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 SECURITIES EXCHANGE ACT OF
1934


For the
quarterly period ended March 31, 2009





o   TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
transition period from:





Commission
file number000-30115





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)





Check
whether the Issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.      YES þ           NO
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files.)  Yes þ   No
o




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




Large
      accelerated filer  o
            Accelerated
      filer  o
            Non-accelerated
      filer  o
            Small
      reporting company þ




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





State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date: On May 15, 2009 there were 35,663,850 shares
of Common Stock, par value $.0001 per share, outstanding.





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934) (check one): Yes o  No 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 MARCH 31, 2009





INDEX






PagePART I
            
            FINANCIAL
      INFORMATION
            1Item 1:
            
            Financial
      Statements
            1Item 2:
            
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
            18Item 3:
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            25Item
    4:
            
            Controls and
      Procedures
            25PART II
            
            OTHER
      INFORMATION26Item 1:
            
            Legal
      Proceedings
            26Item 1A:
            
            Risk
      Factors
            26Item 2:
            
            Unregistered
      Sales of Equity Securities and Use of
      Proceeds
            26Item 3:
            
            Default upon
      Senior Securities
            26Item 4:
            
            Submission of
      Matters to a Vote of Security Holders
            26Item 5:
            
            Other
      Information
            26Item 6:
            
            Exhibits
            26















PART
I




Financial
Information


ITEM
1.




Asia Cork Inc. and
      Subsidiaries(F/K/A
      Hankersen International Corp. and Subsidiaries)Condensed
      Consolidated Balance SheetsMarch
      31, 2009
              
              
              December
      31, 2008(Unaudited)
              
              
              (Audited)Assets:Current
      AssetsCash
      and equivalents
              
              $
              18,979
              
              
              $
              23,605Accounts
      receivable, net of allowance for doubtful accounts of $22,940 and $23,787,
      respectively
              
              
              4,645,920
              
              
              
              4,956,005Inventories
              
              
              2,632,242
              
              
              
              2,756,011Advance
      to suppliers
              
              
              2,826,187
              
              
              
              2,562,357Loan
      to unrelated party
              
              
              1,463,351
              
              
              
              1,465,738Deferred
      income tax assets
              
              
              6,705
              
              
              
              7,757Prepayments
      and other current assets
              
              
              91,637
              
              
              
              34,718Total
      Current Assets
              
              
              11,685,021
              
              
              
              11,806,191Property
      and Equipment - Net
              
              
              4,731,266
              
              
              
              4,813,629Deposit
      for Purchase of Fixed Assets
              
              
              2,019,425
              
              
              
              2,022,719Deposit
      for Acquisition
              
              
              1,463,351
              
              
              
              1,465,738Investment
      - At Cost
              
              
              2,048,692
              
              
              
              2,052,034Intangible
      Assets- Net
              
              
              169,546
              
              
              
              171,178Deferred
      Income Tax Assets
              
              
              15,731
              
              
              
              16,586Total
      Assets
              
              
              22,133,032
              
              
              
              22,348,075Liabilities
      and Equity:Liabilities:Current
      LiabilitiesAccounts
      payable and accrued expenses
              
              
              1,379,966
              
              
              
              1,395,366Loan
      payable
              
              
              439,005
              
              
              
              439,722Convertible
      note, net
              
              
              644,123
              
              
              
              574,276Customer
      deposit
              
              
              10,102
              
              
              
              10,118Taxes
      payable
              
              
              187,973
              
              
              
              275,224Due
      to stockholders/officers
              
              
              177,410
              
              
              
              177,699Other
      current liabilities
              
              
              3,418
              
              
              
              33,027Total
      Current Liabilities
              
              
              2,841,997
              
              
              
              2,905,432Total
      Liabilities
              
              
              2,841,997
              
              
              
              2,905,432Equity:Asia
      Cork Inc. Stockholders' Equity:Common
      stock, $0.0001 par value, 200,000,000 shares authorized,35,663,850
      issued and outstanding
              
              
              3,566
              
              
              
              3,566Additional
      paid-in capital
              
              
              4,485,446
              
              
              
              4,485,446Additional
      paid-in capital  stock warrant
              
              
              279,386
              
              
              
              279,386Reserve
      funds
              
              
              2,236,716
              
              
              
              2,236,716Retained
      earnings
              
              
              7,853,242
              
              
              
              7,966,783Accumulated
      other comprehensive income
              
              
              2,636,129
              
              
              
              2,668,724Total
      Asia Cork Inc. Stockholders' Equity
              
              
              17,494,485
              
              
              
              17,640,621Noncontrolling
      Interest
              
              
              1,796,550
              
              
              
              1,802,022Total
      Equity
              
              
              19,291,035
              
              
              
              19,442,643Total
      Liabilities and Equity
              
              $
              22,133,032
              
              
              $
              22,348,075The
      accompanying notes are an integral part of these unaudited condensed
      consolidated financial statements.
 
