**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 June 30, 2008





o 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 o





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: On August 15, 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 o No x





ASIA
      CORK
      INC .


FORM
      10-Q


QUARTERLY
      PERIOD ENDED JUNE 30, 2008





INDEX





PagePART
                I - FINANCIAL INFORMATIONItem
                1: – Financial Statements
            1Item
                2: - Management's Discussion and Analysis of Financial Condition
                and
                Results of Operations
            15Item
                3: – Quantitative and Qualitative Disclosures About Market Risk
            23Item
                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
            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.**
            **Financial
                Statements**





**ASIA
      CORK INC. AND SUBSIDIARIES**


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


**CONSOLIDATED
      BALANCE SHEET**







**June 30, 2008**
            
            **December 31, 2007**Unaudited
            
            AuditedAssetsCurrent
                AssetsCash
                and equivalents
            
            $
            468,219
            
            $
            367,396Accounts
                receivable, net of allowance for doubtful accounts of $15,571 and
                $12,210,
                respectively
            
            
            3,098,688
            
            
            2,429,772Inventories
            
            
            2,342,743
            
            
            920,140Advance
                to suppliers
            
            
            2,829,540
            
            
            2,375,174Prepayments
                and other current assets
            
            
            85,827
            
            
            16,111Total
                Current Assets
            
            
            8,825,017
            
            
            6,108,593Property
                and Equipment - Net
            
            
            4,157,235
            
            
            1,754,830Deposit
                for Purchase of Fixed Assets
            
            
            2,011,926
            
            
            1,891,810Deposit
                for Purchase of Intangible Assets
            
            
            1,457,917
            
            
            1,370,877Deposit
                for Acquisition
            
            
            1,457,917
            
            
            1,370,877Construction
                in Progress
            
            
            689,595
            
            
            2,821,817Investment
                - At Cost
            
            
            2,041,084
            
            
            1,919,228Intangible
                Assets- Net
            
            
            172,961
            
            
            161,073Total
                Assets
            
            
            20,813,652
            
            
            17,399,105Liabilities
                and Stockholders' EquityCurrent
                LiabilitiesAccounts
                payable and accrued expenses
            
            
            1,326,121
            
            
            956,519Loan
                payable
            
            
            437,375
            
            
            534,642Convertible
                note
            
            
            700,000
            
            
            -Customer
                deposit
            
            
            147,133
            
            
            -Taxes
                payable
            
            
            795,880
            
            
            767,764Due
                to stockholders/officers
            
            
            176,751
            
            
            166,199Other
                current liabilities
            
            
            24,554
            
            
            15,039Total
                Current Liabilities
            
            
            3,607,814
            
            
            2,440,163Total
                Liabilities
            
            
            3,607,814
            
            
            2,440,163Minority
                Interest
            
            
            1,617,564
            
            
            1,522,318Stockholders'
                EquityCommon
                stock, $0.0001 par value, 200,000,000 shares authorized,35,413,850
                issued and outstanding, respectively
            
            
            3,541
            
            
            3,541Additional
                paid-in capital
            
            
            4,400,971
            
            
            4,396,772Reserve
                funds
            
            
            1,741,715
            
            
            1,741,715Retained
                earnings
            
            
            6,881,487
            
            
            5,729,630Accumulated
                other comprehensives income
            
            
            2,560,560
            
            
            1,564,966Total
                Stockholders' Equity
            
            
            15,588,274
            
            
            13,436,624Total
                Liabilities and Stockholders' Equity
            
            $
            20,813,652
            
            $
            17,399,105See
                notes to consolidated financial statements.


1


**ASIA
      CORK INC. AND SUBSIDIARIES**


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


**CONSOLIDATED
      STATEMENTS OF OPERATIONS (UNAUDITED)**





For Three Months Ended June 30,
            
            For Six Months Ended June 30,2008
            
            2007
            
            2008
            
            2007Unaudited
            
            Unaudited
            
            Unaudited
            
            UnauditedRevenues
            
            $
            6,366,384
            
            $
            3,550,064
            
            $
            8,882,729
            
            $
            5,276,391Cost
                of Goods Sold
            
            
            4,173,021
            
            
            2,580,974
            
            
            5,856,120
            
            
            3,908,256Gross
                Profit
            
            
            2,193,363
            
            
            969,090
            
            
            3,026,609
            
            
            1,368,135Operating
                ExpensesSelling
                expenses
            
            
            832,792
            
            
            384,473
            
            
            1,112,086
            
            
            585,314General
                and administrative expense
            
            
            341,248
            
            
            87,284
            
            
            414,717
            
            
            202,087Total
                Operating Expenses
            
            
            1,174,040
            
            
            471,757
            
            
            1,526,803
            
            
            787,401Income
                From Operations
            
            
            1,019,323
            
            
            497,333
            
            
            1,499,806
            
            
            580,734Other
                Income (Expense)Interest
                (expense) income, net
            
            
            (19,835
            )
            
            (16,120
            )
            
            (32,388
            )
            
