**United
      States**


**Securities
      and Exchange Commission**


**Washington,
      D.C. 20549**





FORM
      10-Q


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





For
      the
      quarterly period ended September 30, 2008





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





For
      the
      transition period from:





Commission
      file number 000-30115





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.)





3 rd 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 x NO  ̈





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: On November 13, 2008 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  ̈ No x







ASIA
      CORK
      INC .


FORM
      10-Q


QUARTERLY
      PERIOD ENDED SEPTEMBER 30, 2008


INDEX





PagePART
                I - FINANCIAL INFORMATIONItem
                1: – Financial Statements
            
            2Item
                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
            
            24PART
                II - OTHER INFORMATIONItem
                1: - Legal Proceedings
            
            25Item
                1A: Risk Factors
            
            25Item
                2: - Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            25Item
                3: – Default upon Senior Securities
            
            25Item
                4: – Submission of Matters to a Vote of Security Holders
            
            25Item
                5: – Other Information
            
            25
            .Item
                6: – Exhibits
            
            25




1





**Part
      I**


**Financial
      Information**




**Item
      1. Financial Statements**




**ASIA
      CORK INC. AND SUBSIDIARIES**


**(FORMERLY
      HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)**


**CONSOLIDATED
      BALANCE SHEET**





**September 30, 2008**
            
            **December 31, 2007**Unaudited
            
            AuditedAssetsCurrent
                AssetsCash
                and equivalents
            
            $
            557,075
            
            $
            367,396Accounts
                receivable, net of allowance for doubtful accounts of $22,429 and
                $
                12,210, respectively
            
            
            4,463,314
            
            
            2,429,772Inventories
            
            
            4,211,806
            
            
            920,140Advance
                to suppliers
            
            
            2,664,200
            
            
            2,375,174Prepayments
                and other current assets
            
            
            109,246
            
            
            16,111Total
                Current Assets
            
            
            12,005,641
            
            
            6,108,593Property
                and Equipment - Net
            
            
            5,087,362
            
            
            1,754,830Deposit
                for Purchase of Fixed Assets
            
            
            2,032,431
            
            
            1,891,810Deposit
                for Purchase of Intangible Assets
            
            
            -
            
            
            1,370,877Deposit
                for Acquisition
            
            
            1,472,776
            
            
            1,370,877Construction
                in Progress
            
            
            -
            
            
            2,821,817Investment
                - At Cost
            
            
            2,061,886
            
            
            1,919,228Intangible
                Assets- Net
            
            
            173,362
            
            
            161,073Total
                Assets
            
            
            22,833,458
            
            
            17,399,105Liabilities
                and Stockholders' EquityCurrent
                LiabilitiesAccounts
                payable and accrued expenses
            
            
            1,599,097
            
            
            956,519Loan
                payable
            
            
            441,833
            
            
            534,642Convertible
                note
            
            
            700,000
            
            
            -Customer
                deposit
            
            
            196,617
            
            
            -Taxes
                payable
            
            
            673,799
            
            
            767,764Due
                to stockholders/officers
            
            
            266,919
            
            
            166,199Other
                current liabilities
            
            
            20,826
            
            
            15,039Total
                Current Liabilities
            
            
            3,899,091
            
            
            2,440,163Total
                Liabilities
            
            
            3,899,091
            
            
            2,440,163Minority
                Interest
            
            
            1,737,675
            
            
            1,522,318Stockholders'
                EquityCommon
                stock, $0.0001 par value, 200,000,000 shares authorized,35,663,850
                and
                35,413,850 issued and outstanding, respectively
            
            
            3,566
            
            
            3,541Additional
                paid-in capital
            
            
            4,400,946
            
            
            4,396,772Reserve
                funds
            
            
            1,741,715
            
            
            1,741,715Retained
                earnings
            
            
            8,277,660
            
            
            5,729,630Accumulated
                other comprehensives income
            
            
            2,772,805
            
            
            1,564,966Total
                Stockholders' Equity
            
            
            17,196,692
            
            
            13,436,624Total
                Liabilities and Stockholders' Equity
            
            $
            22,833,458
            
            $
            17,399,105





See
      notes
      to consolidated financial statements.