 1
 Asia Cork Inc. and
      Subsidiaries(F/K/A
      Hankersen International Corp. and Subsidiaries)Condensed
      Consolidated Statements of Operations (Unaudited)For
      Three Months Ended March 31,2009
                  
                  
                  2008(Unaudited)
                  
                  
                  (Unaudited)Revenues
                  
                  $
                  902,504
                  
                  
                  $
                  2,516,345Cost
      of Goods Sold
                  
                  
                  689,587
                  
                  
                  
                  1,683,099Gross
      Profit
                  
                  
                  212,917
                  
                  
                  
                  833,246Operating
      ExpensesSelling
      expenses
                  
                  
                  125,165
                  
                  
                  
                  279,294General
      and administrative expense
                  
                  
                  114,282
                  
                  
                  
                  73,469Total
      Operating Expenses
                  
                  
                  239,447
                  
                  
                  
                  352,763(Loss)
      Income From Operations
                  
                  
                  (26,530
                  )
                  
                  
                  480,483Other
      Income (Expense)Interest
      (expense), net
                  
                  
                  (114,384
                  )
                  
                  
                  (12,553
                  )Other
      income , net
                  
                  
                  24,725
                  
                  
                  
                  34,143Total Other (Expense) Income
                  
                  
                  (89,659
                  )
                  
                  
                  21,590(Loss)
      Income Before Taxes
                  
                  
                  (116,189
                  )
                  
                  
                  502,073Provision
      for Income Taxes
                  
                  
                  2,824
                  
                  
                  
                  76,791Net
      (Loss) Income Before Noncontrolling Interest
                  
                  
                  (119,013
                  )
                  
                  
                  425,282Less:
      Net (loss) income attributable to the noncontrolling
    interest
                  
                  
                  (5,472
                  )
                  
                  
                  35,100Net
      (Loss) Income Attributable to Asia Cork Inc.
                  
                  $
                  (113,541
                  )
                  
                  $
                  390,182Earnings
      Per Share - Basic and Diluted:-
      Basic
                  
                  $
                  (0.00
                  )
                  
                  $
                  0.01- Diluted:
                  
                  $
                  (0.00
                  )
                  
                  $
                  0.01Weighted
      Common Shares Outstanding - Basic and Diluted-
      Basic
                  
                  
                  35,663,850
                  
                  
                  
                  35,413,850- Diluted:
                  
                  
                  38,734,025
                  
                  
                  
                  35,413,850The
      accompanying notes are an integral part of these unaudited condensed
      consolidated financial statements.
 
 2
  Asia Cork Inc. and
      Subsidiaries(F/K/A
      Hankersen International Corp. and Subsidiaries)Condensed
      Consolidated Statements of Comprehensive (Loss) Income
      (Unaudited)For
      Three Months Ended March 31,2009
                  
                  
                  2008(Unaudited)
                  
                  
                  (Unaudited)Net
      (Loss) Income Before Noncontrolling Interest
                  
                  $
                  (119,013
                  )
                  
                  $
                  425,282Other
      Comprehensive (Loss) Income:Foreign
      Currency Translation (Loss) Income
                  
                  
                  (32,595
                  )
                  
                  
                  614,388Comprehensive
      (Loss) Income
                  
                  $
                  (151,608
                  )
                  
                  $
                  1,039,670The
      accompanying notes are an integral part of these unaudited condensed
      consolidated financial statements.
 3





Asia Cork Inc. and
      Subsidiaries(F/K/A
      Hankersen International Corp. and Subsidiaries)Condensed
      Consolidated Statements of Changes in
    Equity (Unaudited)For
      Three Months Ended March 31, 2009 and the Year Ended December 31,
      2008Asia
      Cork Inc. Stockholders' EquityCommon
      Stock,
              
              
              Additional
      Paid-in Capital
              
              
              Additional
      Paid-in Capital Stock Warrant
              
              
              
              
              
              Retained
      Earnings / (Accumulated Deficit)
              
              
              Other
      Comprehensive Income (Expense)
              
              
              Noncontrolling
      InterestNo.
      of Shares
              
              
              Amount
              
              
              Reserve
      Fund
              
              
              TotalBalance,
      December 31, 2007
              
              
              35,413,850
              
              
              $
              3,541
              
              
              $
              4,396,772
              
              
              $
              -
              
              
              $
              1,741,715
              
              
              $
              5,729,630
              
              
              $
              1,564,966
              
              
              $
              1,522,318
              
              
              $
              14,958,942Patent
      rights donated by chairman
              
              
              -
              
              
              
              -
              
              
              