            22,070Other
                (expense) income, net
            
            
            (29,177
            )
            
            18,716
            
            
            4,966
            
            
            36,468Total
                Other (Expense) Income
            
            
            (49,012
            )
            
            2,596
            
            
            (27,422
            )
            
            58,538Income
                Before Taxes and Minority Interest
            
            
            970,311
            
            
            499,929
            
            
            1,472,384
            
            
            639,272Income
                Tax Provision
            
            
            148,490
            
            
            75,714
            
            
            225,281
            
            
            96,595Income
                Before Minority Interest
            
            
            821,821
            
            
            424,215
            
            
            1,247,103
            
            
            542,677Minority
                Interest
            
            
            60,146
            
            
            35,194
            
            
            95,246
            
            
            44,263Net
                Income
            
            $
            761,675
            
            $
            389,021
            
            $
            1,151,857
            
            $
            498,414Other
                Comprehensive Income:Foreign
                Currency Translation Gain
            
            
            381,206
            
            
            164,031
            
            
            995,594
            
            
            205,118Comprehensive
                Income
            
            $
            1,142,881
            
            $
            553,052
            
            $
            2,147,451
            
            $
            703,532Net
                Income Per Common Share-
                Basic
            
            $
            0.02
            
            $
            0.01
            
            $
            0.03
            
            $
            0.01-
                Diluted:
            
            $
            0.02
            
            $
            0.01
            
            $
            0.03
            
            $
            0.01Weighted
                Common Shares Outstanding*-
                Basic
            
            
            35,413,850
            
            
            35,413,850
            
            
            35,413,850
            
            
            35,413,850-
                Diluted:
            
            
            35,413,850
            
            
            35,413,850
            
            
            35,413,850
            
            
            35,413,850





*
      As
      restated to reflect recapitalization and the subsequent reverse stock
      split.


See
      notes
      to consolidated financial statements.


2


**ASIA
      CORK INC. AND SUBSIDIARIES**


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


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







For the Six Months Ended June 30,2008
            
            2007Unaudited
            
            Unaudited**Cash
                Flows From Operating Activities****Net
                Income**
            
            $
            1,151,857
            
            $
            498,414Adjustments
                to Reconcile Net Income to Net CashProvided by Operating ActivitiesDepreciation
                and amortization
            
            
            116,193
            
            
            124,608Bad
                debt adjustment
            
            
            (2,586
            )
            
            (812
            )Minority
                interest
            
            
            95,246
            
            
            44,263Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (486,350
            )
            
            160,659Inventories
            
            
            (1,282,737
            )
            
            (1,557,337
            )Advance
                to suppliers
            
            
            (285,438
            )
            
            153,082Prepayments
                and other current assets
            
            
            (64,593
            )
            
            14,196Accounts
                payable and accrued expenses
            
            
            290,430
            
            
            17,189Customer
                deposits
            
            
            147,133
            
            
            -Taxes
                payable
            
            
            (19,399
            )
            
            458,521Other
                current liabilities
            
            
            8,049
            
            
            10,523**Net
                Cash Used in Operating Activities**
            
            
            (332,195
            )
            
            (76,694
            )**Cash
                Flows From Investing Activities**Proceeds
                from withdraw deposit for purchase of fixed assets
            
            
            -
            
            
            25,628Payment
                for deposit for acquisition
            
            
            -
            
            
            (1,116,658
            )Payment
                for purchase of equipment
            
            
            -
            
            
            (420
            )Payment
                for construction in process
            
            
            (33,532
            )
            
            -Payment
                for advance to unrelated party
            
            
            -
            
            
            (90,636
            )Proceeds
                from repayment of advance to unrelated party
            
            
            -
            
            
            2,012,703**Net
                Cash (Used in) Provided by Investing Activities**
            
            
            (33,532
            )
            
            830,616**Cash
                Flows From Financing Activities**Proceeds
                from long-term debt
            
            
            437,375
            
            
            -Payments
                to long-term debt
            
            
            (568,588
            )
            
            -Proceeds
                from convertible note
            
            
            700,000
            
            
            -Payments
                to stockholders/officers
            
            
            -
            
            
            (7,935
            )Proceeds
                from stockholders/officers
            
            
            -
            
            
            42,449**Net
                Cash Provided by Financing Activities**
            
            
            568,787
            
            
            34,514Net
                Increase in Cash and Equivalents
            
            
            203,060
            
            
            788,436Effect
                of Exchange Rate Changes on Cash
            
            
            (102,237
            )
            
            53,985Cash
                and Equivalents at Beginning of Period
            
            
            367,396
            
            
            564,733Cash
                and Equivalents at End of Period
            
            $
            468,219
            
            $
            1,407,154**SUPPLEMENTAL
                SCHEDULE OF NON-CASH INVESTING AND****FINANCING
                ACTIVITIES**Construction
                in process transferred out to property
            
            $
            2,409,299
            
            $
            -Shareholder
                donation intangible assets into the Company
            
            $
            4,199
            
            $
            -See
                notes to consolidated financial statements.




