United States

Securities and Exchange Commission

Washington, D.C. 20549



FORM 10-Q



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

For the quarterly period ended March 31, 2009

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

For the transition period from:

Commission file number000-30115



ASIA CORK INC.

(Exact name of Small Business Issuer as specified in its charter.)



|                                                               |                                  
|-------------------------------------------------------------- | ---------------------------------
|DELAWARE                                                       | 13-3912047                       
|(State of other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)



3rd Floor, A Tower of Chuang Xin

Information Building

No. 72 Second Keji Road, Hi Tech Zone, XiAn, Shaanxi 710075 P.R. CHINA

(Address of principal executive offices, including zip code)

(011) 86-13301996766

(Issuers telephone number, including area code)



(Former Address, if changed since last report)

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

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

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

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

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

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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one): YES  ̈  NO þ









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ASIA CORK INC.

FORM 10-Q

QUARTERLY PERIOD ENDED March 31, 2009

INDEX

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Page
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
1
Item 2.Management's Discussion And Analysis Or Plan Of Operation
14
Item 3.Quantitative And Qualitative Disclosures About Market Risk
18
Item 4.Controls And Procedures
18
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
19
Item 1ARisk Factors
19
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
19
Item 3.Defaults Upon Senior Securities
19
Item 4.Submission of Matters to a Vote of Security Holders
19
Item 5.Other Information
19
Item 6.       Exhibits
19
Signatures
20











---

Part I - Financial Information

Item 1.

Financial Statements

Asia Cork Inc. and Subsidiaries

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

Condensed Consolidated Balance Sheets

|                                                                                                  |  |                |            |  |                   |   |            | 
|------------------------------------------------------------------------------------------------- |  | -------------- | ---------- |  | ----------------- | - | ---------- | 
|                                                                                                  |  | March 31,
2009 |            |  | December 31,
2008 |  
|                                                                                                  |  | (Unaudited)    |            |  | (Audited)         |  
|Assets:                                                                                           |  |                |            |  |                   |  
|Current Assets                                                                                    |  |                |            |  |                   |  
|Cash and equivalents                                                                              |  | $              | 18,979     |  |                   | $ | 23,605     | 
|Accounts receivable, net of allowance for doubtful 
accounts of $22,940 and $23,787, respectively |  |                | 4,645,920  |  |                   |   | 4,956,005  | 
|Inventories                                                                                       |  |                | 2,632,242  |  |                   |   | 2,756,011  | 
|Advance to suppliers                                                                              |  |                | 2,826,187  |  |                   |   | 2,562,357  | 
|Loan to unrelated party                                                                           |  |                | 1,463,351  |  |                   |   | 1,465,738  | 
|Deferred income tax assets                                                                        |  |                | 6,916      |  |                   |   | 7,757      | 
|Prepayments and other current assets                                                              |  |                | 81,797     |  |                   |   | 15,038     | 
|Total Current Assets                                                                              |  |                | 11,675,392 |  |                   |   | 11,786,511 | 
|                                                                                                  |  |                |            |  |                   |   |            | 
|Property and Equipment - Net                                                                      |  |                | 4,731,266  |  |                   |   | 4,813,629  | 
|Deposit for Purchase of Fixed Assets                                                              |  |                | 2,019,425  |  |                   |   | 2,022,719  | 
|Deposit for Acquisition                                                                           |  |                | 1,463,351  |  |                   |   | 1,465,738  | 
|Investment - At Cost                                                                              |  |                | 2,048,692  |  |                   |   | 2,052,034  | 
|Intangible Assets- Net                                                                            |  |                | 169,546    |  |                   |   | 171,178    | 
|Deferred Income Tax Assets                                                                        |  |                | 15,521     |  |                   |   | 16,586     | 
|Total Assets                                                                                      |  |                | 22,123,193 |  |                   |   | 22,328,395 | 
|                                                                                                  |  |                |            |  |                   |   |            | 
|Liabilities and Equity:                                                                           |  |                |            |  |                   |   |            | 
|Liabilities:                                                                                      |  |                |            |  |                   |   |            | 
|Current Liabilities                                                                               |  |                |            |  |                   |   |            | 
|Accounts payable and accrued expenses                                                             |  |                | 1,380,071  |  |                   |   | 1,427,452  | 
|Loan payable                                                                                      |  |                | 439,005    |  |                   |   | 439,722    | 
|Convertible note                                                                                  |  |                | 700,000    |  |                   |   | 700,000    | 
|Customer deposit                                                                                  |  |                | 10,102     |  |                   |   | 10,118     | 
|Taxes payable                                                                                     |  |                | 189,426    |  |                   |   | 275,219    | 
|Due to stockholders/officers                                                                      |  |                | 177,410    |  |                   |   | 177,699    | 
|Other current liabilities                                                                         |  |                | 3,418      |  |                   |   | 33,027     | 
|Total Current Liabilities                                                                         |  |                | 2,899,432  |  |                   |   | 3,063,237  | 
|                                                                                                  |  |                |            |  |                   |   |            | 
|Total Liabilities                                                                                 |  |                | 2,899,432  |  |                   |   | 3,063,237  | 
|                                                                                                  |  |                |            |  |                   |   |            | 
|Equity:                                                                                           |  |                |            |  |                   |   |            | 
|Asia Cork Inc. Stockholders' Equity:                                                              |  |                |            |  |                   |   |            | 
|Common stock, $0.0001 par value, 200,000,000 shares authorized,                                   |  |                |            |  |                  
|35,663,850 issued and outstanding                                                                 |  |                | 3,566      |  |                   |   | 3,566      | 
|Additional paid-in capital                                                                        |  |                | 4,400,946  |  |                   |   | 4,400,946  | 
|Reserve funds                                                                                     |  |                | 2,231,904  |  |                   |   | 2,231,904  | 
|Retained earnings                                                                                 |  |                | 8,154,571  |  |                   |   | 8,160,402  | 
|Accumulated other comprehensive income                                                            |  |                | 2,636,307  |  |                   |   | 2,668,838  | 
|Total Asia Cork Inc. Stockholders' Equity                                                         |  |                | 17,427,294 |  |                   |   | 17,465,656 | 
|Noncontrolling Interest                                                                           |  |                | 1,796,467  |  |                   |   | 1,799,502  | 
|Total Equity                                                                                      |  |                | 19,223,761 |  |                   |   | 19,265,158 | 
|                                                                                                  |  |                |            |  |                   |   |            | 
|Total Liabilities and Equity                                                                      |  | $              | 22,123,193 |  |                   | $ | 22,328,395 | 



