803          
|Leasehold improvements                                   |   | 97,940             |   | 97,595           
|Motor vehicle                                            |   | 41,787             |   | 41,787           
|                                                         |   | 461,505            |   | 457,588          
|Less: Accumulated depreciation                           |   | 354,369            |   | 328,654          
|                                                         | $ | 107,136            | $ | 128,934          

Depreciation expense for the nine months ended September 30, 2009 was $25,817 and for the year ended December 31, 2008 was $31,456.  Note 7  FAIR VALUE OF INVESTMENTS AND INVESTMENT INCOME  The following are the Companys investments owned and securities sold short by level within the fair value hierarchy at September 30, 2009 and December 31, 2008 are as follows:


|       |   |                    |   |                      |  |         | 
|------ | - | ------------------ | - | -------------------- |  | ------- | 
|Assets |   | Fair value         |   | Fair value Hierarchy
|       |   | September 30, 2009 |   | December 31, 2008    |  |        
|       |   |                    |   |                      |  |        
|Stocks | $ | 368,694            | $ | 143,621              |  | Level 1
|       |   |                    |   |                      |  |        

At September 30, 2009 and December 31, 2008, unrealized gain of $122,102 and loss of $5,943 respectively are related to investments listed in Hong Kong Stock Exchange.


|                                                    |   |                    |   |                  
|--------------------------------------------------- | - | ------------------ | - | -----------------
|                                                    |   | Nine Months Ended  |   | Year Ended       
|Investment Income                                   |   | September 30, 2009 |   | December 31, 2008
|                                                    |   |                    |   |                  
|Dividend from the publicly traded equity securities | $ | 7,259              | $ | 1,008            

18     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 8  DUE TO MINORITY SHAREHOLDERS


|                                              |   |                    |   |                  
|--------------------------------------------- | - | ------------------ | - | -----------------
|Due to shareholders consist of the following: |   | September 30,
2009 |   | December 31,
2008
|                                              |  
|                                              |   |                    |   |                  
|CSC Enterprises Development (HK) Co Ltd       | $ | -                  | $ | 41,025           

Note 9  DUE TO DIRECTORS


|                                           |   |               |   |             
|------------------------------------------ | - | ------------- | - | ------------
|Due to directors consist of the following: |   | September 30, |   | December 31,
|                                           |   | 2009          |   | 2008        
|                                           |   |               |   |             
|Andrew Liu Fu Kang-Traveling Allowance     | $ | 15,091        | $ | 15,496      

Note 10  CAPITAL LEASE  On April 27, 2006, the Company entered into a lease agreement with Hitachi Credit (HK) Ltd.  The related contractual obligations are summarized as follows:


|               |   |                          |   |       |   |      |   |      
|-------------- | - | ------------------------ | - | ----- | - | ---- | - | -----
|               |   | October to
December 2009 |   | 2010  |   | 2011 |   | Total
|               |   |                          |   |       |   |      |   |      
|Payment Due    | $ | 685                      | $ | 2,738 | $ | 685  | $ | 4,108
|Less: Interest |   | 75                       |   | 140   |   | -    |   | 215  
|               |   |                          |   |       |   |      |   |      
|Principle      | $ | 610                      | $ | 2,598 | $ | 685  | $ | 3,893

The term of the lease is 60 months with $228 as its monthly payment.  The leased property was capitalized as office equipment in 2006 by the amount of the total principal, $10,739 and the related depreciation expense was $1,208 in the first nine months of 2009 and 2008.  The principal due within one year is the current portion of long term debt and classified as current liability.  19     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 11  RELATED PARTY TRANSACTION  The Company rents office space in Hong Kong and quarter in Shanghai from companies owned by directors of the Company.  The relevant rent expenses consist of following for the nine months ended:  September 30,LocationLandlord20092008HK Office Room 501 and 502AFortune Ocean Ltd$107,308$107,308HK Office Room 502BFortune Ocean Ltd34,61534,615Shanghai director quarterAndrew Liu Fu Kang23,07723,077Director (Andrew) quarterFirst Pacific Development Ltd15,00015,000$180,000$180,000   Note 12  INCOME TAXES  The Company's effective tax rates for the nine months ended September 30, 2009 and 2008 was 16.5%.  The provisions for income taxes for the nine months ended September 30, 2009 and 2008 are summarized as follows:


| |                 |  |  |  |  |      |         |      |         | 
| | --------------- |  |  |  |  | ---- | ------- | ---- | ------- | 
| | Hong Kong only: |  |  |  |  | 2009 |         | 2008 |        
| |                 |  |  |  |  |      |         |      |         | 
| | Current         |  |  |  |  | $    | 274,677 | $    | 268,783 | 
| | Deferred        |  |  |  |  |      | -       |      | -       | 
| |                 |  |  |  |  | $    | 274,677 | $    | 268,783 | 

20     ALCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2009 (UNAUDITED)  Note 13  OPERATION LEASE  Future minimum lease payments for operating leases for the succeeding years consists of following:


|                                                                |   |                           |   |         |   |        |   |        
|--------------------------------------------------------------- | - | ------------------------- | - | ------- | - | ------ | - | -------
|                                                                |   | 2009 (October  December) |   | 2010    |   | 2011   |   | Total  
|Carmel Hill, Hong Kong (Director Quarter)                       | $ | 34,615                    | $ | 80,770  | $ | -      | $ | 115,385
|Room 1618A, Bank of America Tower, Hong Kong (Hong Kong Office) |   | 6,360                     |   | -       |   | -      |   | 6,360  
|Union Building, Shanghai, China (Shanghai Office)               |   | 9,192                     |   | 36,769  |   | 18,385 |   | 64,346 
|                                                                | $ | 50,167                    | $ | 117,539 | $ | 18,385 | $ | 186,091