3


**ASIA
      CORK INC. AND SUBSIDIARIES**


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


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**





**1.**
            **BASIS
                OF PRESENTATION**





**a)**
            **Interim
                financial statements:**





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





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





**b)**
            **Description
                of business and reverse merger:**





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





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





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


4


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





During
      the year ended December 31, 2005, 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.


5


**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.


6


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





June 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedRaw
                materials
            
            $
            1,838,398
            
            $
            536,319Work
                in process
            
            
            149,806
            
            
            103,395Finished
                goods
            
            
            274,368
            
            
            249,932Packaging
                and other
            
            
            80,171
            
            
            30,494Total
            
            $
            2,342,743
            
            $
            920,140


7





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





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





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




For
      the
      six months ended June 30, 2008 and 2007, depreciation expenses amounted to
      $114,960 and $122,352, respectively.





**4.**
            **DEPOSIT
                FOR PURCHASE OF FIXED
                ASSETS**





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





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





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


8


**6.**
            **DEPOSIT
                FOR ACQUISITION**





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





**7.**
            **CONSTRUCTION
                IN PROGRESS**





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





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





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





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





**8.**
            **INVESTMENT –
                AT COST**





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


9


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





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





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





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





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





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


10


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





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





June 30, 2008
            
            December 31, 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 $437,375 ) from the same bank again, but the new interest
                rate had been increased to 9.967‰ per month. The expiration date for this
                new short-term loan is June 30, 2009.
            
            $
            437,375
            
            $
            534,642Total
                Loan Payable
            
            $
            437,375
            
            $
            534,642








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





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 June 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.


11


**12.**
            **TAX
                PAYABLE**





The
      Company and its US subsidiary will file consolidated Federal income tax return
      and state franchise tax returns individually. The Company's PRC subsidiaries
      file income tax returns under the Income Tax Law of the People's Republic of
      China concerning Foreign Investment Enterprises and Foreign Enterprises and
      local income tax laws. The Company's BVI subsidiary is exempt from income taxes.





Per
      PRC
      Income Tax Law, any new foreign owned corporation is exempt from income tax
      for
      the first two years, and 50% exemption of income tax for the next three years
      for non high-tech corporation or 15% tax rate for corporation qualified by
      State
      Science and Technology Commission as "High Tech corporation" located in State
      "High Tech Zone" approved by China State Council. Hanxin is qualified as a
      High
      Tech corporation. Based on this regulation, Hanxin was exempt from income tax
      in
      year 2003 and 2004 and its income is subject to 15% tax starting from January
      1,
      2005. CIE does not located in State “High Tech Zone” approved by China State
      Council, thus its income is subject to 33%.tax rate. Commencing from January,
      2008, based on the new regulation in the PR, CIE’s income is subject to 25% tax
      rate.




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





June 30, 2008
            
            December 31, 2007Unaudited
            
            AuditedValue-added
                tax
            
            $
            558,729
            
            $
            393,969Corporate
                income tax provision
            
            
            187,235
            
            
            235,465Local
                taxes and surcharges
            
            
            39,716
            
            
            83,330Franchise
                tax
            
            
            10,200
            
            
            55,000Total
            
            $
            795,880
            
            $
            767,764








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





Amounts
      due to stockholders/officers are unsecured, non-interest bearing, and are due
      on
      demand. As of June 30, 2008 and December 31, 2007, the total net amounts due
      to
      the stockholders/officers were $176,751 and $166,199, respectively, which
      represented the net amounts lent by shareholders/officers to the Company.


12


**14.**  **STOCKHOLDERS
      EQUITY**





On
      August
      9, 2005, the Company acquired Hanxin International in exchange for (i)
      24,000,000 shares of the Company’s common stock and (ii) 1,000 shares of the
      Company’s Series A Preferred Stock, which were converted into 177,185,642 shares
      of the Company’s common stock, without taking into effect of a reverse stock
      split as described below.





In
      November 2005, the Company filed and circulated to its shareholders the
      Information Statement which permitted the Company, among other things, to (i)
      amend its Articles of Incorporation to increase its authorized shares of common
      stock to 200,000,000 shares; (ii) approve one for six reverse split as to all
      outstanding shares of common stock of the Company, effective as to holders
      of
      record of shares of common stock on December 9, 2005, (iii) approve a stock
      option, SAR and stock bonus plan for the directors, officers, employees and
      consultants of the Company. A certificate of amendment officially increasing
      the
      authorized shares of common stock and approving the reverse stock split was
      filed with the State of Delaware on December 13, 2005.





On
      September 1, 2006, the 1,000 shares Series A preferred stock were converted
      into
      29,530,937 shares of the Company’s common stock. Subsequently, the Company
      issued additional 118,123 shares in October 2006 to reflect an under-issuance
      to
      a stockholder of the shares of common stock issuable upon conversion of the
      preferred stock As a result the total amount of issued and outstanding shares
      of
      the Company’s common stock was 35,413,850 as of June 30, 2008.





