United States


Securities and Exchange
Commission


Washington, D.C.
20549




FORM 10-Q /A





þ
            QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE
      EXCHANGE ACT OF 1934
              
              For
      the quarterly period ended June 30, 2008o
            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIE
      EXCHANGE ACT OF 1934
              
              For
      the transition period from:








ASIA
      CORK INC.(Exact name of Small Business
      Issuer as specified in its charter.)DELAWARE
              
              13-3912047(State of other jurisdiction of
      incorporation or organization)
              
              (IRS Employer Identification
      No.)3rd Floor, A Tower of
      Chuang Xin
                Information Building
                  No. 72 Second Keji Road, Hi Tech
      Zone, Xi’An, Shaanxi 710075 P.R. CHINA(Address of principal executive
      offices, including zip code)(011) 86-13301996766(Issuer’s telephone number, including area code)(Former Address, if changed
      since last report)


þ o









o þ










This amendment is being filed to
revise the disclosure regarding the effect of the issuance of common stock
purchase warrants as part of a financing by the Company in June
2008.





ASIA
CORK INC.


FORM
10-Q /A QUARTERLY
PERIOD ENDED JUNE 30, 2008






INDEX




PagePART I
            FINANCIAL INFORMATIONItem 1:
            Financial Statements
            1Item 2:
            Management's Discussion and Analysis of Financial
      Condition and Results of Operations    16Item 3:
            Quantitative and Qualitative Disclosures About Market
      Risk
            24Item 4:
            Controls and Procedures
            25PART II
            OTHER INFORMATIONItem 1:
            Legal Proceedings
            26Item 1A:
            Risk Factors
            26Item 2:
            Unregistered Sales of Equity Securities and Use of
      Proceeds
            26Item 3:
            Default upon Senior Securities
            27Item 4:
            Submission of Matters to a Vote of Security
      Holders
            27Item 5:
            Other Information
            27Item 6:
            Exhibits
            27







PART
I




Financial
Information


ITEM 1.  FINANCIAL
STATMENTS




ASIA
CORK INC. AND SUBSIDIARIES


(FORMERLY
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
BALANCE SHEETS




June
      30, 2008
              
              
              December
      31, 2007Unaudited
              
              
              AuditedAssetsCurrent AssetsCash and equivalents
              
              $
              468,219
              
              
              $
              367,396Accounts receivable, net of allowance for doubtful accounts of
      $15,571 and $12,210, respectively
              
              
              3,098,688
              
              
              
              2,429,772Inventories
              
              
              2,342,743
              
              
              
              920,140Advance to suppliers
              
              
              2,829,540
              
              
              
              2,375,174Prepayments and other current assets
              
              
              125,187
              
              
              
              16,111Total Current Assets
              
              
              8,864,377
              
              
              
              6,108,593Property and Equipment - Net
              
              
              4,157,235
              
              
              
              1,754,830Deposit for Purchase of Fixed Assets
              
              
              2,011,926
              
              
              
              1,891,810Deposit for Purchase of Intangible Assets
              
              
              1,457,917
              
              
              
              1,370,877Deposit for Acquisition
              
              
              1,457,917
              
              
              
              1,370,877Construction in Progress
              
              
              689,595
              
              
              
              2,821,817Investment - At Cost
              
              
              2,041,084
              
              
              
              1,919,228Intangible Assets- Net
              
              
              172,961
              
              
              
              161,073Total Assets
              
              
              20,853,012
              
              
              
              17,399,105Liabilities and Stockholders' EquityCurrent LiabilitiesAccounts payable and accrued expenses
              
              
              1,326,121
              
              
              
              956,519Loan payable
              
              
              437,375
              
              
              
              534,642Convertible note, net
              
              
              434,583
              
              
              
              -Customer deposit
              
              
              147,133
              
              
              
              -Taxes payable
              
              
              798,587
              
              
              
              767,764Due to stockholders/officers
              
              
              176,751
              
              
              
              166,199Other current liabilities
              
              
              24,554
              
              
              
              15,039Total Current Liabilities
              
              
              3,345,104
              
              
              
              2,440,163Total Liabilities
              
              
              3,345,104
              
              
              
              2,440,163Minority Interest
              
              
              1,617,353
              
              
              
              1,522,318Stockholders' EquityCommon stock, $0.0001 par value, 200,000,000 shares
    authorized,35,413,850 issued and outstanding, respectively
              
              
              3,541
              
              
              
              3,541Additional paid-in capital
              
              
              4,400,971
              
              
              
              4,396,772Additional paid-in capital - stock
      warrant
              
              
              279,386
              
              
              
              -Additional paid-in capital - stock
      compensation
              
              
              41,000
              
              
              
              -Reserve funds
              
              
              1,939,881
              
              
              
              1,741,715Retained earnings
              
              
              6,665,293
              
              
              
              5,729,630Accumulated other comprehensives income
              
              
              2,560,483
              
              
              
              1,564,966Total Stockholders' Equity
              
              
              15,890,555
              
              
              
              13,436,624Total Liabilities and Stockholders' Equity
              
              $
              20,853,012
              
              
              $
              17,399,105


1
 
 ASIA
CORK INC. SUBSDIARIES
 (FORMERLY
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)


For
      Three Months Ended June 30,
              
              
              For
      Six Months Ended June 30,2008
              
              
              2007
              
              
              2008
              
              
              2007Unaudited
              
              
              Unaudited
              
              
              Unaudited
              
              
              UnauditedRevenues
              
              $
              6,366,384
              
              
              $
              3,550,064
              
              
              $
              8,882,729
              
              
              $
              5,276,391Cost of Goods Sold
              
              
              4,173,021
              
              
              
              2,580,974
              
              
              
              5,856,120
              
              
              
              3,908,256Gross Profit
              
              
              2,193,363
              
              
              
              969,090
              
              
              
              3,026,609
              
              
              
              1,368,135Operating ExpensesSelling expenses
              
              
              832,792
              
              
              
              384,473
              
              
              
              1,112,086
              
              
              
              585,314General and administrative expense
              
              
              342,888
              
              
              
              87,284
              
              
              
              416,357
              
              
              
              202,087Total Operating Expenses
              
              
              1,175,680
              
              
              
              471,757
              
              
              
              1,528,443
              
              
              
              787,401Income From Operations
              
              
              1,017,683
              
              
              
              497,333
              
              
              
              1,498,166
              
              
              
              580,734Other Income (Expense)Interest (expense) income, net
              
              
              (33,804
              )
              
              
              (16,120
              )
              
              
              (46,357
              )
              
              
              22,070Other (expense) income, net
              
              
              (29,177
              )
              
              
              18,716
              
              
              
              4,966
              
              
              
              36,468Total Other (Expense) Income
              
              
              (62,981
              )
              
              
              2,596
              
              
              
              (41,391
              )
              
              
              58,538Income Before Taxes and Minority Interest
              
              
              954,702
              
              
              
              499,929
              
              
              
              1,456,775
              
              
              
              639,272Income Tax Provision
              
              
              151,120
              
              
              
              75,714
              
              
              
              227,911
              
              
              
              96,595Income Before Minority Interest
              
              
              803,582
              
              
              
              424,215
              
              
              
              1,228,864
              
              
              
              542,677Minority Interest
              
              
              59,935
              
              
              
              35,194
              
              
              
              95,035
              
              
              
              44,263Net Income
              
              $
              743,647
              
              
              $
              389,021
              
              
              $
              1,133,829
              
              
              $
              498,414Other Comprehensive Income:Foreign Currency Translation Gain
              
              
              381,129
              
              
              
              164,031
              
              
              
              995,517
              
              
              
              205,118Comprehensive Income
              
              $
              1,124,776
              
              
              $
              553,052
              
              
              $
              2,129,346
              
              
              $
              703,532Net Income Per Common Share- Basic
              
              $
              0.02
              
              
              $
              0.01
              
              
              $
              0.03
              
              
              $
              0.01- Diluted:
              
              $
              0.02
              
              
              $
              0.01
              
              
              $
              0.03
              
              
              $
              0.01Weighted Common Shares Outstanding*- Basic
              
              
              35,413,850
              
              
              
              35,413,850
              
              
              
              35,413,850
              
              
              
              35,413,850- Diluted:
              
              
              36,718,822
              
              
              
              35,413,850
              
              
              
              36,343,578
              
              
              
              35,413,850* As restated to reflect recapitalization and the subsequent reverse
      stock split.