The Company has three material operating lease commitments for its facilities.  The initial term of the lease arrangement for Director Quarter is two years beginning July 19, 2008 with a minimum lease commitment of $276,923.  The initial term of the lease arrangement for the Hong Kong Office is two years beginning November 30, 2007 with a minimum lease commitment of $76,323.  For the Shanghai Office, the initial term of the lease is two years beginning July 3, 2009 with a minimum lease commitment of $73,538.  All the lease arrangements mentioned above have no renewal option and rent holiday.   Note 14  COMMON STOCK  During the year ended December 31, 2007, the Company issued 150,000 shares of common stock in reliance upon exemptions from registration under the Securities Act of 1933.  The shares were issued to the Brean Murray, Carret & Co. on or about October 23, 2007, for total consideration of $50,000, or $0.33 per share.  The consideration was made for payment of services valued at $50,000 in conjunction with developing with the Company a program to introduce the Company to institutional investors, providing general financial advice and undertaking specific investment banking transactions and/or advisory assignment.  The shares were issued in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933.   Note 15  COMMITMENTS AND CONTINGENCIES  The Company's business operations exist solely in the PRC and are subject to significant risks not typically associated with companies in North America and Western Europe.  These include risks associated with, among others, the political, economic and legal environments and foreign currency limitations.  The Company's results may thus be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies, laws, regulations, anti-inflationary measures, currency conversion and remittance limitation, and rates and methods of taxation, among other things.   21     ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS  Certain statements in this report, including statements in the following discussion, which are not statements of historical fact, are what are known as forward-looking statements, which are basically statements about the future.  For that reason, these statements involve risk and uncertainty since no one can accurately predict the future.  Words such as plans, intends, will, hopes, seeks, anticipates, expects, and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement.  Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits.  Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10Q and in the Companys other filings with the Securities and Exchange Commission.  No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.   PLAN OF OPERATIONS  Because of the recent worldwide financial turmoil, the volume of international trade is dramatically reduced which has led to declining volumes in the shipping industry.  As a result of the reduced volume of shipping there is excess tonnage supply in the shipping market which has led to a large volume of layup of ships and the likelihood that some poorly funded owners and operators will face severe financial problems.  Declining volumes of shipping and the resulting layup of ships has had an adverse impact on our business.  In order to deal with the current turmoil and uncertainty created by the unique financial and economic climate, our plan for 2009 consists of improvement of our cost competitiveness, enhancement of credit control and marketing function.  In an effort to improve our cost competitiveness, we will review our existing operating processes and procedures to identify areas for improvement and revise them where necessary to ensure improved efficiency and effectiveness.  In order to enhance our credit controls, we are closely monitoring the aging of client premium receivable and aiming to increase the receivable turnover.  For purposes of the enhancement of marketing functions, we intend to allocate more resources to this function such as allotting more manpower and time in promoting the companys business, expanding our market share in the marine insurance business and enhancing the level of service that we provide to our customers.  We do have a plan to hire additional employees in the next twelve months to enhance our marketing and consultancy service functions.  However, this plan will depend largely on the availability of working capital, which we may not have or be able to raise.  Because there is no assurance that working capital will be available to us, there is also no assurance regarding the extent to which we will be able to implement our plan of operations within the foreseeable future.  We do not have any material off-balance sheet arrangements.   22     RESULTS OF OPERATIONS  NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2008 AND THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2008  Revenue  Revenues for the nine months ending September 30, 2009 were $3,744,792, as compared to the revenues of $3,556,190 for the nine months period ended September 30, 2008.  This increase of $188,602 or approximately 5% was mainly due to an increase of commission income partially offset by a decrease of consulting income, website advertising and enrollment fee.  Commission income, which is based on a percentage premium paid by the insured, for the nine months period ended September 30, 2009 was $3,616,316 as compared to $3,410,066 for the same period of 2008.  The increase of commission income $206,250 or approximately 6% was mainly due to the increase of client base as well as insurance call and premium rates in the market.  Consulting income for the nine months period ended September 30, 2009 was $115,882 compared to $126,360 for the comparable period of 2008.  The decrease of consulting income $10,478 or approximately 8% was mainly due to demand of the services decreased.  Website advertising and enrollment fee for the nine months period ended September 30, 2009 were $10,500 and $2,094 as compared to $13,583 and $6,181 for the same period of 2008 respectively.  The decrease of website advertising was mainly due to the decrease of customers demand while the decrease of enrollment fee was mainly due to the decrease of enrollment during the period.  Revenues for the three months ending September 30, 2009 were $1,346,822, as compared to revenues of $1,164,325 for the three months ending September 30, 2008.  