In
      May
      2008, the board of directors of the Company authorized, and on July 31, 2008
      the
      Company issued, 150,000 shares of the Company’s common stock to its attorney for
      services rendered. In June 2008, the board of directors of the Company
      authorized, and on August 14 2008 the Company issued, 100,000 shares of the
      Company’s common stock to HAWK Associates, Inc (“Hawk”), its investor relations
      firm for services rendered pursuant to the agreement. Accordingly the Company
      has 35,663,850 shares of issued and outstanding common stock as of August 15,
      2008.





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


13




**15.** **COMMITMENTS**





The
      Company leases its office space and production land under operating lease
      agreements that are expiring on December 31, 2008 and October, 2047
      respectively. In order to assure increasing products, the company also leases
      two lands and buildings under operating lease agreements that are expiring
      on
      July 31, it had been extended to September 30, 2008, and November 30, 2008
      respectively The following is a schedule of future minimum rental office space
      and land payments required under these operating leases as of June 30,
      2008.





For
                the Quarter Ending June 30,2009
            
            $
            91,8122010
            
            
            16,9992011
            
            
            16,9992012
            
            
            16,9992013
            
            
            16,999Thereafter
            
            
            583,644Total
                minimum rental payments required
            
            $
            743,452





Rental
      and maintenance expenses for office space, land, and building operating leases
      amounted to $85,615 and $18,820 for the six months ended June 30, 2008 and
      2007,
      respectively.





The
      Company also leases three patents rights from its Chairman, Mr. Fang She Zhang,
      under operating lease agreements that expire on April 16, 2011. The following
      is
      a schedule of future minimum rental payments required under these operating
      leases that have remaining lease terms in excesses of one year as of June 30,
      2008.





For
                the Quarter Ending June 30,2009
            
            $
            339,9872010
            
            
            270,101Total
                minimum rental payments required
            
            $
            610,088





Patent
      lease expenses amounted to $167,546 and $155,469, for six months ended June
      30,
      2008 and 2007, respectively.





On
      June
      15, 2008, the Company signed an agreement with Hawk to provide investor
      relations consulting and advisory services. The term of this agreement is
      effective through June 30, 2009. Hawk is paid a retainer fee of $7,500 per
      month
      and the payments are due at the beginning of each month. An initial payment
      of
      $11,250 was paid to cover the period June 15, 2008 through July 31, 2008.
      Accordingly, an additional $78,750 will be paid to Hawk pursuant to this
      agreement. . Hawk was also issued 100,000 restricted 144 shares of the Company’s
      common stock on August 14, 2008.




14




**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





The
      following analysis of our consolidated financial condition and results of
      operations for the six months ended June 30, 2008 and 2007, should be read
      in
      conjunction with the consolidated financial statements, including footnotes,
      and
      other information presented in our annual report on Form 10-KSB as filed with
      the Securities and Exchange Commission on March 31, 2008.





**Overview**





The
      Company was incorporated under the laws of the State of Delaware on August
      1,
      1996. The Company was formed in connection with the merger acquisition of Kushi
      Macrobiotics Corp. (“KMC”) with American Phoenix Group, Inc. (“APGI”) in 1996.
      Prior to such acquisition, KMC had operated a business of marketing a line
      of
      natural foods (the “Kushi Cuisine”). This business was not successful and
      management determined that it would be in the shareholder’s interest for KMC to
      operate a different business. In August 2005, the Company, through Kushi Sub,
      Inc., a newly formed Delaware corporation and wholly-owned subsidiary of the
      Company ("Acquisition Sub") acquired all the ownership interest in Hanxin (Cork)
      International Holding Co., Ltd. ("Hanxin International"), a British Virgin
      Islands limited liability corporation, organized in September 2004. The Company
      acquired Hanxin International in exchange for 24,000,000 shares of common stock
      and 1,000 shares of the Series A Preferred Stock, which such shares converted
      into 29,530,937 shares of common stock. Subsequent to the merger and upon the
      conversion of the Series A Preferred Stock, the former shareholders of Hanxin
      International currently own 95% of the outstanding shares of the Company's
      common stock.





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.




15




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




**Business
      Overview**





The
      Company, through its subsidiaries, engages in developing, manufacturing and
      marketing of cork wood floor, wall and decorating materials.





Hanxin
      is
      a manufacturing company based in China, which produces cork-building material
      sold under the Hanxin brand name. Approximately 75% of Hanxin's products sold
      in
      year 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 June 30, 2008. .





**Foreign
      Exchange Considerations**





Even
      though we are a U.S. company, because all of our operations are located in
      the
      PRC, we face certain risks associated with doing business in that country.
      These
      risks include risks associated with the ongoing transition from state business
      ownership to privatization, operating in a cash-based economy, dealing with
      inconsistent government policies, unexpected changes in regulatory requirements,
      export restrictions, tariffs and other trade barriers, challenges in staffing
      and managing operations in a communist country, differences in technology
      standards, employment laws and business practices, longer payment cycles and
      problems in collecting accounts receivable, changes in currency exchange rates
      and currency exchange controls. We are unable to control the vast majority
      of
      these risks associated both with our operations and the country in which they
      are located and these risks could result in significant declines in our
      revenues.