              4,199
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              4,199Issued convertible note withstock
      warrant in June, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              279,386
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              279,386Issued new common stocks onJuly 31, 2008for service received
              
              150,000
              
              
              
              15
              
              
              
              43,485
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              43,500Issued new common stocks onAugust 14, 2008for service received
              100,000
              
              
              
              10
              
              
              
              40,990
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              41,000Net
      income for year ended December 31, 2008
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              2,732,154
              
              
              
              -
              
              
              
              279,704
              
              
              
              3,011,858Appropriation
      of reserve funds
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              495,001
              
              
              
              (495,001
              )
              
              
              -
              
              
              
              -
              
              
              
              -Foreign
      currency translation gain
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              1,103,758
              
              
              
              -
              
              
              
              1,103,758Balance,
      December 31, 2008
              
              
              35,663,850
              
              
              $
              3,566
              
              
              $
              4,485,446
              
              
              $
              279,386
              
              
              $
              2,236,716
              
              
              $
              7,966,783
              
              
              $
              2,668,724
              
              
              $
              1,802,022
              
              
              $
              19,442,643Net
      loss for three months ended March 31, 2009
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (113,541
              )
              
              
              
              
              
              
              (5,472
              )
              
              
              (119,013
              )Foreign
      currency translation loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (32,595
              )
              
              
              
              
              
              
              (32,595
              )Balance,
      March 31, 2009
              
              
              35,663,850
              
              
              $
              3,566
              
              
              $
              4,485,446
              
              
              $
              279,386
              
              
              $
              2,236,716
              
              
              $
              7,853,242
              
              
              $
              2,636,129
              
              
              $
              1,796,550
              
              
              $
              19,291,035
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
 4
  Asia Cork Inc. and
      Subsidiaries(F/K/A
      Hankersen International Corp. and Subsidiaries)Condensed
      Consolidated Statements of Cash
    Flows  (Unaudited)For
      the Three Months Ended March 31,2009
              
              
              2008(Unaudited)
              
              
              (Unaudited)Cash
      Flows From Operating ActivitiesNet
      (Loss) Income
              
              $
              (113,541
              )
              
              $
              390,182Adjustments
      to Reconcile Net Income to Net Cash(Used
      in) Provided by Operating ActivitiesDepreciation
      and amortization
              
              
              75,846
              
              
              
              57,860Bad
      debt adjustment
              
              
              (808
              )
              
              
              (347
              )Net
      (loss) income attributable to noncontrolling interest
              
              
              (5,472
              )
              
              
              35,100Deferred
      income tax benefits
              
              
              1,866
              
              
              
              -Consulting
      fees adjusted from deferred
              
              
              9,840
              
              
              
              -Interest
      expenses for discount on convertible note
              
              
              69,756Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              303,315
              
              
              
              (68,220
              )Inventories
              
              
              119,475
              
              
              
              378,493Advance
      to suppliers
              
              
              (268,441
              )
              
              
              20,022Prepayments
      and other current assets
              
              
              (66,908
              )
              
              
              (4,669
              )Accounts
      payable and accrued expenses
              
              
              (13,149
              )
              
              
              (118,629
              )Taxes
      payable
              
              
              (86,944
              )
              
              
              (535,001
              )Other
      current liabilities
              
              
              (29,603
              )
              
              
              (8,417
              )Net
      Cash (Used in) Provided by Operating Activities
              
              
              (4,768
              )
              
              
              146,374Net
      (Decrease) Increase in Cash and Equivalents
              
              
              (4,768
              )
              
              
              146,374Effect
      of Exchange Rate Changes on Cash
              
              
              142
              
              
              
              14,696Cash
      and Equivalents at Beginning of Period
              
              
              23,605
              
              
              
              367,396Cash
      and Equivalents at End of Period
              
              $
              18,979
              
              
              $
              528,466SUPPLEMENT
      DISCLOSURES OF CASH FLOW INFORMATIONInterest
      expenses paid
              
              $
              13,112
              
              
              $
              13,825Income
      taxes paid
              
              $
              108
              
              
              $
              282,495
  
 5





Asia
Cork Inc. and Subsidiaries


(F/K/A
Hankersen International Corp. and Subsidiaries)


Notes
to Condensed Consolidated Financial Statements (Unaudited)




1.
            BASIS
      OF PRESENTATION





a)
            Interim
      financial statements:





The
unaudited condensed 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, 2008 was derived from
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-K. These interim financial statements should be read in
conjunction with that report.





The
condensed 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:








Asia Cork
Inc. (f/k/a Hankersen International Corp.) (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.





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





6


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. The capitalizations are described in further detail in Note 18
to the accompanying consolidated financial statements.





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.








Hanxin
International has no other business activities but owns 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 engages in cork trading
businesses.