2




**ASIA
      CORK INC. AND SUBSIDIARIES**


**(FORMERLY
      HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS (UNAUDITED)**





For Three Months Ended September 30,
            
            For Nine Months Ended September 30,2008
            
            2007
            
            2008
            
            2007Unaudited
            
            Unaudited
            
            Unaudited
            
            UnauditedRevenues
            
            $
            8,958,570
            
            $
            4,134,630
            
            $
            17,841,299
            
            $
            9,411,021Cost
                of Goods Sold
            
            
            5,810,298
            
            
            2,996,475
            
            
            11,666,418
            
            
            6,904,731Gross
                Profit
            
            
            3,148,272
            
            
            1,138,155
            
            
            6,174,881
            
            
            2,506,290Operating
                ExpensesSelling
                expenses
            
            
            1,152,517
            
            
            447,886
            
            
            2,264,603
            
            
            1,033,200General
                and administrative expense
            
            
            191,235
            
            
            95,773
            
            
            605,952
            
            
            297,860Total
                Operating Expenses
            
            
            1,343,752
            
            
            543,659
            
            
            2,870,555
            
            
            1,331,060Income
                From Operations
            
            
            1,804,520
            
            
            594,496
            
            
            3,304,326
            
            
            1,175,230Other
                Income (Expense)Interest
                (expense) income, net
            
            
            (43,924
            )
            
            (15,250
            )
            
            (76,312
            )
            
            6,820Other
                income (expense), net
            
            
            25,705
            
            
            (13,843
            )
            
            30,671
            
            
            22,625Total
                Other (Expense) Income
            
            
            (18,219
            )
            
            (29,093
            )
            
            (45,641
            )
            
            29,445Income
                Before Taxes and Minority Interest
            
            
            1,786,301
            
            
            565,403
            
            
            3,258,685
            
            
            1,204,675Income
                Tax Provision
            
            
            270,017
            
            
            89,136
            
            
            495,298
            
            
            185,731Income
                Before Minority Interest
            
            
            1,516,284
            
            
            476,267.00
            
            
            2,763,387
            
            
            1,018,944Minority
                Interest
            
            
            120,111
            
            
            40,280
            
            
            215,357
            
            
            84,543Net
                Income
            
            $
            1,396,173
            
            $
            435,987
            
            $
            2,548,030
            
            $
            934,401Other
                Comprehensive Income:Foreign
                Currency Translation Gain
            
            
            212,245
            
            
            188,975
            
            
            1,207,839
            
            
            394,093Comprehensive
                Income
            
            $
            1,608,418
            
            $
            624,962
            
            $
            3,755,869
            
            $
            1,328,494Net
                Income Per Common Share-
                Basic
            
            $
            0.04
            
            $
            0.01
            
            $
            0.07
            
            $
            0.03-
                Diluted:
            
            $
            0.04
            
            $
            0.01
            
            $
            0.07
            
            $
            0.03Weighted
                Common Shares Outstanding*-
                Basic
            
            
            35,564,961
            
            
            35,413,850
            
            
            35,464,220
            
            
            35,413,850-
                Diluted:
            
            
            35,663,850
            
            
            35,413,850
            
            
            35,663,850
            
            
            35,413,850




*
        As
        restated to reflect recapitalization and the subsequent reverse stock
        split .
 See
        notes
        to consolidated financial statements.





3





**ASIA
      CORK INC. AND SUBSIDIARIES**


**(FORMERLY
      HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)**


**CONSOLIDATED
      STATEMENT OF CASH FLOWS (UNAUDITED)**





For the Nine Months Ended September 30,2008
            
            2007Unaudited
            
            Unaudited**Cash
                Flows From Operating Activities****Net
                Income**
            
            $
            2,548,030
            
            $
            934,401Adjustments
                to Reconcile Net Income to Net Cash Provided by Operating
                Activities
            
            
            197,831
            
            
            188,869Depreciation
                and amortizationBad
                debt adjustment
            
            
            9,052
            
            
            288Minority
                interest
            
            
            215,357
            
            
            84,543Accrued
                due to shareholder expenses
            
            
            82,252
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (1,733,401
            )
            
            (56,638
            )Inventories
            
            
            (3,000,259
            )
            
            (1,102,622
            )Advance
                to suppliers
            
            
            (104,695
            )
            
            318,349Prepayments
                and other current assets
            
            
            (85,576
            )
            
            10,639Accounts
                payable and accrued expenses
            
            
            531,939
            
            
            189,932Customer
                deposits
            
            
            196,617
            
            
            -Taxes
                payable
            
            
            (140,584
            )
            