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.




16




The
      functional currency of our Chinese subsidiaries is the Chinese RMB, the local
      currency. The financial statements of the subsidiaries are translated to U.S.
      dollars using year-end rates of exchange for assets and liabilities, and average
      rates of exchange for the period for revenues, costs, and expenses. Net gains
      and losses resulting from foreign exchange transactions are included in the
      consolidated statements of operations and were not material during the periods
      presented. Until 1994, the RMB experienced a gradual but significant devaluation
      against most major currencies, including U.S. dollars, and there was a
      significant devaluation of the RMB on January 1, 1994 in connection with the
      replacement of the dual exchange rate system with a unified managed floating
      rate foreign exchange system. Since 1994, the value of the RMB relative to
      the
      U.S. Dollar has remained stable and has appreciated slightly against the U.S.
      dollar. Countries, including the United States, have argued that the RMB is
      artificially undervalued due to China's current monetary policies and have
      pressured China to allow the RMB to float freely in world markets.





On
      July
      21, 2005, the PRC reported that it would have its currency pegged to a basket
      of
      currencies rather than just tied to a fixed exchange rate to the dollar. It
      also
      increased the value of its currency 2% higher against the dollar, effective
      immediately. If any devaluation of the RMB were to occur in the future, returns
      on our operations in China, which are expected to be in the form of RMB, will
      be
      negatively affected upon conversion to U.S. dollars. Although we attempt to
      have
      most future payments, mainly repayments of loans and capital contributions,
      denominated in U.S. dollars, if any increase in the value of the RMB were to
      occur in the future, our product sales in China and in other countries may
      be
      negatively affected.





**Critical
      Accounting Policies**





The
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States.
      The preparation of these consolidated financial statements requires us to make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses, and related disclosure of contingent assets and
      liabilities. On an on-going basis, we evaluate our estimates based on historical
      experience and on various other assumptions that are believed to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





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




17




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.




18




**RESULTS
      OF OPERATIONS**




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





**For Three Months Ended June 30,**2008
            
            2007
            
            (Decrease)/
                IncreaseUnaudited
            
            UnauditedRevenues
            
            $
            6,366,384
            
            $
            3,550,064
            
            $
            2,816,320
            
            
            79
            %Cost
                of Goods Sold
            
            
            4,173,021
            
            
            2,580,974
            
            
            1,592,047
            
            
            62
            %Gross
                Profit
            
            
            2,193,363
            
            
            969,090
            
            
            1,224,273
            
            
            126
            %Gross
                Profit Percentage
            
            
            34.45
            %
            
            27.30
            %Operating
                ExpensesSelling
                expenses
            
            
            832,792
            
            
            384,473
            
            
            448,319
            
            
            117
            %General
                and administrative expense
            
            
            341,248
            
            
            87,284
            
            
            253,964
            
            
            291
            %Total
                Operating Expenses
            
            
            1,174,040
            
            
            471,757
            
            
            702,283
            
            
            149
            %Income
                From Operations
            
            
            1,019,323
            
            
            497,333
            
            
            521,990
            
            
            105
            %Other
                Income (Expense)Interest
                (expense), net
            
            
            (19,835
            )
            
            (16,120
            )
            
            (3,715
            )
            
            23
            %Other
                (expense) income, net
            
            
            (29,177
            )
            
            18,716
            
            
            (47,893
            )
            
            -256
            %Total
                Other (Expense) Income
            
            
            (49,012
            )
            
            2,596
            
            
            (51,608
            )
            
            -1988
            %Income
                Before Taxes and Minority Interest
            
            
            970,311
            
            
            499,929
            
            
            470,382
            
            
            94
            %Income
                Tax Provision
            
            
            148,490
            
            
            75,714
            
            
            72,776
            
            
            96
            %Income
                Before Minority Interest
            
            
            821,821
            
            
            424,215
            
            
            397,606
            
            
            94
            %Minority
                Interest
            
            
            60,146
            
            
            35,194
            
            
            24,952
            
            
            71
            %Net
                Income
            
            $
            761,675
            
            $
            389,021
            
            $
            372,654
            
            
            96
            %




**Revenues**





For
      the
      three months ended June 30, 2008, our revenues were $6,366,384 as compared
      to
      $3,550,064 for the three months ended June 30, 2007, an increase of $2,816,320
      or 79%. The reason for the increase is primarily due to our selling efforts
      which increased sales of our major finished goods (wood materials, boards and
      floors) as compared to the sales quantities for the three months ended June
      30,
      2007. We also increased our unit sales prices by 20% effective as of October
      2007. Our revenues from wood materials and floor sales increased by amounts
      of
      $621,702 and $1,749,372 respectively in the three months ended June 30, 2008
      as
      compared to the same period in year 2007, Even though our sales on the wood
      paper products decreased, this was offsets by an increase in the amount in
      boards sold during the three months ended June 30, 2008.