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements



1



---







Asia Cork Inc. and Subsidiaries

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

Condensed Consolidated Statements of Operations (Unaudited)

|                                                                    |  |                                  |            |   |             |   |            |  
|------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ----------- | - | ---------- | -
|                                                                    |  | For Three Months Ended March 31, |           
|                                                                    |  | 2009                             |            |   | 2008        |  
|                                                                    |  | (Unaudited)                      |            |   | (Unaudited) |  
|Revenues                                                            |  | $                                | 902,504    |   |             | $ | 2,516,345  |  
|Cost of Goods Sold                                                  |  |                                  | 689,587    |   |             |   | 1,683,099  |  
|Gross Profit                                                        |  |                                  | 212,917    |   |             |   | 833,246    |  
|                                                                    |  |                                  |            |   |             |   |            |  
|Operating Expenses                                                  |  |                                  |            |   |             |   |            |  
|Selling expenses                                                    |  |                                  | 125,165    |   |             |   | 279,294    |  
|General and administrative expense                                  |  |                                  | 104,442    |   |             |   | 73,469     |  
|Total Operating Expenses                                            |  |                                  | 229,607    |   |             |   | 352,763    |  
|                                                                    |  |                                  |            |   |             |   |            |  
|(Loss) Income From Operations                                       |  |                                  | (16,690    | ) |             |   | 480,483    |  
|                                                                    |  |                                  |            |   |             |   |            |  
|Other Income (Expense)                                              |  |                                  |            |   |             |   |            |  
|Interest (expense), net                                             |  |                                  | (12,621    | ) |             |   | (12,553    | )
|Other income (expense), net                                         |  |                                  | 24,725     |   |             |   | 34,143     |  
|Total Other Income                                                  |  |                                  | 12,104     |   |             |   | 21,590     |  
|                                                                    |  |                                  |            |   |             |   |            |  
|(Loss) Income Before Taxes                                          |  |                                  | (4,586     | ) |             |   | 502,073    |  
|Provision for Income Taxes                                          |  |                                  | 4,280      |   |             |   | 76,791     |  
|                                                                    |  |                                  |            |   |             |   |            |  
|Net (Loss) Income Before Noncontrolling Interest                    |  |                                  | (8,866     | ) |             |   | 425,282    |  
|                                                                    |  |                                  |            |   |             |   |            |  
|Less: Net (loss) income attributable to the noncontrolling interest |  |                                  | (3,035     | ) |             |   | 35,100     |  
|                                                                    |  |                                  |            |   |             |   |            |  
|Net (Loss) Income Attributable to Asia Cork Inc.                    |  | $                                | (5,831     | ) |             | $ | 390,182    |  
|                                                                    |  |                                  |            |   |             |   |            |  
|                                                                    |  |                                  |            |   |             |   |            |  
|Earnings Per Share - Basic and Diluted:                             |  |                                  |            |   |             |   |            |  
|Net (loss) income per share attributable to Asia Cork Inc.          |  | $                                | (0.00      | ) |             | $ | 0.01       |  
|Weighted Common Shares Outstanding - Basic and Diluted              |  |                                  | 35,663,850 |   |             |   | 35,413,850 |  