            133,577Other
                current liabilities
            
            
            4,346
            
            
            13,789**Net
                Cash (Used in) Provided Operating Activities**
            
            
            (1,279,091
            )
            
            715,127**Cash
                Flows From Investing Activities**Proceeds
                from withdraw deposit for purchase of fixed assets
            
            
            -
            
            
            25,628Proceeds
                from withdraw deposit for purchase of intangible assets
            
            
            1,370,877
            
            
            -Payment
                for deposit for acquisition
            
            
            -
            
            
            (1,334,615
            )Payment
                for purchase of equipment
            
            
            -
            
            
            (984
            )Payment
                for construction in process
            
            
            (208,277
            )
            
            (1,253,703
            )Proceeds
                from repayment of advance to unrelated party
            
            
            -
            
            
            1,922,067**Net
                Cash Provided (Used in) by Investing Activities**
            
            
            1,162,600
            
            
            (641,607
            )**Cash
                Flows From Financing Activities**Proceeds
                from long-term debt
            
            
            441,833
            
            
            -Payments
                to long-term debt
            
            
            (574,383
            )
            
            (384,413
            )Proceeds
                from convertible note
            
            
            700,000
            
            
            -Payments
                to stockholders/officers
            
            
            -
            
            
            (8,061
            )Proceeds
                from stockholders/officers
            
            
            -
            
            
            443,508**Net
                Cash Provided by Financing Activities**
            
            
            567,450
            
            
            51,034Net
                Increase in Cash and Equivalents
            
            
            450,959
            
            
            124,554Effect
                of Exchange Rate Changes on Cash
            
            
            (261,280
            )
            
            43,903Cash
                and Equivalents at Beginning of Period
            
            
            367,396
            
            
            564,733Cash
                and Equivalents at End of Period
            
            $
            557,075
            
            $
            733,190**SUPPLEMENTAL
                SCHEDULE OF NON-CASH INVESTING AND FINANCING
                ACTIVITIES**Construction
                in process transferred out to property
            
            $
            3,401,660
            
            $
            -Shareholder
                donated intangible assets into the Company without payment
            
            $
            4,199
            
            $
            -





See
      notes
      to consolidated financial statements.





4





**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. 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 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.





5





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, the Company through 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.





6








d)  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.





**e)** **** **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.





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.





7





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.





**2.** **** **INVENTORIES**




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





September 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedRaw
                materials
            
            $
            3,562,367
            
            $
            536,319Work
                in process
            
            
            209,044
            
            
            103,395Finished
                goods
            
            
            394,929
            
            
            249,932Packaging
                and other
            
            
            45,466
            
            
            30,494Total
            
            $
            4,211,806
            
            $
            920,140




8





**3.** **** **PROPERTY
      AND EQUIPMENT**





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





Estimated Life
            
            September 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedBuilding
                and improvement
            
            
            27-35
            
            $
            5,020,936
            
            $
            1,507,241Manufacturing
                equipment
            
            
            1-8
            
            
            1,212,798
            
            
            1,128,887Office
                furniture and equipment
            
            
            5
            
            
            30,699
            
            
            28,575Vehicle
            
            
            2-8
            
            
            12,587
            
            
            11,716Machinery
                improvement
            
            
            3
            
            
            81,003
            
            
            75,398Subtotal
            
            
            
            
            
            6,358,022
            
            
            2,751,817Less:
                Accumulated depreciation
            
            
            
            
            
            1,270,660
            
            
            996,987Total
            
            
            
            
            $
            5,087,362
            
            $
            1,754,830





For
      the
      nine months ended September 30, 2008 and 2007, depreciation expenses amounted
      to
      $194,015 and $185,462 respectively.





**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. $2,032,431 (equivalent to RMB 13.8
      million) was paid to the agent as of the nine months ended September 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
      fixed
      assets. The deposit is fully refundable if the purchase does not close.





**5.** **** **DEPOSIT
      FOR PURCHASE OF INTANGIBLE ASSETS**





Pursuant
      to the terms of a Cancellation Agreement dated August 19, 2008, the Company
      and
      Shaanxi Shuta Wood Products Co., Ltd. (“Shaanxi Shuta”) terminated the Land
      Transfer Agreement by which the Company had intended to purchase the right
      to
      use a parcel of land from Shaanxi Shuta in the ShaanXi Baoji district of the
      PRC. The entire $1,472,776 (equivalent to RMB 10 million) deposit that had
      been
      previously paid to Shaanxi Shuta pursuant to the Land Transfer Agreement was
      refunded to the Company in August 2008 and September 2008.