2




ASIA
CORK INC. AND SUBSIDIARIES


(FORMERLY
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED)




For
      the Six Months Ended June 30,2008
              
              
              2007Unaudited
              
              
              UnauditedCash
      Flows From Operating ActivitiesNet
      Income
              
              $
              1,133,829
              
              
              $
              498,414Adjustments
      to Reconcile Net Income to Net CashUsed
      in Operating ActivitiesDepreciation
      and amortization
              
              
              117,426
              
              
              
              124,608Bad
      debt adjustment
              
              
              (2,586
              )
              
              
              (812
              )Minority
      interest
              
              
              95,035
              
              
              
              44,263Deferred
      consulting fee
              
              
              1,640
              
              
              
              -Interest
      expenses for discount on convertible note
              
              
              13,969
              
              
              
              -Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              (486,350
              )
              
              
              160,659Inventories
              
              
              (1,282,737
              )
              
              
              (1,557,337
              )Advance
      to suppliers
              
              
              (285,438
              )
              
              
              153,082Prepayments
      and other current assets
              
              
              (62,242
              )
              
              
              14,196Accounts
      payable and accrued expenses
              
              
              290,430
              
              
              
              17,189Customer
      deposits
              
              
              147,133
              
              
              
              -Taxes
      payable
              
              
              (16,854
              )
              
              
              458,521Other
      current liabilities
              
              
              8,049
              
              
              
              10,523Net
      Cash Used in Operating Activities
              
              
              (328,696
              )
              
              
              (76,694
              )Cash
      Flows From Investing ActivitiesProceeds
      from withdraw deposit for purchase of fixed assets
              
              
              -
              
              
              
              25,628Payment
      for deposit for acquisition
              
              
              -
              
              
              
              (1,116,658
              )Payment
      for purchase of equipment
              
              
              -
              
              
              
              (420
              )Payment
      for construction in process
              
              
              (33,532
              )
              
              
              -Payment
      for advance to unrelated party
              
              
              -
              
              
              
              (90,636
              )Proceeds
      from repayment of advance to unrelated party
              
              
              -
              
              
              
              2,012,702Net
      Cash (Used in) Provided by Investing Activities
              
              
              (33,532
              )
              
              
              830,616Cash
      Flows From Financing ActivitiesProceeds
      from long-term debt
              
              
              437,375
              
              
              
              -Payments
      to long-term debt
              
              
              (568,588
              )
              
              
              -Proceeds
      from convertible note
              
              
              700,000
              
              
              
              -Payments
      to stockholders/officers
              
              
              -
              
              
              
              (7,935
              )Proceeds
      from stockholders/officers
              
              
              -
              
              
              
              42,449Net
      Cash Provided by Financing Activities
              
              
              568,787
              
              
              
              34,514Net
      Increase in Cash and Equivalents
              
              
              206,559
              
              
              
              788,436Effect
      of Exchange Rate Changes on Cash
              
              
              (105,736
              )
              
              
              53,985Cash
      and Equivalents at Beginning of Period
              
              
              367,396
              
              
              
              564,733Cash
      and Equivalents at End of Period
              
              $
              468,219
              
              
              $
              1,407,154SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING ANDFINANCING
      ACTIVITIESConstruction
      in process transferred out to property
              
              $
              2,409,299
              
              
              $
              -Shareholder
      donated intangible assets into the Company
              
              $
              4,199
              
              
              $
              -Declared
      common stock for part of consulting fees
              
              $
              41,000
              
              
              $
              -


3


ASIA
CORK INC. AND SUBSIDIARIES


(FORMERLY
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




1.
            BASIS
      OF PRESENTATION





a)
            Interim
      financial statements:





The unaudited
consolidated financial statements of Asia Cork Inc.(f/k/a Hankersen
International Corp.)and subsidiaries (the "Company") have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and pursuant to the requirements for reporting on Form
10-Q. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for annual financial statements. However, the information included in
these interim financial statements reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary for the fair presentation of the consolidated financial position and
the consolidated results of operations. Results shown for interim periods are
not necessarily indicative of the results to be obtained for a full year. The
consolidated balance sheet information as of December 31, 2007 was derived from
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-KSB. These interim financial statements should be read in
conjunction with that report.





The
consolidated financial statements include the accounts of the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.





b)
            Description
      of business and reverse merger:





The Company
was incorporated on August 1, 1996, under the laws of the State of Delaware.
Until August 2005, the Company had no operations and the sole purpose of the
Company was to locate and consummate a merger or acquisition with a private
entity.





In August
2005, the Company, through Kushi Sub, Inc., a newly formed Delaware corporation
and wholly-owned subsidiary of the Company ("Acquisition Sub") acquired all the
ownership interest in Hanxin (Cork) International Holding Co., Ltd. ("Hanxin
International"), a British Virgin Islands limited liability corporation,
organized in September 2004. The Company acquired Hanxin International in
exchange for shares of common stock and shares of the Series A Preferred Stock
of the Company.





Subsequent to
the merger and upon the conversion of the Series A Preferred Stock, the former
shareholders of Hanxin International will own 95% of the outstanding shares of
the Company's common stock. As a result of the ownership interests of the former
shareholders of Hanxin International, for financial statement reporting
purposes, the merger was treated as a reverse acquisition, with Hanxin
International deemed the accounting acquirer and Kushi deemed the accounting
acquiree. Historical information of the surviving company is that of Hanxin
International.





4





Kushi Sub,
Inc., the surviving entity in the merger with Hanxin International, has no other
business activities except for owning 100% of Xi'An Cork Investments
Consultative Management Co., Ltd. ("Xi'An"), which owns 92% of Xian Hanxin
Technology Co., Ltd. ("Hanxin"), incorporated in July 2002. Both Xi'An and
Hanxin are People's Republic of China (PRC) corporations. Most of the Company’s
activities are conducted through Hanxin.





During the
year ended December 31, 2005, Hanxin acquired 75% equity interest of Cork Import
and Export Co. Ltd (“CIE”), a PRC corporation engaged in cork trading
businesses.





On July 11,
2008, the Company's wholly owned subsidiary, Asia Cork Inc., was merged into its
parent, the Company, in order to change the name of the Company, after approval
by the Board of Directors of the Company pursuant to the Delaware General
Corporation Law. The Company is the surviving company of the merger and, except
for the adoption of the new name, its Certificate of Incorporation is otherwise
unchanged. The wholly-owned subsidiary was formed in July 2008 and had no
material assets.





As permitted
by Delaware General Corporation Law, the Company assumed the name of its wholly
owned subsidiary following the merger and now operates under the name Asia Cork
Inc. The Company’s common stock is quoted on the Over the Counter Bulletin Board
under the trading symbol “AKRK.OB.”