This increase of $182,497, or approximately 16%, was mainly due to increases in commission income from the existing and new clients.  Commission income for the three months period ended September 30, 2009 was $1,320,181 as compared to $1,091,367 for the same period of 2008.  The increase of commission income $228,814, or approximately 21%, was mainly due to an increase of insurance premium paid by clients to insurers in relation to advanced, additional and supplementary calls.  Consulting income for the three months period ended September 30, 2009 was $21,500 compared to $65,444 for the comparable period of 2008.  In addition, website advertising and enrollment fee for the three months period ended September 30, 2009 were $3,500 and $1,641 as compared to $3,500 and $4,014 for the same period of 2008 respectively.  Causes for the changes for the three months ended September 30, 2009 and 2008 are same as the causes stated in the nine months ending as the paragraph above.  Net income before tax and noncontrolling interest  Net income before tax and noncontrolling interest for the nine months ending September 30, 2009 was $1,638,330 compared to $1,598,249 for the nine months period ended September 30, 2008.  The increase in pre-tax profit of $40,081, or approximately 3%, was mainly due to an increase in revenues partially offset by a decrease of other income together with an increase in operating expenses during the nine months ended September 30, 2009.  Causes for the revenue increase were discussed in the section of Revenue above while causes for the operating expense increase will be discussed in the section of Operating expenses below.  For the other income, the decrease was mainly due to the decrease in interest income as a result of the fact that low interest rate environment in the money market.  Net income before tax and noncontrolling interest for the three months ending September 30, 2009 was $671,663 compared to $524,360 for the three months period ended September 30, 2008.  The increase in pre-tax profit of $147,303, or approximately 28%, was mainly due to an increase in revenues partially offset by an increase in operating expenses and a decrease in other income during the three months ended September 30, 2009.  Causes for these changes are same as the causes stated in the nine months ending as the paragraph above.  Operating expenses  Operating expenses for the nine months and three months ending September 30, 2009 were $2,147,160 and $692,583, as compared to $2,036,318 and $660,828 for the nine and three months period ended September 30, 2008 respectively.  The increase of $110,842 (or approximately 5%) and $31,755 (or approximately 5%) was mainly due to increases in salary, rents, depreciation and exchange loss, which were partially offset by a reduction in travel expenses, and other general and  23     administrative expenses.  The reasons for the increases and decreases in the major items are as follows:  n Salaries  increased $177,272 or 17% for the nine months ended and $58,994 or 17% for the three months ended September 30, 2009.  The increase in salary expenses was mainly due to increases in pay rates and headcounts. n Rent  increased $8,037 or 2% for the nine months ended and decreased $2,180 or 2% for the three months ended September 30, 2009.  The increase was mainly due to an increase in rental rate.  The decrease was mainly due to a decrease in the rental rate of a staff quarter. n Depreciation  increased $2,868 or 12% for the nine months ended and $386 or 5% for the three months ended September 30, 2009.  The increase was primarily due to the addition of fixed assets during second half of 2008 and the first nine months of 2009. n Exchange loss  increased $10,369 or 312% for the nine months ended and $2,599 or 116% for the three months ended September 30, 2009.  The increase was mainly because of the depreciation of US dollar against HK dollar during 2009. n Travel Expenses  decreased $56,466 or 24% for the nine months ended and $19,029 or 22% for the three months ended September 30, 2009.  The decrease was the result of the imposition of limitations on travel in order to reduce operating expenses. n Other General and Administrative Expenses - decreased $18,731 or 5% for the nine months ended and $9,015 or 9% for the three months ended September 30, 2009.  In general, the decrease was the result of tightening of expenses.  In addition, liaison office at Korea has been closed since August 2009.  LIQUIDITY AND CAPITAL RESOURCES  Cash flow  For the nine months ended September 30, 2009, cash provided by operating activities totaled $1,347,824.  This was primarily due to net income during the period plus an increase in commission receivable, enrolment fee receivable, other receivables, deferred income and income tax payable which was partially offset by a decrease in restricted cash, deposits and prepayments, accounts payable, claims payables, other payables and accrued expenses.  For the nine months ended September 30, 2008, cash provided by operating activities totaled $1,289,879.  This was primarily due to net income during the period plus an increase in commission receivable, restricted cash, other receivables, accounts payable, claims payable, deferred income and income tax payable which was partially offset by a decrease in enrolment fee receivable, deposits and prepayments, other payables and accrued expenses.  Net cash provided by operating activities for the nine months ended September 30, 2009 increased by $57,945, or approximately 4%, as compared to the same period of 2008.  The increase of net cash flow was mainly due to the increase of net income in the nine months ended September 30, 2009 as compared to the same period of 2008, and increase of net changes in operating assets and liabilities.  For the nine months ended September 30, 2009, cash used in investing activities amounted to $101,166.  The use of funds for the nine months period was for the purchase of fixed assets and equity investment for long term investment purpose.  For the same period of 2008, cash used in investing activities amounted to $86,905.  The use of funds was for the purchases of fixed assets.  For the nine months ended September 30, 2009, cash used in finance activities totaled $43,163 which was due to repayment of obligations under finance leases, minority shareholders and amount due to director.  