9





**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 $2,945,551 (RMB20 million). As of September 30, 2008, the
      Company had paid a deposit of $1,472,776 (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 interior 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.





The
      fifth
      workshop was completed in September 2008. All costs of $967,807 (equivalent
      to
      RMB 6,571,311) had been transferred to the property as of September 30, 2008.
      Commencing in October 2008, the Company installed the internal equipments for
      fifth workshop, and expects to complete this installation project before the
      ended of year 2008. However, there can be no assurance that it will be completed
      by then.





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





September 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedDormitory
                construction and decoration
            
            $
            -
            
            $
            2,204,922Fifth
                workshop construction
            
            
            -
            
            
            616,895Total
            
            $
            -
            
            $
            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
      $2,061,886 (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.





10





**9.** **** **INTANGIBLE
      ASSETS**





On
      September 27, 2001, the Company purchased the right to use a parcel of land
      for
      40 years. 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 September 30,
      2008 and December 31, 2007, intangible assets, less accumulated amortization
      consisted of the following:





September 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedIntangible
                assets
            
            $
            209,332
            
            $
            190,901Less:
                Accumulated amortization
            
            
            35,970
            
            
            29,828Total
            
            $
            173,362
            
            $
            161,073





For
      the
      nine months ended September 30, 2008 and 2007, amortization expense amounted
      to
      $3,816 and $3,407, respectively.




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





2009
            
            $
            5,2952010
            
            
            5,2952011
            
            
            5,2952012
            
            
            5,2952013
            
            
            5,295





**10.** **** **LOAN
      PAYABLE**





Loan
      payable as of September 30, 2008 and December 31, 2007 consisted of the
      following:





11




September 30, 2008
              
              December 31, 2007Unaudited
              
              AuditedOn
                  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 $441,833 ) from the same bank again, but the new
                  interest
                  rate had been increased to 9.967‰ per month. The expiration date for this
                  new short-term loan is June 30, 2009.$
              441,833
              
              $
              534,642Total
                  Loan Payable
              
              $
              441,833
              
              $
              534,642




**11.** **** **CONVERTIBLE
      NOTE**




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. 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 shares of common
      stock at a conversion price of $0.228 per share. The interest payable regarding
      the convertible notes has been accrued and recorded as of September 30, 2008.





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.





12





**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. The location of CIE is not part of the “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.





As
      of
      September 30, 2008 and December 31, 2007, taxes payable consisted the following:





September 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedValue-added
                tax
            
            $
            582,062
            
            $
            393,969Corporate
                income tax provision
            
            
            33,938
            
            
            235,465Local
                taxes and surcharges
            
            
            41,349
            
            
            83,330Franchise
                tax
            
            
            16,450
            
            
            55,000Total
            
            $
            673,799
            
            $
            767,764





**13.** **** **DUE
      TO STOCKHOLDERS/OFFICERS**





Amounts
      due to stockholders/officers are unsecured, non-interest bearing, and are due
      on
      demand. As of September 30, 2008 and December 31, 2007, the total net amounts
      due to the stockholders/officers were $266,919 and $166,199, respectively,
      which
      represented the net amounts owed to shareholders/officers by 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.





13





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.




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 November
      15,
      2008.




In
      June
      2008, the Company was assigned ownership of three patent rights from its major
      shareholder, Mr. Fang She 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
      September 30, 2008.





**15.** **** **COMMITMENTS**





The
      Company leases its office space and production land under operating lease
      agreements that expire on December 31, 2008 and October, 2047 respectively.
      The
      Company expects to renew the lease that expires on December 31, 2008. In order
      to assure increasing products, the company also leases two additional properties
      under operating lease agreements that are scheduled to expire on November 30,
      2008. The Company intends to extend one of these leases for an additional six
      (6) months and will let the other lease expire. The following is a schedule
      of
      future minimum rental office space and land payments required under these
      operating leases as of September 30, 2008.





14





For
                the Quarter Ending September 30,2009
            
            $
            47,1142010
            
            
            17,1822011
            
            
            17,1822012
            
            
            17,1822013
            
            
            17,182Thereafter
            
            
            585,608Total
                minimum rental payments required
            
            $
            701,450





Rental
      and maintenance expenses for office space, land, and building operating leases
      amounted to $137,048 and $28,287 for the nine months ended September 30, 2008
      and 2007, respectively.