Hanxin is
engaged in developing, manufacturing and marketing of cork wood floor, wall and
decorating materials. Its products are sold to customers in China and oversea
customers in India, the United States of America, Germany and
Japan.




c)
            Use
      of estimates:


The
preparation of financial statements in conformity with generally accepted
accounting principles 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 reporting amounts of revenues and expenses during the reported period.
Significant estimates in 2008 and 2007 include the estimated useful lives and
fair values of the assets. Actual results could differ from those
estimates.





d)
            Basic and diluted net income per
      share:










5




e)
            Stock-based
  compensation:











f)
            Revenue
      recognition:




The
Company's revenues from the sale of products are recognized when the goods are
shipped, title passes, the sales price to the customer is fixed and
collectibility is reasonably assured. Persuasive evidence of an arrangement is
demonstrated via purchase order from distributor, our customers, product
delivery is evidenced by warehouse shipping log as well as signed bill of lading
from the trucking company and no product return is allowed except defective or
damaged products, the sales price to the customer is fixed upon acceptance of
purchase order, there is no separate sales rebate, discounts, and volume
incentives.





g)
            Recent
      accounting pronouncements:





In May 2008,
the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No.162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS 162 indicates the entity (not its auditor) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP. Accordingly, the GAAP hierarchy should
reside in the accounting literature established by the FASB and is issuing SFAS
162 to achieve that result. SFAS 162 also identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).SFAS 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The Company is in the process of evaluating the new disclosure
requirements under SFAS 162.





In March
2008, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No.161,"Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of SFAS No. 133" ("SFAS 161").
SFAS 161 seeks to improve financial reporting for derivative instruments and
hedging activities by requiring enhanced disclosures regarding the impact on
financial position, financial performance, and cash flows. To achieve this
increased transparency, SFAS 161 requires (1) the disclosure of the fair value
of derivative instruments and gains and losses in a tabular format;(2) the
disclosure of derivative features that are credit risk-related; and
(3)cross-referencing within the footnotes. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008 (that is, January 1, 2009, for entities with calendar year-ends)., with
early application encouraged.  The Company is in the process of
evaluating the new disclosure requirements under SFAS 161.





6





In December
2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No. 160,
“Non-controlling Interests in Consolidated Financial Statements-an amendment of
ARB No. 51” which clarifies that a non-controlling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as
equity in the consolidated financial statements. This statement also changes the
way the consolidated income statement is presented. It requires consolidated net
income to be reported at amounts that include the amounts attributable to both
the parent and the non-controlling interest. In addition, it requires
disclosure, on the face of the consolidated statement of income, of the amounts
of consolidated net income attributable to the parent and to the non-controlling
interest. SFAS No. 160 is effective for fiscal years, and interim periods within
those fiscal years beginning on or after December 15, 2008 (that is, January 1,
2009, for entities with calendar year-ends). Earlier adoption is prohibited. The
company is currently in the process of evaluating the effect, if any, the
adoption of SFAS No. 160 will have on its consolidated results of operations,
financial position, and financial disclosure.





In December
2007, Statement of Financial Accounting Standards No. 141(R), Business
Combinations, was issued. SFAS No. 141R replaces SFAS No. 141, Business
Combinations. SFAS 141R retains the fundamental requirements in SFAS 141 that
the acquisition method of accounting (which SFAS 141 called the purchase method)
be used for all business combinations and for an acquirer to be identified for
each business combination. SFAS 141R requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree at the acquisition date, measured at their fair values as of that
date, with limited exceptions. This replaces SFAS 141's cost-allocation process,
which required the cost of an acquisition to be allocated to the individual
assets acquired and liabilities assumed based on their estimated fair values.
SFAS 141R also requires the acquirer in a business combination achieved in
stages (sometimes referred to as a step acquisition) to recognize the
identifiable assets and liabilities, as well as the non-controlling interest in
the acquiree, at the full amounts of their fair values (or other amounts
determined in accordance with SFAS 141R). SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). An
entity may not apply it before that date. The Company is currently evaluating
the impact that adopting SFAS 141R will have on its financial
statements.




7




2.
            INVENTORIES





Inventories
as of June 30, 2008 and December 31, 2007, consisted of the
following:




June
      30, 2008
            
            
            December
      31, 2007Unaudited
            
            
            AuditedRaw
    materials
            
            $
            1,838,398
            
            
            $
            536,319Work in
      process
            
            
            149,806
            
            
            
            103,395Finished
    goods
            
            
            274,368
            
            
            
            249,932Packaging and
      other
            
            
            80.171
            
            
            
            30,494Total
            
            $
            2,342,743
            
            
            $
            920,140




3.
            PROPERTY
      AND EQUIPMENT





As of June
30, 2008 and December 31, 2007, property and equipment consisted of the
following:




Estimated
      Life
              
              
              June
      30, 2008
              
              
              December
      31, 2007Unaudited
              
              
              AuditedBuilding
      and improvement
              
              
              27-35
              
              
              $
              4,012,238
              
              
              $
              1,507,241Manufacturing
      equipment
              
              
              1-8
              
              
              
              1,200,563
              
              
              
              1,128,887Office
      furniture and equipment
              
              
              5
              
              
              
              30,389
              
              
              
              28,575Vehicle
              
              
              2-8
              
              
              
              12,460
              
              
              
              11,716Machinery
      improvement
              
              
              3
              
              
              
              80,185
              
              
              
              75,398Subtotal
              
              
              
              
              
              
              5,335,835
              
              
              
              2,751,817Less:
      Accumulated depreciation
              
              
              
              
              
              
              1,178,600
              
              
              
              996,987Total
              
              
              
              
              
              $
              4,157,235
              
              
              $
              1,754,830
 For the six
months ended June 30, 2008 and 2007, depreciation expenses amounted to $114,960
and $122,352, respectively.




8




4.
            DEPOSIT
      FOR PURCHASE OF FIXED ASSETS





The Company
intends to purchase certain factory facilities from an unrelated company without
disclosing its own identity.  The purchase was arranged through an
agent who is not affiliated with the Company. $2,011,926 (equivalent to RMB 13.8
million) was paid to the agent as of the six months ended June 30, 2008. The
agency agreement has no firm commitment on the purchase but it states a maximum
price of RMB 50 million that the Company is willing to pay for the facilities.
The deposit is fully refundable if the purchase does not close.




5.
            DEPOSIT
      FOR PURCHASE OF INTANGIBLE ASSETS





In order to
grow its own raw material in the future, the Company intends to purchase the
right to use a parcel of land from an unrelated company in the ShaanXi Baoji
district of PRC. This “right to use” is based on the principal in the PR that
while one can own the buildings situated on the land except for the government,
one cannot own the land itself in perpetuity.  Commercial land can be
used for a period of no more than fifty (50) years, unless extended (whereby a
fee is required to be paid to extend).  The total purchase price is
$5,510,927(equivalent to RMB 37.8 million) of which a $1,457,917 (equivalent to
RMB 10 million) deposit was paid to this company as of June 30, 2008. A closing
date for the transfer of the property has not been scheduled as of yet, however,
the Company is obligated to pay the remaining balance of $4,053,010 (equivalent
to RMB27.8 million) within seven days after the property transfer.





6.
            DEPOSIT
      FOR ACQUISITION





The Company
intends to acquire a private company located in Sichuan China called Sichuan
Hanxin Cork Merchandises Co, Ltd. (“SHCM”). The purchase price of SHCM shall not
exceed $2,915,834 (RMB20 million). As of June 30, 2008, the Company had paid a
deposit of $1,457,917 (equivalent to RMB10 million) to SHCM. SHCM is a
manufacturer for cork products and is one of the Company’s current cork raw
materials providers.




7.
            CONSTRUCTION
      IN PROGRESS





Student
dormitory construction and internal decorations were completed in June 2008. All
costs of approximately $2.4 million (equivalent to RMB 16,525,621) had been
transferred to the property as of June 30, 2008. While construction has been
completed, the Company still has not acquired the occupation certificates and
ownership certificates with respect to the dormitory. The Company expects to
receive these certificates before the end of this year, however, there can be no
assurances that it will receive them by the end of the year.