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 through the
distributors or agents..





c)
            Negative
      Cash Flow in Operating Activities during Transaction Period and Management
      Plans





Commencing
from fourth quarter 2008, due to adverse market conditions for home and
commercial renovation and decoration, the Company’s accounts receivable
outstanding for over a half year increased to $2,521,196 (equivalent to
RMB17,228,923) and the cash and equivalents dropped significantly to $18,979 as
of March 31, 2009. In addition, the Company had negative cash flow in operating
activities for the year ended December 31, 2008 and for the three months ended
March 31, 2009, respectively. These events raise substantial doubt about the
Company’s ability to continue as a going concern. The Company’s ability to
continue as a going concern and its future success is dependent upon its ability
to collect the outstanding accounts receivable, to borrow the money either from
shareholders or outside credit union, banks, or investors, and to raise capital
in the near term to (1) satisfy its current obligations, and (2) the successful
wide scale development and marketing of its high profit products.





7


The
Company presently has ongoing discussions and negotiations with a number of
additional financing alternatives. However, the Company has no definitive
agreements to provide funding at this time.





The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





d)
            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 2009 and 2008 include the estimated useful lives and
fair values of the assets. Actual results could differ from those
estimates.





e)
            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.





f)
            Stock-based compensation


g)
              Basic and diluted net income per
      share
 8
 
 h)
                Foreign
      currency translation
 The
reporting currency of the Company is the U.S. dollar. The functional currencies
of the Company's subsidiaries are local currencies, primarily the Chinese
Renminbi. The financial statements are translated into U.S. dollars using
period-end rates of exchange for assets and liabilities and average rates of
exchange for the period for revenues and expenses. Translation adjustments
resulting from the process of translating the local currency financial
statements into U.S. dollars are included in other comprehensive income or
loss.
 
 i)
                Recent
      accounting pronouncements
 
 In June
2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue
03-6, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1
states that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. All prior-period
EPS data presented shall be adjusted retrospectively (including interim
financial statements, summaries of earnings, and selected financial data) to
conform with the provisions of FSP EITF 03-6-1. The adoption of this FSP EITF
03-6-1 did not have a material effect on the Company’s financial
position.
 
 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.
 
 9
 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 had adopted SFAS No. 160 on its condensed
consolidated results of operations, financial position, and financial disclosure
in year 2009.
 
 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.
  10
 2.
                INVENTORIES
 
 Inventories
as of March 31, 2009 and December 31, 2008, consisted of the
following:
  March
      31, 2009
                  
                  
                  December
      31, 2008(Unaudited)
                  
                  
                  (Audited)Raw
      materials
                  
                  $
                  1,850,269
                  
                  
                  $
                  2,073,501Work
      in process
                  
                  
                  534,654
                  
                  
                  
                  210,526Finished
      goods
                  
                  
                  232,224
                  
                  
                  
                  427,459Packaging
      and other
                  
                  
                  15,095
                  
                  
                  
                  44,525Total
                  
                  $
                  2,632,242
                  
                  
                  $
                  2,756,011
 3.
                LOAN
      TO UNRELATED PARTY
 
 Hanxin
had prepaid RMB10 million as deposits to purchase the land use right from one of
its major sales distributors in Shaanxi Province, Shaanxi Shuta Wood Products
Co., Ltd. (“Shaanxi Shuta”). However, Hanxin terminated the agreement in August
2008 and had all deposits refunded in August and September 2008.
 
 In 2008,
Shaanxi Shuta opened cork retail chain stories dedicated to sell Hanxin’s
products exclusively. Shaanxi Shuta incurred heavy losses because Hanxin could
not achieve its 500,000 square meters floor and board production plan in 2008
and had delayed many purchase orders. In order to avoid losing a very important
distribution channel and to assist Shaanxi Shuta to recover from this situation,
Hanxin loaned RMB10 million (equivalent to $1,463,351) to Shaanxi Shuta for one
year starting from October 27, 2008. This loan is non-interest bearing and
unsecured.
 
 4.
                PROPERTY
      AND EQUIPMENT
 
 As of
March 31, 2009 and December 31, 2008, property and equipment consisted of the
following:
  March
      31, 2009
                  
                  
                  December
      31, 2008Estimated
      Life
                  
                  
                  (Unaudited)
                  
                  
                  (Audited)Building
      and improvement
                  
                  
                  27-35
                  
                  
                  $
                  4,886,973
                  
                  
                  $
                  4,894,945Manufacturing
      equipment
                  
                  
                  1-8
                  
                  
                  
                  837,400
                  
                  
                  
                  838,766Office
      furniture and equipment
                  
                  
                  5
                  
                  
                  
                  31,090
                  
                  
                  
                  31,141Vehicle
                  
                  
                  2-8
                  
                  
                  
                  12,506
                  
                  
                  
                  12,527Machinery
      improvement
                  
                  
                  3
                  
                  
                  