The
      Company also leases three patent 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 September
      30, 2008.





For
                the Quarter Ending September 30,2009
            
            $
            343,6332010
            
            
            187,089Total
                minimum rental payments required
            
            $
            530,722





Patent
      lease expenses amounted to $257,726 and $234,913, for the nine months ended
      September 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. Hawk was also issued
      100,000 restricted 144 shares of the Company’s common stock on August 14, 2008.




15




**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 nine months ended September 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.





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.”


16


**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 2007 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 September 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.





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.


17


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.





A
      summary
      of significant accounting policies is included in Note 1 in 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 records 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.


18


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**




**THREE
      MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30,
      2007** ****





**For Three Months Ended September 30,**2008
            
            2007
            
            (Decrease)/ IncreaseUnaudited
            
            UnauditedRevenues
            
            $
            8,958,570
            
            $
            4,134,630
            
            $
            4,823,940
            
            
            117
            %Cost
                of Goods Sold
            
            
            5,810,298
            
            
            2,996,475
            
            
            2,813,823
            
            
            94
            %Gross
                Profit
            
            
            3,148,272
            
            
            1,138,155
            
            
            2,010,117
            
            
            177
            %Gross
                Profit Percentage
            
            
            35.14
            %
            
            27.53
            %Operating
                ExpensesSelling
                expenses
            
            
            1,152,517
            
            
            447,886
            
            
            704,631
            
            
            157
            %General
                and administrative expense
            
            
            191,235
            
            
            95,773
            
            
            95,462
            
            
            100
            %Total
                Operating Expenses
            
            
            1,343,752
            
            
            543,659
            
            
            800,093
            
            
            147
            %Income
                From Operations
            
            
            1,804,520
            
            
            594,496
            
            
            1,210,024
            
            
            204
            %Other
                Income (Expense)Interest
                (expense), net
            
            
            (43,924
            )
            
            (15,250
            )
            
            (28,674
            )
            
            188
            %Other
                income (expense), net
            
            
            25,705
            
            
            (13,843
            )
            
            39,548
            
            
            -286
            %Total
                Other (Expense)
            
            
            (18,219
            )
            
            (29,093
            )
            
            10,874
            
            
            -37
            %Income
                Before Taxes and Minority Interest
            
            
            1,786,301
            
            
            565,403
            
            
            1,220,898
            
            
            216
            %Income
                Tax Provision
            
            
            270,017
            
            
            89,136
            
            
            180,881
            
            
            203
            %Income
                Before Minority Interest
            
            
            1,516,284
            
            
            476,267
            
            
            1,040,017
            
            
            218
            %Minority
                Interest
            
            
            120,111
            
            
            40,280
            
            
            79,831
            
            
            198
            %Net
                Income
            
            $
            1,396,173
            
            $
            435,987
            
            $
            960,186
            
            
            220
            %


19


**Revenues**





For
      the
      three months ended September 30, 2008, our revenues were $8,958,570 as compared
      to $4,134,630 for the three months ended September 30, 2007, an increase of
      $4,823,940 or 117%. 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 September 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 $1,165,545 and $3,017,900 respectively in the three
      months ended September 30, 2008 as compared to the same period in year 2007,
      Even though our sales of the wood bar products decreased, this reduction was
      offset by an increase in the amount of boards sold during the three months
      ended
      September 30, 2008.





**Cost
      of Sales and Gross Profit**





For
      the
      three months ended September 30, 2008, cost of sales amounted to $5,810,298
      or
      64.86% of net revenues as compared to cost of sales of $2,996,475 or 72.47%
      of
      net revenues for the three months ended September 30, 2007. Gross profit for
      the
      three months ended September 30, 2008 was $3,148,272 or 35.14% of revenues,
      as
      compared to $1,138,155 or 27.53% of revenues for the three months ended
      September 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, boards and floors) during the current year.





**Operating
      Expenses**





Our
      operating expenses increased for the three months ended September 30, 2008
      as
      compared to the three months ended September 30, 2007. For the three months
      ended September 30, 2008, total operating expenses were $1,343,752 as compared
      to $543,659 for the three months ended September 30, 2007, a increase of
      approximately $800,000 or 147%. This increase was attributable to an increase
      in
      selling expenses, freight costs and commissions associated with our increased
      revenues. The increase in general and administrative costs was primarily
      attributable to increases consulting fees, advisory fees, attorney fees, and
      other professional fees in the current quarter. ****





**Other
      Income (expense)**





For
      the
      three months ended September 30, 2008, total other expense, net amounted to
      ($18,219) as compared to total other expense net of ($29,093) for the three
      months ended September 30, 2007, a decrease of $10,874 or 37%. Other income
      for
      the three months ended September 30, 2008 and 2007 is related to the income
      received from the rental of our entertainment facility.