In order to
increase production capacity, the Company started to build a fifth workshop on
its leased land during the third quarter of 2007. As of June 30, 2008, the
Company expended $689,595 (equivalent to RMB 4.73 million) on the construction
of the fifth workshop.  The Company expects to complete this
construction project in the third quarter of year 2008, however, the can be no
assurance that it will be completed by then.





9





As of June
30, 2008 and December 31, 2007, construction in process consisted of the
following:




June
      30, 2008
            
            
            December
      31,2007Unaudited
            
            
            AuditedDormitory
      construction  and decoration
            
            $
            -
            
            
            $
            2,204,922Fifth Workshop
      construction
            
            
            689,595
            
            
            
            616,895Total
            
            
            689,595
            
            
            
            2,821,817




8.
            INVESTMENT
      – AT COST





On June 28,
2005, the Company purchased a 12% equity interest of Shaanxi DeRong Technology
Information Development Co. Ltd. (“DeRong”), a PRC corporation, for $2,041,084
(equivalent to RMB 14 million). DeRong owns a cork tree forest plantation in
China. The investment is for long term and is stated at cost.




9.
            INTANGIBLE
      ASSETS





The Company
purchased the right to use a parcel of land for 40 years on September 27, 2001.
The purchase price is being amortized over the term of the right. In addition,
the company was assigned ownership of three patent rights from its major
stockholder and Chairman, Mr. Fang She Zhang, during the quarter ended June 30,
2008.  These patents were assigned without any payment due to Mr.
Zhang.  . These three patent rights are used as part of a vital
technique for the production of the Company’s products. The application and
filing costs of these three patent rights was $4,199 (equivalent to RMB28,800).
As of June 30, 2008 and December 31, 2007, intangible assets, less accumulated
amortization consisted of the following:




June 
      30, 2008
            
            
            December
      31, 2007Unaudited
            
            
            AuditedIntangible
      assets
            
            $
            207,220
            
            
            $
            190,901Less: Accumulated
      amortization
            
            
            34,259
            
            
            
            29,828Total
            
            
            172,961
            
            
            
            161,073


For the six
months ended June 30, 2008 and 2007, amortization expense amounted to $2,466 and
$2,256, respectively.





The
amortization expenses for the next five years are as follows:





2009
            
            $
            5,2362010
            
            
            5,2362011
            
            
            5,2362012
            
            
            5,2362013
            
            
            5,236




10




10.
            LOAN
      PAYABLE





Loan payable
as of June 30, 2008 consisted of the following:




June
      30, 2008
                
                
                December
      31, 2007On
      November 30, 2007, the Company obtained a short-term loan RMB3.9 million
      (equivalent at that time to $534,642 ) from Xian Xitaoyuan Credit Bank by
      pledging the Company's building in YuLerYuan with bank, The loan interest
      is 8.37‰ per month. The Company had paid principal RMB3.9 million back to
      bank on June 30, 2008. On the same day, the company
      borrowed  RMB3 million (equivalent to $437,375 ) from the same
      bank again,  but the new interest rate had been increased to
      9.967‰ per month. The expiration date for this new short-term loan is June
      30,  2009.
                
                $
                437,375
                
                
                $
                534,642Total
      Loan Payable
                
                $
                437,375
                
                
                $
                534,642


11.
            CONVERTIBLE
      NOTE AND
WARRANTS











11
 
 The Company’s
obligations under the promissory notes are secured by an aggregate of 2,332,899
shares of common stock pledged by Mr. Pengcheng Chen, the Company’s Chief
Executive Officer, and 2,031,191 shares of common stock pledged by Mr. Zhang
(the “Escrow Shares”). In the event that subsequent to the issuance of the
Convertible Notes, the value of the Escrow Shares is less than 150% of the
outstanding principal amount of the promissory notes for 10 consecutive trading
days, then the holder of the promissory notes shall have the right to give the
Company notice (the “Investor Notice”) to deposit or cause to be deposited
additional Escrow Shares such that the value of the Escrow Shares based upon the
volume weighted average price per share for the 20 trading days preceding the
date of the Investor Notice, is equal to 150% of the outstanding principal
amount of the promissory notes.  The Company shall deposit or cause to
be deposited such additional Escrow Shares within 30 days of the date of the
Investor Notice. To the extent the Escrow Shares are not sufficient to meet the
threshold of 150% of the outstanding principal amount of the promissory notes
within 30 days after the Investor Notice, the Company shall grant to Investors a
security interest on the Company’s tangible assets to the extent permitted under
applicable law.
 
 
  June
      30, 2008
              
              
              December
      31, 2007Unaudited
              
              
              AuditedConvertible
      note
              
              $
              700,00
              
              
              $
              -Less: Discount on
      convertible note
              
              
              265,417
              
              
              
              -Convertible note,
    net
              
              $
              434,583
  12.
              TAX
      PAYABLE
 
 The Company
and its US subsidiary will file consolidated Federal income tax return and state
franchise tax returns individually. The Company's PRC subsidiaries file income
tax returns under the Income Tax Law of the People's Republic of China
concerning Foreign Investment Enterprises and Foreign Enterprises and local
income tax laws. The Company's BVI subsidiary is exempt from income
taxes.
 
 Per PRC
Income Tax Law, any new foreign owned corporation is exempt from income tax for
the first two years, and 50% exemption of income tax for the next three years
for non high-tech corporation or 15% tax rate for corporation qualified by State
Science and Technology Commission as "High Tech corporation" located in State
"High Tech Zone" approved by China State Council. Hanxin is qualified as a High
Tech corporation. Based on this regulation, Hanxin was exempt from income tax in
year 2003 and 2004 and its income is subject to 15% tax starting from January 1,
2005. CIE does not located in State “High Tech Zone” approved by China State
Council, thus its income is subject to 33%.tax rate. Commencing from January,
2008, based on the new regulation in the PR, CIE’s income is subject to 25% tax
rate.
 
 12
 
 As of June
30, 2008 and December 31, 2007, taxes payable consisted the
following:
   June
      30, 2008
              
              
              December
      31, 2007Unaudited
              
              
              AuditedValue -added
      tax
              
              $
              558,729
              
              
              $
              393,969Corporate income tax
      Provision
              
              
              189,943
              
              
              
              235,465Local tax and
      surcharges
              
              
              39,715
              
              
              
              83,330Franchise
    tax
              
              
              10,200
              
              
              
              55,000Total
              
              $
              798,587
              
              
              $
              767,764
  13.
              DUE
      TO STOCKHOLDERS/OFFICERS
 
 Amounts due
to stockholders/officers are unsecured, non-interest bearing, and are due on
demand.  As of June 30, 2008 and December 31, 2007, the total net
amounts due to the stockholders/officers were $176,751 and $166,199,
respectively, which represented the net amounts lent by shareholders/officers to
the Company.
  14.
              STOCKHOLDERS
      EQUITY
 
 On August 9,
2005, the Company acquired Hanxin International in exchange for (i) 24,000,000
shares of the Company’s common stock and (ii) 1,000 shares of the Company’s
Series A Preferred Stock, which were converted into 177,185,642 shares of the
Company’s common stock, without taking into effect of a reverse stock split as
described below.
 
 In November
2005, the Company filed and circulated to its shareholders the Information
Statement which permitted the Company, among other things, to (i) amend its
Articles of Incorporation to increase its authorized shares of common stock to
200,000,000 shares; (ii) approve one for six reverse split as to all outstanding
shares of common stock of the Company, effective as to holders of record of
shares of common stock on December 9, 2005, (iii) approve a stock option, SAR
and stock bonus plan for the directors, officers, employees and consultants of
the Company. A certificate of amendment officially increasing the authorized
shares of common stock and approving the reverse stock split was filed with the
State of Delaware on December 13, 2005.
 