The accompanying notes are an integral part of these unaudited condensed consolidated financial statements



2



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Asia Cork Inc. and Subsidiaries

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

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

|                                                 |  |                                  |         |   |             |   |           | 
|------------------------------------------------ |  | -------------------------------- | ------- | - | ----------- | - | --------- | 
|                                                 |  | For Three Months Ended March 31, |        
|                                                 |  | 2009                             |         |   | 2008        |  
|                                                 |  | (Unaudited)                      |         |   | (Unaudited) |  
|Net (Loss) Income Before Noncontrolling Interest |  | $                                | (8,866  | ) |             | $ | 425,282   | 
|Other Comprehensive (Loss) Income:               |  |                                  |         |   |             |   |           | 
|Foreign Currency Translation (Loss) Income       |  |                                  | (32,531 | ) |             |   | 614,388   | 
|Comprehensive (Loss) Income                      |  | $                                | (41,397 | ) |             | $ | 1,039,670 | 







The accompanying notes are an integral part of these unaudited condensed consolidated financial statements



3



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Asia Cork Inc. and Subsidiaries

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

Condensed Consolidated Statements of Changes in Equity (Unaudited)
For Three Months Ended March 31, 2009 and 2008

|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|--------------------------------------------------------------- |  | ----------------------------------- | ---------- |  | ---------- | - | ----- | --------------- |  | - | ------------ | - |  | --------------------- | --------- |  | ---------------- | - | --------- | --------------------- |  | - | --------- | - |  | - | --------- | - |  | - | ---------- | -
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |  
|                                                                |  | Asia Cork Inc. Stockholders' Equity |            |  |            |   |       |                 | 
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  | Retained              |           |  | Other            |   |           |                       |  |   |           |  
|                                                                |  | Common Stock,                       |            |  | Additional |   |       |                 |  |   | Earnings /   |   |  | Comprehensive         |           |  | Non              |   |           |                       | 
|                                                                |  | No. of
Shares                       |            |  | Amount     |   |       | Paid-in
Capital |  |   | Reserve
Fund |   |  | (Accumulated
Deficit) |           |  | Income
(expense) |   |           | -controlling
Interest |  |   | Total     |  
|Balance, December 31, 2007                                      |  |                                     | 35,413,850 |  |            | $ | 3,541 |                 |  | $ | 4,396,772    |   |  | $                     | 1,741,715 |  |                  | $ | 5,729,630 |                       |  | $ | 1,564,966 |   |  | $ | 1,522,318 |   |  | $ | 14,958,942 |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Patent rights donation                                          |  |                                     |          |  |            |   |     |                 |  |   | 4,199        |   |  |                       |         |  |                  |   |         |                       |  |   |         |   |  |   |         |   |  |   | 4,199      |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Issue new common stocks on July 31, 2008 for service received   |  |                                     | 150,000    |  |            |   | 15    |                 |  |   | (15          | ) |  |                       |         |  |                  |   |         |                       |  |   |         |   |  |   |         |   |  |   |          |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Issue new common stocks on August 14, 2008 for service received |  |                                     | 100,000    |  |            |   | 10    |                 |  |   | (10          | ) |  |                       |         |  |                  |   |         |                       |  |   |         |   |  |   |         |   |  |   |          |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Net income for year ended December 31, 2008                     |  |                                     |          |  |            |   |     |                 |  |   |            |   |  |                       |         |  |                  |   | 2,920,961 |                       |  |   |         |   |  |   | 277,184   |   |  |   | 3,198,145  |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Appropriation of Reserve funds                                  |  |                                     |          |  |            |   |     |                 |  |   |            |   |  |                       | 490,189   |  |                  |   | (490,189  | )                     |  |   |         |   |  |   |         |   |  |   |          |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Foreign currency translation gain                               |  |                                     |          |  |            |   |     |                 |  |   |            |   |  |                       |         |  |                  |   |         |                       |  |   | 1,103,872 |   |  |   |         |   |  |   | 1,103,872  |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Balance, December 31, 2008                                      |  |                                     | 35,663,850 |  |            | $ | 3,566 |                 |  | $ | 4,400,946    |   |  | $                     | 2,231,904 |  |                  | $ | 8,160,402 |                       |  | $ | 2,668,838 |   |  | $ | 1,799,502 |   |  | $ | 19,265,158 |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Net loss for three months ended March 31, 2009                  |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   | (5,831    | )                     |  |   |           |   |  |   | (3,035    | ) |  |   | (8,866     | )
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Foreign currency translation loss                               |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   | (32,531   | ) |  |   |           |   |  |   | (32,531    | )
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  
|Balance, March 31, 2009                                         |  |                                     | 35,663,850 |  |            | $ | 3,566 |                 |  | $ | 4,400,946    |   |  | $                     | 2,231,904 |  |                  | $ | 8,154,571 |                       |  | $ | 2,636,307 |   |  | $ | 1,796,467 |   |  | $ | 19,223,761 |  
|                                                                |  |                                     |            |  |            |   |       |                 |  |   |              |   |  |                       |           |  |                  |   |           |                       |  |   |           |   |  |   |           |   |  |   |            |  