**Cost
      of Sales and Gross Profit**





For
      the
      three months ended June 30, 2008, cost of sales amounted to $4,173,021 or 65.55%
      of net revenues as compared to cost of sales of $2,580,974 or 72.7% of net
      revenues for the three months ended June 30, 2007. Gross profit for the three
      months ended June 30, 2008 was $2,193,363 or 34.45% of revenues, as compared
      to
      $969,090 or 27.3% of revenues for the three months ended June 30, 2007. The
      gross margin increased mainly as a result of increased sales in the high-unit
      profit margin in the sale of finished goods (wood materials and floors) during
      the current year.





19





**Operating
      Expenses**





Our
      operating expenses increased for the three months ended June 30, 2008 as
      compared to the three months ended June 30, 2007. For the three months ended
      June 30, 2008, total operating expenses were $1,174,040 as compared to $471,757
      for the three months ended June 30, 2007, a increase of approximately $0.7
      million or 149%. This increase was attributable to an increase in selling
      expenses, freight cost, and commissions associated with our increased revenues.
      The increase in general and administrative costs was primarily attributable
      to
      increases consulting fee, advisory fee, attorney fee, and professional fee
      in
      the current quarter.





**Other
      Income (expense)**





For
      the
      three months ended June 30, 2008, other expense, net, amounted to ($49,012)
      as
      compared to other income net of $2,596 for the three months ended June 30,
      2007,
      a decrease of ($51,608) or 1988%. Other income for the three months ended June
      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
      contribution made by the Company during the three months ended June 30, 2008
      in
      the amount of $71,822 and which such donation was made in connection with
      earthquake in SiChuan PRC.





For
      the
      three months ended June 30, 2008, net interest expense was ($19,835) as compared
      to net interest expense of ($16,120) for the three months ended June 30, 2007,
      an increase of ($3,715) or 23%. The increase was primarily due to interest
      income being reduced more than the reduction of interest expenses during the
      three months ended June 30, 2008 as compared to the same period in year
      2007.





**Income
      Tax**





Our
      income taxes increased by $72,776 or 96% to $148,490 for the three months ended
      June 30, 2008 compared to $75,714 for the three months ended June 30, 2007.
      This
      increase was due to an increase in net income before income taxes. The Company's
      tax-exempt status ended as of December 31, 2004. Hanxin is subject to a 15%
      corporate income tax starting from year 2005. CIE is subject to a 25% corporate
      income tax starting from January 1, 2008.





20





**SIX
      MONTHS ENDED JUNE 30, 2008 COMPARED TO SIX MONTHS ENDED JUNE 30,
      2007**





**For Six Months Ended June 30,**2008
            
            2007
            
            (Decrease)/
                IncreaseUnaudited
            
            UnauditedRevenues
            
            $
            8,882,729
            
            $
            5,276,391
            
            $
            3,606,338
            
            
            68
            %Cost
                of Goods Sold
            
            
            5,856,120
            
            
            3,908,256
            
            
            1,947,864
            
            
            50
            %Gross
                Profit
            
            
            3,026,609
            
            
            1,368,135
            
            
            1,658,474
            
            
            121
            %Gross
                Profit Percentage
            
            
            34.07
            %
            
            25.93
            %Operating
                ExpensesSelling
                expenses
            
            
            1,112,086
            
            
            585,314
            
            
            526,772
            
            
            90
            %General
                and administrative expense
            
            
            414,717
            
            
            202,087
            
            
            212,630
            
            
            105
            %Total
                Operating Expenses
            
            
            1,526,803
            
            
            787,401
            
            
            739,402
            
            
            94
            %Income
                From Operations
            
            
            1,499,806
            
            
            580,734
            
            
            919,072
            
            
            158
            %Other
                Income (Expense)Interest
                (expense) income, net
            
            
            (32,388
            )
            
            22,070
            
            
            (54,458
            )
            
            -247
            %Other
                income, net
            
            
            4,966
            
            
            36,468
            
            
            (31,502
            )
            
            -86
            %Total
                Other (Expense) Income
            
            
            (27,422
            )
            
            58,538
            
            
            (85,960
            )
            
            -147
            %Income
                Before Taxes and Minority Interest
            
            
            1,472,384
            
            
            639,272
            
            
            833,112
            
            
            130
            %Income
                Tax Provision
            
            
            225,281
            
            
            96,595
            
            
            128,686
            
            
            133
            %Income
                Before Minority Interest
            
            
            1,247,103
            
            
            542,677
            
            
            704,426
            
            
            130
            %Minority
                Interest
            
            
            95,246
            
            
            44,263
            
            
            50,983
            
            
            115
            %Net
                Income
            
            $
            1,151,857
            
            $
            498,414
            
            $
            653,443
            
            
            131
            %





**Revenues**





For
      the
      six months ended June 30, 2008, our revenues were $8,882,729 as compared to
      $5,276,391 for the six months ended June 30, 2007, an increase of $3,606,338
      or
      68%. As a result of increasing the commission rates in an effort to promote
      the
      personnel's selling effort, sales of our major finished goods (wood materials,
      board and floors) increased as compared to the sales quantities for the six
      months ended June 30, 2007. In addition, we increased our unit sales prices
      by
      20% effective as of October 2007. Our revenues from wood materials, board and
      floor sales increased by amounts of $748,496, $179,620, and $2,283,669,
      respectively in the six months ended June 30, 2008 as compared to the same
      period in year 2007