 13
 
 On September
1, 2006, the 1,000 shares Series A preferred stock were converted into
29,530,937 shares of the Company’s common stock. Subsequently, the Company
issued additional 118,123 shares in October 2006 to reflect an under-issuance to
a stockholder of the shares of common stock issuable upon conversion of the
preferred stock As a result the total amount of issued and outstanding shares of
the Company’s common stock was 35,413,850 as of June 30, 2008.
 
 In May 2008,
the board of directors of the Company authorized, and on July 31, 2008 the
Company issued, 150,000 shares of the Company’s common stock to its attorney for
services rendered. In June 2008, the board of directors of the Company
authorized, and on August 14 2008 the Company issued, 100,000 shares of the
Company’s common stock to HAWK Associates, Inc (“Hawk”), its investor relations
firm for services rendered pursuant to the agreement. Accordingly the Company
has 35,663,850 shares of issued and outstanding common stock as of August 15,
2008.
 
 In June 2008,
the Company was assigned ownership of three patent rights from its major
shareholder, Mr. Fangshe Zhang.  These patents were assigned without
any payment due to Mr. Zhang. The application and filing costs of these three
patents was RMB28,800 (equivalent to $4,199). In connection therewith, the
Company recorded $4,199 of intangible assets, and same amount of additional paid
in capital as of June 30, 2008.
 
 15.
BASIC AND DILUTED EARNING PER SHARE
 
 
  For
      Three Months Ended June 30,
                
                
                For
      Six Months Ended June 30,2008
                
                
                2007
                
                
                2008
                
                
                2007Unaudited
                
                
                Unaudited
                
                
                Unaudited
                
                
                UnauditedBasic:Numerator:Net
      income for basic calculation
                
                
                743,647
                
                
                
                389,021
                
                
                
                1,133,829
                
                
                
                498,414Denominator:Weighted
      average common shares
                
                
                35,413,850
                
                
                
                35,413,850
                
                
                
                35,413,850
                
                
                
                35,413,850Net
      income per share — basic
                
                $
                0.02
                
                
                $
                0.01
                
                
                $
                0.03
                
                
                $
                0.01Diluted:Numerator:Net
      income for basic calculation
                
                
                743,647
                
                
                
                389,021
                
                
                
                1,133,829
                
                
                
                498,414Effect
      of dilutive securities issued
                
                
                20,735
                
                
                
                -
                
                
                
                20,735
                
                
                
                -Net
      income for diluted calculation
                
                
                764,382
                
                
                
                389,021
                
                
                
                1,154,564
                
                
                
                498,414Denominator:Denominator
      for basic calculation
                
                
                35,413,850
                
                
                
                35,413,850
                
                
                
                35,413,850
                
                
                
                35,413,850Weighted
      average effect of dilutive securities:Warrants
                
                
                554,484
                
                
                
                -
                
                
                
                554,484
                
                
                
                -Convertible
      debt
                
                
                750,488
                
                
                
                -
                
                
                
                375,244
                
                
                
                -Denominator
      for diluted calculation
                
                
                36,718,822
                
                
                
                35,413,850
                
                
                
                36,343,578
                
                
                
                35,413,850Net
      income per share — diluted
                
                $
                0.02
                
                
                $
                0.01
                
                
                $
                0.03
                
                
                $
                0.01
  14
  16.
              COMMITMENTS
 
 The Company
leases its office space and production land under operating lease agreements
that are expiring on December 31, 2008 and October, 2047 respectively. In order
to assure increasing products, the company also leases two lands and buildings
under operating lease agreements that are expiring on July 31, it had been
extended to September 30, 2008, and November 30, 2008 respectively The following
is a schedule of future minimum rental office space and land payments required
under these operating leases as of June 30, 2008.
  For the Quarter Ending June
    30,2009
                
                $
                91,8122010
                
                
                16,9992011
                
                
                16,9992012
                
                
                16,9992013
                
                
                16,999Thereafter
                
                
                583,644Total
      minimum rental payments required
                
                $
                743,452
  Rental and
maintenance expenses for office space, land, and building operating leases
amounted to $85,615 and $18,820 for the six months ended June 30, 2008 and 2007,
respectively.
 
 The Company
also leases three patents rights from its Chairman, Mr. Fang She Zhang, under
operating lease agreements that expire on April 16, 2011. The following is a
schedule of future minimum rental payments required under these operating leases
that have remaining lease terms in excesses of one year as of June 30,
2008.
  15
  For the Quarter Ending June
    30,2009
                
                $
                339,9872010
                
                
                270,101Total
      minimum rental payments required
                
                $
                610,088
    Patent lease
expenses amounted to $167,546 and $155,469, for six months ended June 30, 2008
and 2007, respectively.
 
 On June 15,
2008, the Company signed an agreement with Hawk to provide investor relations
consulting and advisory services. The term of this agreement is effective
through June 30, 2009. Hawk is paid a retainer fee of $7,500 per month and the
payments are due at the beginning of each month. An initial payment of $11,250
was paid to cover the period June 15, 2008 through July 31, 2008. Accordingly,
an additional $78,750 will be paid to Hawk pursuant to this
agreement.  . Hawk was also issued 100,000 restricted 144 shares of
the Company’s common stock on August 14, 2008.
  ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 The following
analysis of our consolidated financial condition and results of operations for
the six months ended June 30, 2008 and 2007, should be read in conjunction with
the consolidated financial statements, including footnotes, and other
information presented in our annual report on Form 10-KSB as filed with the
Securities and Exchange Commission on March 31, 2008.
 Overview
 
 The Company
was incorporated under the laws of the State of Delaware on August 1, 1996. The
Company was formed in connection with the merger acquisition of Kushi
Macrobiotics Corp. (“KMC”) with American Phoenix Group, Inc. (“APGI”) in 1996.
Prior to such acquisition, KMC had operated a business of marketing a line of
natural foods (the “Kushi Cuisine”). This business was not successful and
management determined that it would be in the shareholder’s interest for KMC to
operate a different business. In August 2005, the Company, through Kushi Sub,
Inc., a newly formed Delaware corporation and wholly-owned subsidiary of the
Company ("Acquisition Sub") acquired all the ownership interest in Hanxin (Cork)
International Holding Co., Ltd. ("Hanxin International"), a British Virgin
Islands limited liability corporation, organized in September 2004. The Company
acquired Hanxin International in exchange for 24,000,000 shares of common stock
and 1,000 shares of the Series A Preferred Stock, which such shares converted
into 29,530,937 shares of common stock. Subsequent to the merger and upon the
conversion of the Series A Preferred Stock, the former shareholders of Hanxin
International currently own 95% of the outstanding shares of the Company's
common stock.
 
 16
 
 
 Kushi Sub,
the surviving entity of the merger with Hanxin International, has no other
business activities other than owning 100% of Xi'An Cork Investments
Consultative Management Co., Ltd. ("Xi'An"), which owns 92% of Xian Hanxin
Technology Co., Ltd. ("Hanxin"), incorporated in July 2002, both Xi'An and
Hanxin are People's Republic of China (PRC) corporations. Most of the Company’s
operating and business activities are conducted through
Hanxin.
 
 On July 11,
2008, the Company's wholly owned subsidiary, Asia Cork Inc. was merged into its
parent, the Company as approved by the Board of Directors of the Company
pursuant to the Delaware General Corporation Law. The Company is the surviving
company of the merger and Certificate of Incorporation is otherwise unchanged.
The wholly-owned subsidiary was formed in July 2008 and had no material assets.
The Certificate of Merger was filed with the Secretary of State of Delaware on
July 11, 2008.
 