                  80,484
                  
                  
                  
                  80,616Subtotal
                  
                  
                  
                  
                  
                  
                  5,848,454
                  
                  
                  
                  5,857,995Less:
      Accumulated depreciation
                  
                  
                  
                  1,117,188
                  
                  
                  
                  1,044,366Total
                  
                  
                  
                  
                  
                  $
                  4,731,266
                  
                  
                  $
                  4,813,629
 For the
three months ended March 31, 2009 and 2008, depreciation expenses amounted to
$74,494 and $56,645 respectively.
  11
 5.
                DEPOSIT
      FOR PURCHASE OF FIXED ASSETS
  Hanxin
intended to purchase a factory’s fixed assets through an unrelated agent who
will do the negotiation for the Company, and both parties signed the Entrust
Purchase Agreement on November 10, 2005. Hanxin had paid deposits $2,019,425
(equivalent to RMB 13,800,000) to the agent as of March 31, 2009, and the same
deposit was valued at $2,022,719 (equivalent to RMB 13,800,000) as of December
31, 2008. The agency agreement has no firm commitment on the purchase but it
states a maximum price of RMB 50,000,000 that the Company is willing to pay for
the fixed assets. The deposit is fully refundable if the purchase does not close
by September 30, 2009.
  
 6.
                DEPOSIT
      FOR ACQUISITION
  Hanxin
intended to acquire Sichuan Hanxin Cork Merchandises Co, Ltd. (“Sichuan Hanxin
”), one of its cork raw material providers located in Sichuan Province China,
and signed a strategic cooperation agreement with Sichuan Hanxin on March 26,
2007. The purchase price of Sichuan Hanxin shall not exceed $2,926,702 (RMB20
million) based upon the agreement. As of March 31, 2009, Hanxin had paid a
$1,463,351 (equivalent to RMB10 millions) deposit to Sichuan Hanxin. Hanxin
anticipates applying the whole deposited amount to payments for raw materials if
the acquisition does not occur.
  
 7.
                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
$2,048,692 (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.
 
 
 8.
                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. Fangshe 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 were $4,199 (equivalent to RMB28,800). As of March 31, 2009
and December 31, 2008, intangible assets, less accumulated amortization
consisted of the following:
  12
 March
      31, 2009
                  
                  
                  December
      31, 2008(Unaudited)
                  
                  
                  (Audited)Intangible
      assets
                  
                  $
                  207,992
                  
                  
                  $
                  208,332Less:
      Accumulated amortization
                  
                  
                  38,446
                  
                  
                  
                  37,154Total
                  
                  $
                  169,546
                  
                  
                  $
                  171,178
 
 For the
three months ended March 31, 2009 and 2008, amortization expense amounted to
$1,352 and $1,215 respectively.
 
 The
amortization expenses for the next five years are as follows:
 
 2009
                
                $
                5,4122010
                
                
                5,4122011
                
                
                5,4122012
                
                
                5,4122013
                
                
                5,412
  9.
                LOAN
      PAYABLE
 
 Loan
payable as of March 31, 2009 and December 31, 2008 consisted of the
following:
 
 March
      31, 2009
                  
                  
                  December
      31, 2008(Unaudited)
                  
                  
                  (Audited)On
      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 $439,722 ) 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.
                  
                  $
                  439,005
                  
                  
                  $
                  439,722Total
      Loan Payable
                  
                  $
                  439,005
                  
                  
                  $
                  439,722
 
 10.
                CONVERTIBLE
      NOTES AND
WARRANTS
   
 13
  The
Company’s obligations under the promissory notes are secured by an aggregate of
7,630,814 shares of common stock pledged by Mr. Pengcheng Chen, the Company’s
Chief Executive Officer, Mr. Fangshe Zhang, the Company’s Chairman (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.
    March
      31, 2009
                    
                    
                    December
      31, 2008(Unaudited)
                    
                    
                    (Audited)Convertible
      note
                    
                    $
                    700,000
                    
                    
                    $
                    700,000Less:
      Discount on convertible note
                    
                    
                    55,877
                    
                    
                    
                    125,724Convertible
      note, net
                    
                    $
                    644,123
                    
                    
                    $
                    574,276
  11.
                  TAX
      PAYABLE
  The
Company and its U. S. subsidiary will file consolidated Federal income tax and
state franchise tax annual report individually. Its PRC subsidiaries file income
tax returns under the Income Tax Law of the PRC 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 of existence, and then receives a 50% exemption of income
tax for the next three years if it is a non high-tech corporation or 15% tax
rate for corporation qualified by State Science and Technology Commission as
"High Tech Manufacturing Enterprise" located in State "High Tech Zone" approved
by China State Council. Hanxin is qualified as a High Tech Manufacturing
Enterprise. Based on this regulation, Hanxin was exempt from income tax in year
2003 and 2004 and its income has been subject to a 15% tax starting from January
1, 2005. CIE is not “High Tech Manufacturing Enterprise”, thus its income is
subject to 33% tax rate. Commencing from January 2008, based on the new
regulation in the PRC, CIE’s income is subject to 25% tax rate.
  On March
31, 2009 and December 31, 2008, taxes payable consisted the
following:
  March
      31, 2009
                    