**Cost
      of Sales and Gross Profit**





For
      the
      six months ended June 30, 2008, cost of sales amounted to $5,856,120 or 65.93%
      of net revenues as compared to cost of sales of $3,908,256 or 74.07% of net
      revenues for the six months ended June 30, 2007, an increase of $1,947,864
      or
      50%. Gross profit for the six months ended June 30, 2008 was $3,026,609 or
      34.07% of revenues, as compared to $1,368,135 or 25.93% of revenues for the
      six
      months ended June 30, 2007, an increase of $1,658,474 or 121%. The gross margin
      increased mainly as a result of increased sales in the high-unit profit margin
      in the sale of finished goods (wood materials and floors) during the current
      year.





21




**Operating
      Expenses**





Our
      operating expenses increased for the six months ended June 30, 2008 as compared
      to the six months ended June 30, 2007. For the six months ended June 30, 2008,
      total operating expenses were $1,526,803 as compared to $$787,401 for the six
      months ended June 30, 2007, an increase of $739,402million or 94%. This increase
      was attributable to a significant increase in selling expenses, freight cost,
      and commissions associated with our increased revenues. The increase in general
      and administrative costs was primarily attributable to increases in consulting
      fees, advisory fees, and legal fees.





**Other
      Income (expenses)**





For
      the
      six months ended June 30, 2008, other expense, net, amounted to ($27,422) as
      compared to other income net of $58,538 for the six months ended June 30, 2007,
      an decrease of ($85,960) or 147%. Other income for the six months ended June
      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
      contribution made by the Company during the three months ended June 30, 2008
      in
      the amount of $71,822 and which such donation was made in connection with the
      earthquake in SiChuan PRC.





For
      the
      six months ended June 30, 2008, net interest expense was $32,388 as compared
      to
      net interest income of $22,070 for the six months ended June 30, 2007, a
      decrease of $54,458 or 247%. This decrease was primary attributable to the
      significant decrease in interest income in the current year.





**Income
      Tax**





Our
      income taxes increased by $128,686 to $225,281 for the three months ended June
      30, 2008 compared to $96,595 for the three months ended June 30, 2007, an
      increase of 133%. 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.





**LIQUIDITY
      AND CAPITAL RESOURCES**





Operating
      working capital (accounts receivable plus inventory less accounts payable and
      accrued expenses) increased by approximately $1,700,000 from approximately
      $2,400,000 as of December 31, 2007 to approximately $4,100,000 as of June 30,
      2008. The increase was primarily due to an increase in inventories for amount
      of
      approximately $1,300,000 during the current year.




22




Cash
      used
      in operating activities was ($332,195) for the six months ended June 30, 2008
      as
      compared to ($76,694) used in the six months ended June 30, 2007. The increase
      in cash used in by operating activities for the six months ended June 30, 2008
      was a result of an increase of accounts receivable, inventories, and advance
      to
      suppliers.





Cash
      used
      in investing activities was ($33,532) for the six months ended June 30, 2008
      as
      compared to $830,616 for the six months ended June 30, 2007. The decrease is
      a
      result of less investment activities of the Company in the current year which
      is
      primarily due to insufficient cash and equivalent in the current year.





With
      approximately $5.2 million of net working capital (total current assets less
      total current liabilities) and positive cash flow from operations as of June
      30,
      2008, we believe we will have sufficient resources to finance our operations
      for
      the coming year.





**CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**





Management's
      Discussion and Analysis of Financial Condition and Plan of Operations discusses
      the Company's financial statements, which have been prepared in accordance
      with
      accounting principles generally accepted in the United States of America. The
      preparation of these financial statements requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. On an on-going basis, management evaluates
      its estimates and judgments, including those related to revenue recognition,
      intangible assets, financing operations, and contingencies and litigation.
      Management bases its estimates and judgments on historical experience and on
      various other factors that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying value of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions. The most significant accounting estimates inherent
      in
      the preparation of the Company's financial statements include estimates as
      to
      the appropriate carrying value of certain assets and liabilities which are
      not
      readily apparent from other sources, primarily allowance for doubtful accounts
      and accruals for other liabilities. These accounting policies are described
      at
      relevant sections in this discussion and analysis and in the notes to the
      consolidated financial statements included in our Annual Report on Form 10-KSB
      for the fiscal year ended December 31, 2007.





**ITEM
      3.** **QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**





A
      smaller
      reporting company is not required to provide the information required by this
      Item.