 As
permitted by Delaware General Corporation Law, the Company assumed the name of
its wholly owned subsidiary following the merger and now operates under the name
Asia Cork Inc. The Company’s common stock is quoted on the Over the Counter
Bulletin Board under the trading symbol “AKRK.OB.”
 
 Business
Overview
 
 The Company,
through its subsidiaries, engages in developing, manufacturing and marketing of
cork wood floor, wall and decorating materials.
 
 Hanxin is a
manufacturing company based in China, which produces cork-building material sold
under the Hanxin brand name. Approximately 75% of Hanxin's products sold in year
2008 were to customers in China by our own sales persons, and domestic
distributors and agents, with the remaining sales being made to customers in
India, the United States, Germany and Japan through unrelated national
distributors and agents. Our Chairman who is also a principal shareholder owns
several cork processing technology related patents in China.  As
discussed in the Notes to the Financial Statements, Mr. Zhang leases three of
these patents to Hanxin and has assigned three others to Hanxin as of June 30,
2008.   .
 
 Foreign
Exchange Considerations
 
 Even though
we are a U.S. company, because all of our operations are located in the PRC, we
face certain risks associated with doing business in that country. These risks
include risks associated with the ongoing transition from state business
ownership to privatization, operating in a cash-based economy, dealing with
inconsistent government policies, unexpected changes in regulatory requirements,
export restrictions, tariffs and other trade barriers, challenges in staffing
and managing operations in a communist country, differences in technology
standards, employment laws and business practices, longer payment cycles and
problems in collecting accounts receivable, changes in currency exchange rates
and currency exchange controls. We are unable to control the vast majority of
these risks associated both with our operations and the country in which they
are located and these risks could result in significant declines in our
revenues.
 
 17
 
 
 Because
revenues from our operations in the PRC accounted for 100% of our consolidated
net revenues, how we report net revenues from our PRC-based operations is of
particular importance to understanding our financial statements. Transactions
and balances originally denominated in U.S. dollars are presented at their
original amounts. Transactions and balances in other currencies are converted
into U.S. dollars in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, "Foreign Currency Translation," and are included in determining
comprehensive net income or loss. For foreign operations with the local currency
as the functional currency, assets and liabilities are translated from the local
currencies into U.S. dollars. Translation adjustments resulting from the process
of translating the local currency financial statements into U.S. dollars are
included in determining comprehensive income or loss.
 
 The
functional currency of our Chinese subsidiaries is the Chinese RMB, the local
currency. The financial statements of the subsidiaries are translated to U.S.
dollars using year-end rates of exchange for assets and liabilities, and average
rates of exchange for the period for revenues, costs, and expenses. Net gains
and losses resulting from foreign exchange transactions are included in the
consolidated statements of operations and were not material during the periods
presented. Until 1994, the RMB experienced a gradual but significant devaluation
against most major currencies, including U.S. dollars, and there was a
significant devaluation of the RMB on January 1, 1994 in connection with the
replacement of the dual exchange rate system with a unified managed floating
rate foreign exchange system. Since 1994, the value of the RMB relative to the
U.S. Dollar has remained stable and has appreciated slightly against the U.S.
dollar. Countries, including the United States, have argued that the RMB is
artificially undervalued due to China's current monetary policies and have
pressured China to allow the RMB to float freely in world markets.
 
 On July 21,
2005, the PRC reported that it would have its currency pegged to a basket of
currencies rather than just tied to a fixed exchange rate to the dollar. It also
increased the value of its currency 2% higher against the dollar, effective
immediately. If any devaluation of the RMB were to occur in the future, returns
on our operations in China, which are expected to be in the form of RMB, will be
negatively affected upon conversion to U.S. dollars. Although we attempt to have
most future payments, mainly repayments of loans and capital contributions,
denominated in U.S. dollars, if any increase in the value of the RMB were to
occur in the future, our product sales in China and in other countries may be
negatively affected.
 
 Critical
Accounting Policies
 
 The
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these consolidated financial statements requires us to make
estimates and judgments 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 on 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.
 
 18
 
 A summary of
significant accounting policies is included in Note 1 to the consolidated
financial statements. Management believes that the application of these policies
on a consistent basis enables us to provide useful and reliable financial
information about our operating results and financial condition
 
 The Company
record property and equipment at cost. Depreciation is provided using the
straight-line method over the estimated economic lives of the assets, which are
from 2 to 35 years. Expenditures for major renewals and betterments that extend
the useful lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred. We review the
carrying value of long-lived assets for impairment at least annually or whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of long-lived assets is measured by
comparison of its carrying amount to the undiscounted cash flows that the asset
or asset group is expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property, if any, exceeds its fair market
value.
 
 The Company's
revenues from the sale of products are recognized when the goods are shipped,
title passes, the sales price to the customer is fixed and collectibility is
reasonably assured. Persuasive evidence of an arrangement is demonstrated via
purchase order from customer, product delivery is evidenced by warehouse
shipping log as well as bill of lading from the trucking company and no product
return is allowed except defective or damaged products, the sales price to the
customer is fixed upon acceptance of purchase order, there is no separate sales
rebate, discounts, and volume incentives.
 
 RESULTS OF
OPERATIONS
  19
 
 THREE
MONTHS ENDED JUNE 30, 2008 COMPARED TO THREE MONTHS ENDED JUNE 30,
2007
  For
      Three Months Ended June 30,2008
                
                
                2007
                
                
                (Decrease)/
      IncreaseUnaudited
                
                
                UnauditedRevenues
                
                $
                6,366,384
                
                
                $
                3,550,064
                
                
                $
                2,816,320
                
                
                
                79
                %Cost
      of Goods Sold
                
                
                4,173,021
                
                
                
                2,580,974
                
                
                
                1,592,047
                
                
                
                62
                %Gross
      Profit
                
                
                2,193,363
                
                
                
                969,090
                
                
                
                1,224,273
                
                
                
                126
                %Gross
      Profit Percentage
                
                
                34.45
                %
                
                
                27.30
                %Operating
      ExpensesSelling
      expenses
                
                
                832,792
                
                
                
                384,473
                
                
                
                448,319
                
                
                
                117
                %General
      and administrative expense
                
                
                342,888
                
                
                
                87,284
                
                
                
                255,604
                
                
                
                293
                %Total
      Operating Expenses
                
                
                1,175,680
                
                
                
                471,757
                
                
                
                703,923
                
                
                
                149
                %Income
      From Operations
                
                
                1,017,683
                
                
                
                497,333
                
                
                
                520,350
                
                
                
                105
                %Other
      Income (Expense)Interest
      (expense), net
                
                
                (33,804
                )
                
                
                (16,120
                )
                
                
                (17,684
                )
                
                
                110
                %Other
      (expense) income, net
                
                
                (29,177
                )
                
                
                18,716
                
                
                
                (47,893
                )
                
                
                -256
                %Total
      Other (Expense) Income
                
                
                (62,981
                )
                
                
                2,596
                
                
                
                (65,577
                )
                
                
                -2526
                %Income
      Before Taxes and Minority Interest
                
                
                954,702
                
                
                
                499,929
                
                
                
                454,773
                
                
                
                91
                %Income
      Tax Provision
                
                
                151,120
                
                
                
                75,714
                
                
                
                75,406
                
                
                
                100
                %Income
      Before Minority Interest
                
                
                803,582
                
                
                
                424,215
                
                
                
                379,367
                
                
                
                89
                %Minority
      Interest
                
                
                59,935
                
                
                
                35,194
                
                
                
                24,741
                
                
                
                70
                %Net
      Income
                
                $
                743,647
                
                
                $
                389,021
                
                
                $
                354,626
                
                
                
                91
                %
 
 20
 
 Revenues
 
 For the three
months ended June 30, 2008, our revenues were $6,366,384 as compared to
$3,550,064 for the three months ended June 30, 2007, an increase of $2,816,320
or 79%. The reason for the increase is primarily due to our selling efforts
which increased sales of our major finished goods (wood materials, boards and
floors) as compared to the sales quantities for the three months ended June 30,
2007. We also increased our unit sales prices by 20% effective as of October
2007. Our revenues from wood materials and floor sales increased by amounts of
$621,702 and $1,749,372 respectively in the three months ended June 30, 2008 as
compared to the same period in year 2007, Even though our sales on the wood
paper products decreased, this was offsets by an increase in the amount in
boards sold during the three months ended June 30, 2008.
 