For the same period of 2008, net cash used by financing activities amounted to $42,015 which was due to repayment of obligation under finance leases and amount due to minority shareholders which was offset by a loan of amount due to director.  Assets and liabilities  For the nine months ended September 30, 2009, the Groups balance sheet reflects total assets of $8,814,308 and total liabilities of $1,028,862.  These items increased $664,178 or approximately 8% and decreased $827,520 or approximately 45% respectively when compared to the year ended December 31, 2008.  The increase of total assets was mainly due to an increase of  24     cash and cash equivalents, commission receivable, Equity investment and other receivables.  In addition, the decrease of total liabilities was due to a decrease of trade accounts payable, claim payable, other payable, accrued expenses, and amount due to minority shareholders.  Because the rate of insurance premium paid by clients to insurers was raised, commissions receivable and other receivable significantly increased during the nine months ending September 30, 2009.  On the other hand, trade accounts payable and other payable significantly decreased during the nine months period of 2009 was because of the timing of making payments to insurers.  In addition, because certain claims received from insurers on behalf of clients was paid to clients, the claims payable decreased as compared to the year end of 2008.  As of September 30, 2009, there was $5,417 deferred revenue included in the liabilities.  This item is in relation to the income received in advance for the website advertising.  Furthermore, accrued expenses of $5,075 as of September 30, 2009 significant reduced by $52,947 or approximately 91% from $58,022 as of December 2008.  The reduction was mainly due to repayment of the accrued expenses which were provided for the year of 2008.  In addition, income tax payable as of September 30, 2009 was $275,082.  It increased by $274,677 when compared to $405 as of December 31, 2008.  The increase was mainly due to the provision for income tax which was provided for the first nine months period of 2009.  The Group has bank deposits and cash equivalents of approximately $6,767,742 as of September 30, 2009.  The Company has sufficient funds to satisfy its financial commitments and working capital requirements for the next twelve months.  During the nine months period ended September 30, 2009, the Company had no commitments for capital expenditures or off-balance sheet arrangements, and had lease commitments of $186,091.  OFF BALANCE SHEET ARRANGEMENTS  We do not have any material off-balance sheet arrangements.  RECENT ACCOUNTING PRONOUNCEMENTS  For information about new accounting pronouncements and the potential impact on our Consolidated Financial Statements, see Note 1 of the Notes to Financial Statements in this Form 10-Q and Note 1 of the Notes to Consolidated Financial Statements in our 2008 Form 10-K.    ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Not applicable.    25     ITEM 4(T). CONTROLS AND PROCEDURES  Evaluation of Disclosure Controls and Procedures  The Securities and Exchange Commission defines the term disclosure controls and procedures to mean a company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuers management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.  As of the end of the period covered by this report, The Company's management, with the participation of the chief executive officer and the chief financial officer, carried out an evaluation of the effectiveness of the design and operation of the Company's "disclosure, controls and procedures" (as defined in the Exchange Act Rules 13a-15(3) and 15-d-15(3) as of the end of the period covered by this annual report (the "Evaluation Date").  Based on that evaluation, the chief executive officer and the chief financial officer concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures are designed to provide reasonable assurance of achieving the objectives of timely alerting them to material information required to be included in our periodic SEC reports and of ensuring that such information is recorded, processed, summarized and reported with the time periods specified.  Our chief executive office and chief financial officer also concluded that our disclosure controls and procedures were effective as of September 30, 2009 to provide reasonable assurance of the achievement of these objectives.  Changes in Internal Controls Over Financial Reporting  There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or any other factors during the nine months ended September 30, 2009, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.   26       PART II - OTHER INFORMATION    ITEM 1. LEGAL PROCEEDINGS  None.     ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  None.    ITEM 3. DEFAULTS UPON SENIOR SECURITIES  Not applicable.    ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  Not applicable.    ITEM 5. OTHER INFORMATION  None    27     ITEM 6. EXHIBITS  The following exhibits are filed herewith:  3.1 Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).  3.1(b) Amendment to Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).  3.2 Bylaws (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on January 6, 2005).  10.1 Exclusive representative agreement between ALC and The Strike Club (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 5, 2006).  10.2 Agreement between EduShipAsia Ltd. and the Institute of Chartered Shipbrokers appointing EduShipAsia Ltd. as ICSs exclusive agent in China (herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on June 5, 2006).  10.3 Employment Agreement between Andrew Liu & Company, Ltd. and Andrew Liu.  (Herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on September 14, 2006)  10.4 Employment Agreement between Andrew Liu & Company, Ltd. and John Liu.  (Herein incorporated by reference from the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on September 14, 2006).  31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.      28      SIGNATURES  Pursuant to the requirements 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.  ALCO, INC. (Registrant)    By: /s/ Andrew Liu, CEO and Chairman  Date:  November 16, 2009   By: /s/ John Liu, Director  Date:  November 16, 2009   By: /s/ Colman Au, Chief Financial Officer  Date:  November 16, 2009   29