23




**ITEM
      4. CONTROLS AND PROCEDURES**





*Evaluation
      of Disclosure Controls and Procedures* .
      Under
      the supervision and with the participation of our management, including our
      Chief Executive Officer, Pengcheng Chen, and Chief Financial Officer, Yi Tong,
      we evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
      Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the
      period covered by this report. Based upon that evaluation, our Chief Executive
      Officer and Chief Financial Officer concluded that our disclosure controls
      and
      procedures as of the end of the period covered by this report were effective
      such that the information required to be disclosed by us in reports filed under
      the Securities Exchange Act of 1934 is (i) recorded, processed, summarized
      and
      reported within the time periods specified in the SEC's rules and forms and
      (ii)
      accumulated and communicated to our management to allow timely decisions
      regarding disclosure. A controls system cannot provide absolute assurance,
      however, that the objectives of the controls system are met, and no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, within a company have been detected.





*Changes
      in Internal Control Over Financial Reporting.* During
      the most recent quarter ended March 31, 2008, there has been no change in our
      internal control over financial reporting (as defined in Rule 13a-15(f) and
      15d-15(f) under the Exchange Act) ) that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.


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.  As
      discussed in Note 12 to the Financial Statements (and as described on the
      Company’s Report on Form 8-K filed with the Securities and Exchange Commission
      on June 20, 2008) on June 4 and June 12, 2008, the Company consummated an
      offering of convertible promissory notes and common stock purchase warrants
      for
      aggregate gross proceeds of $700,000. The notes mature one (1) year from closing
      and bear interest at an annual rate of 18%, payable at maturity in USD. Upon
      the
      successful closing of an equity or convertible debt financing for a minimum
      of
      $2,000,000 (“Financing”), the promissory notes will be convertible for shares of
      common stock at a 50% discount to the price per share of Common Stock sold
      in
      the Financing. If a Financing is not achieved within the one year term of the
      promissory notes, each investor has the option to be paid the principal and
      interest due under the promissory note or convert the note into common stock
      at
      a conversion price of $0.228 per share.





The
      warrants are exercisable at any time after the consummation of the Financing
      through the fourth anniversary of the consummation of the Financing (the
“Financing Expiration Date”). Each holder is entitled to purchase the number of
      shares of common stock equal to the initial principal amount of such investor’s
      promissory note *divided by* the
      lowest cash purchase price paid for the Company’s common stock (or the
      conversion price or exercise price if the Financing consists of convertible
      securities or warrants, respectively) in the Financing (the “Financing Based
      Conversion Price”) at an exercise price equal to the Financing Based Conversion
      Price. If the Financing has not occurred within 12 months of the issuance of
      the
      warrant, the warrant is exercisable from and after such date and through the
      fourth anniversary of the issuance date of the warrant. In such event, the
      holder is entitled to purchase the number of shares of common stock equal to
      50%
      of the initial principal amount of the promissory note *divided
      by* $0.228
      at
      an exercise price equal to $0.228, subject to certain adjustments as set forth
      in the warrant.




The
      investors have the right to require the Company to register the shares of common
      stock issuable upon exercise of the warrants and conversion of the promissory
      notes at the Company’s expense should the Company register any of its shares of
      common stock or any securities convertible into common stock.





25





The
      Company’s obligations under the promissory notes are secured by an aggregate of
      2,332,899 shares of common stock pledged by Mr. Pengcheng Chen, the Company’s
      Chief Executive Officer and 2,031,191 shares of common stock pledged by Mr.
      Fangshe Zhang, the Company’s Chairman (the “Escrow Shares”). In the event that
      subsequent to the closing, the value of the Escrow Shares is less than 150%
      of
      the outstanding principal amount of the promissory notes for 10 consecutive
      trading days, then the investors shall have the right to give the Company notice
      (the “Investor Notice”) to deposit or cause to be deposited additional Escrow
      Shares such that the value of the Escrow Shares based upon the volume weighted
      average price per share for the 20 trading days preceding the date of the
      Investor Notice, is equal to 150% of the outstanding principal amount of the
      promissory notes. The Company shall deposit or cause to be deposited such
      additional Escrow Shares within 30 days of the date of the Investor Notice.
      To
      the extent the Escrow Shares are not sufficient to meet the threshold of 150%
      of
      the outstanding principal amount of the promissory notes within 30 days after
      the Investor Notice, the Company shall grant to Investors a security interest
      on
      the Company’s tangible assets to the extent permitted under applicable
      law.





The
      Company is using the proceeds of the Offering for working capital.





2.  In
      May
      2008, the board of directors of the Company authorized, and on July 31, 2008
      the
      Company issued, 150,000 shares of the Company’s common stock to its attorney for
      services rendered





3.  In
      June
      2008, the board of directors of the Company authorized, and on August 14 2008
      the Company issued, 100,000 shares of the Company’s common stock to Hawk
      Associates, Inc. for services rendered pursuant to the term of the agreement
      with Hawk Associates.





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




26




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.


27




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant has caused
      his report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





**ASIA
                CORK INC.**Dated:
                August 15, 2008
            By:
            /s/
                Pengcheng ChenPengcheng
                Chen, Chief Executive OfficerBy:
            /s/
                Yi TongYi
                Tong, Chief Financial Officer