 Cost
of Sales and Gross Profit
 
 For the three
months ended June 30, 2008, cost of sales amounted to $4,173,021 or 65.55% of
net revenues as compared to cost of sales of $2,580,974 or 72.7% of net revenues
for the three months ended June 30, 2007. Gross profit for the three months
ended June 30, 2008 was $2,193,363 or 34.45% of revenues, as compared to
$969,090 or 27.3% of revenues for the three months ended June 30, 2007. The
gross margin increased mainly as a result of increased sales in the high-unit
profit margin in the sale of finished goods (wood materials and floors) during
the current year.
 
 Operating
Expenses
 
 Our operating
expenses increased for the three months ended June 30, 2008 as compared to the
three months ended June 30, 2007. For the three months ended June 30, 2008,
total operating expenses were $1,175,680 as compared to $471,757 for the three
months ended June 30, 2007, a increase of approximately $0.7 million or 149%.
This increase was attributable to an increase in selling expenses, freight cost,
and commissions associated with our increased revenues. The increase in general
and administrative costs was primarily attributable to increases consulting fee,
advisory fee, attorney fee, and professional fee in the current
quarter.
 
 Other
Income (expense)
  
  
 
 Income
Tax
 
 Our income
taxes increased by $75,406 or 100% to $151,120 for the three months ended June
30, 2008 compared to $75,714 for the three months ended June 30, 2007. This
increase was due to an increase in net income before income taxes. The Company's
tax-exempt status ended as of December 31, 2004. Hanxin is subject to a 15%
corporate income tax starting from year 2005. CIE is subject to a 25% corporate
income tax starting from January 1, 2008.
  21
 
 SIX
MONTHS ENDED JUNE 30, 2008 COMPARED TO SIX MONTHS ENDED JUNE 30,
2007
  For
      Six Months Ended June 30,2008
                
                
                2007
                
                
                (Decrease)/
      IncreaseUnaudited
                
                
                UnauditedRevenues
                
                $
                8,882,729
                
                
                $
                5,276,391
                
                
                $
                3,606,338
                
                
                
                68
                %Cost
      of Goods Sold
                
                
                5,856,120
                
                
                
                3,908,256
                
                
                
                1,947,864
                
                
                
                50
                %Gross
      Profit
                
                
                3,026,609
                
                
                
                1,368,135
                
                
                
                1,658,474
                
                
                
                121
                %Gross
      Profit Percentage
                
                
                34.07
                %
                
                
                25.93
                %Operating
      ExpensesSelling
      expenses
                
                
                1,112,086
                
                
                
                585,314
                
                
                
                526,772
                
                
                
                90
                %General
      and administrative expense
                
                
                416,357
                
                
                
                202,087
                
                
                
                214,270
                
                
                
                106
                %Total
      Operating Expenses
                
                
                1,528,443
                
                
                
                787,401
                
                
                
                741,042
                
                
                
                94
                %Income
      From Operations
                
                
                1,498,166
                
                
                
                580,734
                
                
                
                917,432
                
                
                
                158
                %Other
      Income (Expense)Interest
      (expense) income, net
                
                
                (46,357
                )
                
                
                22,070
                
                
                
                (68,427
                )
                
                
                -310
                %Other
      income, net
                
                
                4,966
                
                
                
                36,468
                
                
                
                (31,502
                )
                
                
                -86
                %Total
      Other (Expense) Income
                
                
                (41,391
                )
                
                
                58,538
                
                
                
                (99,929
                )
                
                
                -171
                %Income
      Before Taxes and Minority Interest
                
                
                1,456,775
                
                
                
                639,272
                
                
                
                817,503
                
                
                
                128
                %Income
      Tax Provision
                
                
                227,911
                
                
                
                96,595
                
                
                
                131,316
                
                
                
                136
                %Income
      Before Minority Interest
                
                
                1,228,864
                
                
                
                542,677
                
                
                
                686,187
                
                
                
                126
                %Minority
      Interest
                
                
                95,035
                
                
                
                44,263
                
                
                
                50,772
                
                
                
                115
                %Net
      Income
                
                $
                1,133,829
                
                
                $
                498,414
                
                
                $
                635,415
                
                
                
                127
                %
 
 Revenues
 
 For the six
months ended June 30, 2008, our revenues were $8,882,729 as compared to
$5,276,391 for the six months ended June 30, 2007, an increase of $3,606,338 or
68%. As a result of increasing the commission rates in an effort to promote the
personnel's selling effort, sales of our major finished goods (wood materials,
board and floors) increased as compared to the sales quantities for the six
months ended June 30, 2007. In addition, we increased our unit sales prices by
20% effective as of October 2007. Our revenues from wood materials, board and
floor sales increased by amounts of $748,496, $179,620, and $2,283,669,
respectively in the six months ended June 30, 2008 as compared to the same
period in year 2007
 
 Cost
of Sales and Gross Profit
 
 For the six
months ended June 30, 2008, cost of sales amounted to $5,856,120 or 65.93% of
net revenues as compared to cost of sales of $3,908,256 or 74.07% of net
revenues for the six months ended June 30, 2007, an increase of $1,947,864 or
50%. Gross profit for the six months ended June 30, 2008 was $3,026,609 or
34.07% of revenues, as compared to $1,368,135 or 25.93% of revenues for the six
months ended June 30, 2007, an increase of $1,658,474 or 121%. The gross margin
increased mainly as a result of increased sales in the high-unit profit margin
in the sale of finished goods (wood materials and floors) during the current
year.
 
 22
 
 Operating
Expenses
 
 Our operating
expenses increased for the six months ended June 30, 2008 as compared to the six
months ended June 30, 2007. For the six months ended June 30, 2008, total
operating expenses were $1,528,443 as compared to $$787,401 for the six months
ended June 30, 2007, an increase of $741,042 million or 94%. This increase was
attributable to a significant increase in selling expenses, freight cost, and
commissions associated with our increased revenues. The increase in general and
administrative costs was primarily attributable to increases in consulting fees,
advisory fees, and legal fees.
 
 Other
Income (expenses)
  
  
 
 Income
Tax
  
  23
 
 LIQUIDITY
AND CAPITAL RESOURCES
 
 Operating
working capital (accounts receivable plus inventory less accounts payable and
accrued expenses) increased by approximately $1,700,000 from approximately
$2,400,000 as of December 31, 2007 to approximately $4,100,000 as of June 30,
2008. The increase was primarily due to an increase in inventories for amount of
approximately $1,400,000 during the current year.
 
 
 
 Cash used in
investing activities was ($33,532) for the six months ended June 30, 2008 as
compared to $830,616 for the six months ended June 30, 2007. The decrease is a
result of less investment activities of the Company in the current year which is
primarily due to insufficient cash and equivalent in the current
year.
 