For
      the
      three months ended September 30, 2008, net interest expense was ($43,924) as
      compared to net interest expense of ($15,250) for the three months ended
      September 30, 2007, an increase of ($28,674) or 188%. The increase was primarily
      due to the Company acquired a convertible debt in second quarter of 2008,
      accordingly, more interest expense had been accrued in the current quarter
      as
      compared to same period of last year.


20


**Income
      Tax**





Our
      income taxes increased by $180,881 or 203% to $270,017 for the three months
      ended September 30, 2008 compared to $89,136 for the three months ended
      September 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.





**NINE
      MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
      2007**





**For Nine Months Ended September 30,**2008
            
            2007
            
            (Decrease)/ IncreaseUnaudited
            
            UnauditedRevenues
            
            $
            17,841,299
            
            $
            9,411,021
            
            $
            8,430,278
            
            
            90
            %Cost
                of Goods Sold
            
            
            11,666,418
            
            
            6,904,731
            
            
            4,761,687
            
            
            69
            %Gross
                Profit
            
            
            6,174,881
            
            
            2,506,290
            
            
            3,668,591
            
            
            146
            %Gross
                Profit Percentage
            
            
            34.61
            %
            
            26.63
            %Operating
                ExpensesSelling
                expenses
            
            
            2,264,603
            
            
            1,033,200
            
            
            1,231,403
            
            
            119
            %General
                and administrative expense
            
            
            605,952
            
            
            297,860
            
            
            308,092
            
            
            103
            %Total
                Operating Expenses
            
            
            2,870,555
            
            
            1,331,060
            
            
            1,539,495
            
            
            116
            %Income
                From Operations
            
            
            3,304,326
            
            
            1,175,230
            
            
            2,129,096
            
            
            181
            %Other
                Income (Expense)Interest
                (expense) income, net
            
            
            (76,312
            )
            
            6,820
            
            
            (83,132
            )
            
            -1219
            %Other
                income, net
            
            
            30,671
            
            
            22,625
            
            
            8,046
            
            
            36
            %Total
                Other (Expense) Income
            
            
            (45,641
            )
            
            29,445
            
            
            (75,086
            )
            
            -255
            %Income
                Before Taxes and Minority Interest
            
            
            3,258,685
            
            
            1,204,675
            
            
            2,054,010
            
            
            171
            %Income
                Tax Provision
            
            
            495,298
            
            
            185,731
            
            
            309,567
            
            
            167
            %Income
                Before Minority Interest
            
            
            2,763,387
            
            
            1,018,944
            
            
            1,744,443
            
            
            171
            %Minority
                Interest
            
            
            215,357
            
            
            84,543
            
            
            130,814
            
            
            155
            %Net
                Income
            
            $
            2,548,030
            
            $
            934,401
            
            $
            1,613,629
            
            
            173
            %





**Revenues**





For
      the
      nine months ended September 30, 2008, our revenues were $17,841,299 as compared
      to $9,411,021 for the nine months ended September 30, 2007, an increase of
      $8,430,278 or 90%. As a result of increasing the commission rates in an effort
      to promote our personnel's selling efforts, sales of our major finished goods
      (wood materials, board and floors) increased during the nine months ended
      September 30, 2008 as compared to the sales quantities for the nine months
      ended
      September 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 $1,900,634, $364,584, and $5,260,665, respectively
      in the nine months ended September 30, 2008 as compared to the same period
      in
      year 2007, Even though our sales on the wood bar products decreased, this
      reduction was offsets by an increase in the amount of boards sold during the
      nine months ended September 30, 2008.