                    
                    December
      31, 2008(Unaudited)
                    
                    
                    (Audited)Value-added
      tax
                    
                    $
                    87,773
                    
                    
                    $
                    177,287Corporate
      income tax provision
                    
                    
                    75,615
                    
                    
                    
                    74,887Local
      taxes and surcharges
                    
                    
                    7,188
                    
                    
                    
                    13,492Franchise
      tax
                    
                    
                    17,397
                    
                    
                    
                    9,558Total
                    
                    $
                    187,973
                    
                    
                    $
                    275,224
 The
deferred income tax assets results from loss on disposition of fixed assets that
are not deductible.
 The
components of the provisions for income taxes were as follows:
  For
      Three Months Ended March 31,2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Audited)Current
      taxes:Current
      income taxes in P.R. China
                    
                    $
                    958
                    
                    
                    $
                    76,791Deferred
      taxes
                    
                    
                    1,866
                    
                    
                    
                    -Total
      provision for income taxes
                    
                    $
                    2,824
                    
                    
                    $
                    76,791
  14
 12.
                  DUE TO
    STOCKHOLDERS/OFFICERS
 
 Amounts
due to stockholders/officers are unsecured, non-interest bearing, and have not
set repayment date.  As of March 31, 2009 and December 31, 2008, the
total net amounts due to the stockholders/officers were $177,410 and $177,699,
respectively, which represented the net amounts lent by stockholders/officers to
the Company.
  13.
                  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.
 
 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 May 15,
2009.
 
 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 were 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 March 31, 2009.
 
 15
 14.  BASIC
AND DILUTED EARNING PER SHARE
    For
      Three Months Ended March 31,2009
                    
                    
                    2008Basic:Numerator:Net
      (loss) income for basic calculation
                    
                    $
                    (113,541
                    )
                    
                    $
                    390,182Denominator:Weighted
      average common shares
                    
                    
                    35,663,850
                    
                    
                    
                    35,413,850Denominator
      for basic calculation
                    
                    
                    35,663,850
                    
                    
                    
                    35,413,850Net
      (loss) income per share — basic
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.01Diluted:Numerator:Net
      (loss) income for basic calculation
                    
                    $
                    (113,541
                    )
                    
                    $
                    390,182Effect
      of dilutive securities issued
                    
                    
                    98,015
                    
                    
                    
                    -Net
      (loss) income for diluted calculation
                    
                    $
                    (15,526
                    )
                    
                    $
                    390,182Denominator:Denominator
      for basic calculation
                    
                    
                    35,663,850
                    
                    
                    
                    35,413,850Weighted
      average effect of dilutive securities:Convertible
      debt
                    
                    
                    3,070,175
                    
                    
                    
                    -Denominator
      for diluted calculation
                    
                    
                    38,734,025
                    
                    
                    
                    35,413,850Net
      (loss) income per share — diluted
                    
                    $
                    (0.00
                    )
                    
                    $
                    0.01
 15.
                  COMMITMENTS
  The
Company leases its office space and production land under operating lease
agreements that are expiring on December 31, 2009 and October, 2047
respectively. The following is a schedule of future minimum rental land payments
required under these operating leases as of March 31, 2009.
  16
 For
      the Quarter Ending March 31,
                    
                    Amount2010
                    
                    $
                    74,1882011
                    
                    
                    17,5532012
                    
                    
                    17,5532013
                    
                    
                    17,5532014
                    
                    
                    17,553Thereafter
                    
                    
                    589,501Total
      minimum rental payments required
                    
                    $
                    733,901
 Rent and
properties maintenance expenses amounted to $29,118 and $36,170 for the three
months ended March 31, 2009 and 2008, respectively.
 
 The
Company also leases three patent rights from its Chairman, Mr. Fangshe 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 as of March 31, 2009.
  For
      the Quarter Ending March 31,
                    
                    Amount2010
                    
                    $
                    351,0682011
                    
                    
                    351,0682012
                    
                    
                    15,603Total
      minimum rental payments required
                    
                    $
                    717,739
 Patent
lease expenses amounted to $87,767 and $83,773 for the three months ended March
31, 2009 and 2008, 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. Hawk was also issued
100,000 restricted 144 shares of the Company’s common stock on August 14,
2008.
 