 With
approximately $5.5 million of net working capital (total current assets less
total current liabilities) and positive cash flow from operations as of June 30,
2008, we believe we will have sufficient resources to finance our operations for
the coming year.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 Management's  Discussion  and  Analysis  of
Financial Condition and Plan of
Operations  discusses  the  Company's  financial  statements,  which  have  been
prepared  in  accordance  with  accounting  principles
generally accepted in the
United  States  of  America.  The  preparation  of  these  financial  statements
requires  management  to make estimates and assumptions that
affect the reported amounts  of  assets  and
liabilities at the date of the financial statements and
the  reported  amounts of revenues and expenses during the
reporting period.  On an on-going basis, management evaluates its
estimates and judgments, including those related to revenue recognition,
intangible assets, financing operations, and contingencies and
litigation.  Management bases its estimates and judgments
on  historical  experience  and on various other
factors that are believed to be
reasonable  under  the  circumstances,  the  results
of which form the basis for making judgments about the carrying value 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  most significant
accounting  estimates  inherent  in  the  preparation
of the Company's financial
statements  include  estimates  as  to
the appropriate carrying value of certain
assets  and  liabilities  which  are  not  readily  apparent
from other sources,
primarily  allowance  for  doubtful accounts and
accruals for other liabilities. These  accounting policies are
described at relevant sections in this discussion and  analysis and in
the notes to the consolidated financial statements included in our Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2007.
 
  ITEM 3.QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
 A smaller
reporting company is not required to provide the information required by this
Item.
 
 24
 
 ITEM
4.  CONTROLS AND PROCEDURES
 
 Evaluation of Disclosure Controls and
Procedures. Under the supervision and with the
participation  of  our  management,  including  our
Chief Executive Officer, Pengcheng Chen, and Chief Financial Officer, Yi Tong,
we  evaluated  the  effectiveness  of
the design and operation  of
our  disclosure  controls  and  procedures  (as  defined  in  Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange
Act")) as of the end of the  period  covered  by
this  report.  Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures as of the end of the period covered by this report were
effective such that the  information  required to be
disclosed by us in reports  filed under
the  Securities  Exchange  Act of 1934 is
(i)  recorded, processed,  summarized  and
reported  within the time  periods  specified in
the SEC's rules and forms and (ii) accumulated and  communicated to
our management to allow timely
decisions  regarding  disclosure.  A controls
system cannot provide absolute assurance, however, that the objectives of the
controls system are met, and no evaluation of controls can
provide  absolute  assurance  that all control
issues and  instances  of  fraud, if any, within a
company have been  detected.
 
 Changes
in  Internal  Control  Over  Financial  Reporting.  During
the most recent quarter ended March 31, 2008, there has been no change in our
internal control over financial  reporting  (as defined in
Rule  13a-15(f) and 15d-15(f) under the Exchange Act) ) that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
 
  25
 Part
II - OTHER INFORMATION
  ITEM 1
              LEGAL
      PROCEEDINGSNoneITEM
      1A
              RISK
      FACTORSA SMALLER REPORTING
      COMPANY IS NOT REQUIRED TO PROVIDE THE INFORMATION REQUIRED BY THIS
      ITEM.ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
  PROCEEDS.
 
 Unregistered
Sales of Equity Securities and Use of Proceeds.
 
 1.           As
discussed in Note 12 to the Financial Statements (and as described on the
Company’s Report on Form 8-K filed with the Securities and Exchange Commission
on June 20, 2008) on June 4 and June 12, 2008, the Company consummated an
offering of convertible promissory notes and common stock purchase warrants for
aggregate gross proceeds of $700,000.  The notes mature one (1) year
from closing and bear interest at an annual rate of 18%, payable at maturity in
USD.  Upon the successful closing of an equity or convertible debt
financing for a minimum of $2,000,000 (“Financing”), the promissory notes will
be convertible for shares of common stock at a 50% discount to the price per
share of Common Stock sold in the Financing. If a Financing is not achieved
within the one year term of the promissory notes, each investor has the option
to be paid the principal and interest due under the promissory note or convert
the note into common stock at a conversion price of $0.228 per
share.
 
 The warrants are exercisable at any
time after the consummation of the Financing through the fourth anniversary of
the consummation of the Financing (the “Financing Expiration Date”). Each holder
is entitled to purchase the number of shares of common stock equal to the
initial principal amount of such investor’s promissory notedivided by the lowest cash
purchase price paid for the Company’s common stock  (or the conversion
price or exercise price if the Financing consists of convertible securities or
warrants, respectively) in the Financing (the “Financing Based Conversion
Price”) at an exercise price equal to the Financing Based Conversion
Price.  If the Financing has not occurred within 12 months of the
issuance of the warrant, the warrant is exercisable from and after such date and
through the fourth anniversary of the issuance date of the
warrant.  In such event, the holder is entitled to purchase the number
of shares of common stock equal to 50% of the initial principal amount of the
promissory note divided by$0.228 at an exercise price equal to $0.228, subject to certain
adjustments  as set forth in the warrant.
  The investors have the right to require
the Company to register the shares of common stock  issuable upon
exercise of the warrants and conversion of the promissory notes at the Company’s
expense should the Company register any of its shares of common stock or any
securities convertible into common stock.
 
 26
 
 The Company’s
obligations under the promissory notes are secured by an aggregate of 2,332,899
shares of common stock pledged by Mr. Pengcheng Chen, the Company’s Chief
Executive Officer and 2,031,191 shares of common stock pledged by Mr. Fangshe
Zhang, the Company’s Chairman (the “Escrow Shares”). In the event that
subsequent to the closing, the value of the Escrow Shares is less
than  150% of the outstanding principal amount of the promissory notes
for 10 consecutive trading days, then the investors shall have the right to give
the Company notice (the “Investor Notice”) to deposit or cause to be deposited
additional Escrow Shares such that the value of the Escrow Shares based upon the
volume weighted average price per share  for the 20 trading days
preceding the date of the Investor Notice, is equal to 150% of the outstanding
principal amount of the promissory notes.  The Company shall deposit
or cause to be deposited such additional Escrow Shares within 30 days of the
date of the Investor Notice. To the extent the Escrow Shares are not sufficient
to meet the threshold of 150% of the outstanding principal amount of the
promissory notes within 30 days after the Investor Notice, the Company shall
grant to Investors a security interest on the Company’s tangible assets to the
extent permitted under applicable law.
 
 The Company
is using the proceeds of the Offering for working capital.
  2.
              In May 2008, the
      board of directors of the Company authorized, and on July 31, 2008 the
      Company issued, 150,000 shares of the Company’s common stock to its
      attorney for services rendered3.
              In June 2008, the
      board of directors of the Company authorized, and on August 14 2008 the
      Company issued, 100,000 shares of the Company’s common stock to Hawk
      Associates, Inc. for services rendered pursuant to the term of the
      agreement with Hawk Associates.
 
 ITEM3.
              DEFAULTS
      UPON SENIOR SECURITIESNoneITEM 4.
              SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERSNoneITEM 5.
              OTHER  INFORMATIONNoneITEM 6.
              EXHIBITS
  Exhibit
      Number
                  
                  Description31.1
                  
                  Certification of the
      Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
      of2002.31.2
                  
                  Certification of the
      Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
      of200232.1
                  
                  Certification of
      Chief Executive Officer Certification pursuant to Section 906 of the
      Sarbanes-Oxley Act of
      2002.32.2
                  
                  Certification of Chief Financial
      Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.
 27
 SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant has caused
his report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 ASIA CORK INC.Dated:
      February
      11, 2010
                By:
                /s/ Pengcheng
      ChenPengcheng
      Chen, Chief Executive OfficerBy:
                /s/
      Yi TongYi
      Tong, Chief Financial Officer
 
 28