21


**Cost
      of Sales and Gross Profit**





For
      the
      nine months ended September 30, 2008, cost of sales amounted to $11,666,418
      or
      65.39% of net revenues as compared to cost of sales of $6,904,731 or 73.37%
      of
      net revenues for the nine months ended September 30, 2007, an increase of
      $4,761,687 or 69%. Gross profit for the nine months ended September 30, 2008
      was
      $6,174,881 or 34.61% of revenues, as compared to $2,506,290 or 26.63% of
      revenues for the nine months ended September 30, 2007, an increase of $3,668,591
      or 146%. 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 nine months ended September 30, 2008 as
      compared to the nine months ended September 30, 2007. For the nine months ended
      September 30, 2008, total operating expenses were $2,870,555 as compared to
      $1,331,060 for the nine months ended September 30, 2007, an increase of
      $1,539,495 or 116%. 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, legal fees and
      professional fee in the current year.





**Other
      Income (expenses)**





For
      the
      nine months ended September 30, 2008, total other expense, net amounted to
      ($45,641) as compared to total other income net of $29,445 for the nine months
      ended September 30, 2007, a decrease of ($75,086) or 255%. Other income, net
      for
      the nine months ended September 30, 2008 and 2007 is related to the income
      received from the rental of our entertainment facility. This rental income
      was
      primarily offset by the donation made by the Company during the second quarter
      of 2008 in the amount of $72,592 in connection with the earthquake in SiChuan
      PRC.





For
      the
      nine months ended September 30, 2008, net interest expense was ($76,312) as
      compared to net interest income of $6,820 for the nine months ended September
      30, 2007, a decrease of ($83,132) or 1219%. This decrease was primary
      attributable to the Company having issued a convertible debenture in second
      quarter of 2008, and having renewed a bank loan at a higher interest rate.
      As a
      result, the Company has accrued higher interest expense in 2008 compared to
      2007.


22


**Income
      Tax**





Our
      income taxes increased by $309,567 to $495,298 for the nine months ended
      September 30, 2008 compared to $185,731 for the nine months ended September
      30,
      2007, an increase of 167%. This increase was due to a significant 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.





**LIQUIDITY
      AND CAPITAL RESOURCES**





Operating
      working capital (accounts receivable plus inventory less accounts payable and
      accrued expenses) increased by approximately $4,680,000 from approximately
      $2,400,000 as of December 31, 2007 to approximately $7,076,000 as of September
      30, 2008. The increase was primarily due to an increase in inventories and
      account receivable for amount of approximately $3,000,000 and $2,000,000 during
      the current year, respectively.





Cash
      used
      in operating activities was ($1,279,091) for the nine months ended September
      30,
      2008 as compared to $715,127 provided for the nine months ended September 30,
      2007. The increase in cash used in by operating activities for the nine months
      ended September 30, 2008 was a result of an increase of accounts receivable,
      inventories, and advance to suppliers.





Cash
      provided in investing activities was $1,162,600 for the nine months ended
      September 30, 2008 as compared to ($641,607) used in the nine months ended
      September 30, 2007. The increase is primarily due to the Company and Shaanxi
      Shuta Wood Products Co., Ltd. had terminated the Land Transfer Agreement. The
      entire amount of approximately $1.4 million (equivalent to RMB 10 million)
      deposit that had been previously paid to Shaanxi Shuta pursuant to the Land
      Transfer Agreement had been refunded to the Company in August and September
      2008.





The
      retractile funds were better utilized in expanding current operations, including
      purchasing additional raw materials to secure immediate future production needs.





With
      approximately $8.11 million of net working capital (total current assets less
      total current liabilities) and positive cash flow from operations as of
      September 30, 2008, we believe we will have sufficient resources to finance
      our
      operations for the coming year.


23


**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.





**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 September 30, 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.


24


**Part
      II - OTHER INFORMATION**





Item
      1.
      Legal Proceedings





None





Item
      1A
      Risk Factors





A
      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.





1.
      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 attorneys,
      McLaughlin & Stern, LLP, for services rendered.





2.
      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.





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





ExhibitNumber
            
            Description31.1
                Certification of the Chief Executive Officer pursuant to Section
                302 of
                theSarbanes-Oxley
                Act of2002.31.2Certification
                of the Chief Financial Officer pursuant to Section 302 of theSarbanes-Oxley
                Act of2002.32.1Certification
                of Chief Executive Officer Certification pursuant to Section 906
                of
                theSarbanes-
                Oxley Act of 2002.32.2
                Certification of Chief Financial Officer Certification pursuant to
                Section
                906 of the Sarbanes- Oxley Act of 2002.


25


**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:
                November 13, 2008
            By:
            /s/
                Pengcheng ChenPengcheng
                Chen, Chief Executive OfficerBy:
            /s/ Yi TongYi
                Tong, Chief Financial Officer