 
 16.
                  CONCENTRATIONS
      OF BUSINESS AND CREDIT RISK
 
 Financial
Risks:
 
 The
Company provides credit in the normal course of business. The Company performs
ongoing credit evaluations of its customers and maintains allowances for
doubtful accounts based on factors surrounding the credit risk of specific
customers, historical trends, and other information.
 
 Concentrations
Risks:
 
 For the
three months ended March 31, 20009 and 2008, none of the Company’s customers
accounted for more than 10% of its sales.
 17
 Major
Suppliers:
 
 The
Following summaries purchases of raw materials from major suppliers (each 10% or
more of purchases):
 
 Purchases
      from
                    
                    
                    Number
      of
                    
                    
                    PercentageThree
      Months Ended March 31,
                    
                    Major
      Suppliers
                    
                    
                    Suppliers
                    
                    
                    of
      Total2009
                    
                    $
                    119,480
                    
                    
                    
                    2
                    
                    
                    
                    76.60
                    %2008
                    
                    $
                    514,077
                    
                    
                    
                    3
                    
                    
                    
                    50.73
                    %
 Geographical
Risks:
 
 Substantially
all of the Company’s assets and operations were in the PRC for the three months
ended March 31, 2009 and 2008. Accordingly, the Company’s business, financial
condition and results of operations may be influenced by the political, economic
and legal environment in PRC, and by the general state of the economy of PRC.
The Company’s operations in PRC are subject to special considerations and
significant risks not typically associated with companies in the United States.
These include risks associated with, among others, the political, economic and
legal environments and foreign currency exchange. The Company's results may be
adversely affected by, among other things, changes in the political, economic
and social conditions in PRC, and by changes in governmental policies with
respect to laws and regulations, changes in PRC's cork manufacture industry and
regulatory rules and policies, anti-inflationary measures, currency conversion
and remittance abroad, and rates and methods of taxation.
 
 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 three months ended March 31, 2009 and 2008, should be read in
conjunction with the consolidated financial statements, including footnotes, and
other information presented in our annual report on Form 10-K as filed with the
Securities and Exchange Commission on April 16, 2009.
 
 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.
 
 18
 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. Hanxin is the manufacturing subsidiary
that produces cork-building material sold under the Hanxin brand name and on a
private label basis. Approximately 70% of Hanxin's products sold in 2009 were to
customers in foreign countries, among which approximately 30% sold through
unrelated export distributors under their private label, and around 40% sold to
other domestic cork product manufacturers who reprocess our products and sell
the end products to overseas markets under their private label. The rest 30% are
sold to customers in China by our own sales persons, and domestic 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.   .
 
 19
 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.
 
 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.
 
 20
 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.
 
 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.
 
 21
 
 RESULTS OF
OPERATIONS
 
 THREE
MONTHS ENDED MARCH 31, 2009 COMPARED TO THREE MONTHS ENDED MARCH 31,
2008
  For
      Three Months Ended March 31,2009
                    
                    
                    2008(Unaudited)
                    
                    
                    (Unaudited)
                    
                    
                    (Decrease)/
      IncreaseRevenues
                    
                    $
                    902,504
                    
                    
                    $
                    2,516,345
                    
                    
                    $
                    (1,613,841
                    )
                    
                    
                    -64.13
                    %Cost
      of Goods Sold
                    
                    
                    689,587
                    
                    
                    
                    1,683,099
                    
                    
                    
                    (993,512
                    )
                    
                    
                    -59.03
                    %Gross
      Profit
                    
                    
                    212,917
                    
                    
                    
                    833,246
                    
                    
                    
                    (620,329
                    )
                    
                    
                    -74.45
                    %Gross
      Profit Percentage
                    
                    
                    23.59
                    %
                    
                    
                    33.11
                    %Operating
      ExpensesSelling
      expenses
                    
                    
                    125,165
                    
                    
                    
                    279,294
                    
                    
                    
                    (154,129
                    )
                    
                    
                    -55.19
                    %General
      and administrative expense
                    
                    
                    114,282
                    
                    
                    
                    73,469
                    
                    
                    
                    40,813
                    
                    
                    
                    55.55
                    %Total
      Operating Expenses
                    
                    
                    239,447
                    
                    
                    
                    352,763
                    
                    
                    
                    (113,316
                    )
                    
                    
                    -32.12
                    %(Loss)
      Income From Operations
                    
                    
                    (26,530
                    )
                    
                    
                    480,483
                    
                    
                    
                    (507,013
                    )
                    
                    
                    -105.52
                    %Other
      Income (Expense)Interest
      (expense), net
                    
                    
                    (114,384
                    )
                    
                    
                    (12,553
                    )
                    
                    
                    (101,831
                    )
                    
                    
                    811.21
                    %Other
      income, net
                    
                    
                    24,725
                    
                    
                    
                    34,143
                    
                    
                    
                    (9,418
                    )
                    
                    
                    -27.58
                    %Total Other (Expense) Income
                    
                    
                    (89,659
                    )
                    
                    
                    21,590
                    
                    
                    
                    (111,249
                    )
                    
                    
                    -515.28
                    %(Loss)
      Income Before Taxes
                    
                    
                    (116,189
                    )
                    
                    
                    502,073
                    
                    
                    
                    (618,262
                    )
                    
                    
                    -123.14
                    %Income
      Tax Provision
                    
                    
                    2,824
                    
                    
                    
                    76,791
                    
                    
                    
                    (73,967
                    )
                    
                    
                    -96.32
                    %(Loss)
      Income Before Noncontrolling Interest
                    
                    
                    (119,013
                    )
                    
                    
                    425,282
                    
                    
                    
                    (544,295
                    )
                    
                    
                    -127.98
                    %Less:
      Net (loss)  income attributable to the noncontrolling
      interest
                    
                    
                    (5,472
                    )
                    
                    
                    35,100
                    
                    
                    
                    (40,572
                    )
                    
                    
                    -115.59
                    %Net
      (Loss) Income Attributable to Asia Cork Inc.
                    
                    $
                    (113,541
                    )
                    
                    $
                    390,182
                    
                    
                    $
                    (503,723
                    )
                    
                    
                    -129.10
                    %
 Revenues
 
 For the
three months ended March 31, 2009, our revenues were $902,504 as compared to
$2,516,345 for the three months ended March 31, 2008, a decrease of $1,613,841
or 64.13%. The reason for the decrease is primarily due to adverse market
condition for home and commercial renovation has recently significantly
adversely affected revenues. While we have successfully grown our revenues over
recent years, we cannot predict when the industry will recover.
 
 Cost
of Sales and Gross Profit
 
 For the
three months ended March 31, 2009, cost of sales amounted to $689,587 or 76.41%
of net revenues as compared to cost of sales of $1,683,099 or 66.89% of net
revenues for the three months ended March 31, 2008. Gross profit for the three
months ended March 31, 2009 was $212,917 or 23.59% of revenues, as compared to
$833,246 or 33.11% of revenues for the three months ended March 31, 2008. The
gross margin decreased mainly as a result of decreased sales in certain finished
goods (wood materials and floors), which had the high-unit profit margin, and
slightly reduced unit sales price in the first quarter 2009 that were made to
attract sales.
 
 22
 Operating
Expenses
 
  
 Other
Income (expense)
 
  
  
 Income
Tax
 
  
 LIQUIDITY
AND CAPITAL RESOURCES
 
  
 23
  
 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 the date of issuance 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 into shares of common stock at a 50%
discount to the price per share of Common Stock sold in the Financing. It is
unlike that a Financing will be achieved within the one year term of the
promissory notes. Therefore, each investor has the option to be paid the
principal and interest due under the promissory note or convert the note into
shares of common stock at a conversion price of $0.228 per share. The promissory
notes are secured by Common Stock pledged by Pengcheng Chen, our Chief Executive
Officer and Fangshe Zhang, our Chairman.  However, at the present time
we do not have sufficient cash or cash equivalents to repay the promissory
should the investors demand payment upon maturity. The Company is seeking
alternate financing, but there is no assurance it will be
obtained.
 
  
 The
Company presently has ongoing discussions and negotiations with a number of
additional financing alternatives. However, the Company has no definitive
agreements to provide funding at this time.
 
 CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
 
 24
  
 INFLATION
 
 During
the period under review, inflation did not have a material impact on our
financial performance.
 
 Web Site
Access to Our Periodic SEC Reports
 You may
read and copy any public reports we filed with the SEC at the SEC’s Public Reference
Room at 100 F Street, N.E. Room 1580, Washington D.C. 20549.  You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1800-SEC-0330.  The SEC also maintains an Internet site http://www.sec.gov
that contains reports and information statements, and other information we filed
electronically
 
 ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  Not
applicable.
 
 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 year ended December 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 Proceedings
 
 None
 
 Item
1A   Risk Factors
 
 Not
applicable.
  Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
 
 None
 
 Item 3.
Defaults Upon Senior Securities
 
 None
 
 Item 4.
Submission of Matters to a Vote of Security Holders
 
 None
 
 Item 5.
Other Information
 
 None
 
 Item
6.  Exhibits
  Exhibit
                    Number
                  
                  Description31.1
                  
                  Certification of the
      Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.31.2
                  
                  Certification of the
      Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002.32.1
                  
                  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.
 
  26
 
 
 
 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.Date:  
      February 11 , 2010
                    By:
                    /s/ Pengcheng
      Chen,Pengcheng
      Chen, Chief Executive OfficerBy:
                    Yi
      Tong,Yi
      Tong, Chief Financial Officer
   27