The accompanying notes are an integral part of these unaudited condensed consolidated financial statements



4



---





Asia Cork Inc. and Subsidiaries

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

Condensed Consolidated Statements of Cash Flows  (Unaudited)

|                                                                                   |  |                                      |          |   |             |   |          |  
|---------------------------------------------------------------------------------- |  | ------------------------------------ | -------- | - | ----------- | - | -------- | -
|                                                                                   |  | For the Three Months Ended March 31, |         
|                                                                                   |  | 2009                                 |          |   | 2008        |  
|                                                                                   |  | (Unaudited)                          |          |   | (Unaudited) |  
|Cash Flows From Operating Activities                                               |  |                                      |          |   |             |  
|Net (Loss) Income                                                                  |  | $                                    | (5,831   | ) |             | $ | 390,182  |  
|Adjustments to Reconcile Net Income to Net Cash                                    |  |                                      |          |   |             |   |          |  
|(Used in) Provided by Operating Activities                                         |  |                                      |          |   |             |   |          |  
|Depreciation and amortization                                                      |  |                                      | 75,846   |   |             |   | 57,860   |  
|Bad debt adjustment                                                                |  |                                      | (808     | ) |             |   | (347     | )
|Net (loss) income attributable to noncontrolling interest                          |  |                                      | (3,035   | ) |             |   | 35,100   |  
|Deferred income tax benenfits                                                      |  |                                      | 1,866    |   |             |   |          |  
|Changes in operating assets and liabilities:                                       |  |                                      |          |   |             |   |          |  
|Accounts receivable                                                                |  |                                      | 303,315  |   |             |   | (68,220  | )
|Inventories                                                                        |  |                                      | 119,475  |   |             |   | 378,493  |  
|Advance to suppliers                                                               |  |                                      | (268,441 | ) |             |   | 20,022   |  
|Prepayments and other current assets                                               |  |                                      | (66,892  | ) |             |   | (4,669   | )
|Accounts payable and accrued expenses                                              |  |                                      | (45,130  | ) |             |   | (118,629 | )
|Customer deposits                                                                  |  |                                      |        |   |             |   |          |  
|Taxes payable                                                                      |  |                                      | (85,484  | ) |             |   | (535,001 | )
|Other current liabilities                                                          |  |                                      | (29,603  | ) |             |   | (8,417   | )
|Net Cash (Used in) Provided by Operating Activities                                |  |                                      | (4,722   | ) |             |   | 146,374  |  
|                                                                                   |  |                                      |          |   |             |   |          |  
|                                                                                   |  |                                      |          |   |             |   |          |  
|Net (Decrease) Increase in Cash and Equivalents                                    |  |                                      | (4,722   | ) |             |   | 146,374  |  
|Effect of Exchange Rate Changes on Cash                                            |  |                                      | 96       |   |             |   | 14,696   |  
|Cash and Equivalents at Beginning of Period                                        |  |                                      | 23,605   |   |             |   | 367,396  |  
|Cash and Equivalents at End of Period                                              |  | $                                    | 18,979   |   |             | $ | 528,466  |  
|                                                                                   |  |                                      |          |   |             |   |          |  
|SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION                                    |  |                                      |          |   |            
|Interest paid for the three months ended March 31, 2009 and 2008, respectively     |  | $                                    | 13,112   |   |             | $ | 13,825   |  
|Income taxes paid for the three months ended March 31, 2009 and 2008, respectively |  | $                                    | 108      |   |             | $ | 282,495  |  
|                                                                                   |  |                                      |          |   |             |   |          |  







The accompanying notes are an integral part of these unaudited condensed consolidated financial statements



5



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Asia Cork Inc. and Subsidiaries

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

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.

BASIS OF PRESENTATION

a)

Interim financial statements:

The unaudited condensed consolidated financial statements of Asia Cork Inc. (f/k/a Hankersen International Corp.)and subsidiaries (the "Company") have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of December 31, 2008 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report.

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

b)

Description of business and reverse merger:

Asia Cork Inc. (f/k/a Hankersen International Corp.) (the "Company") was incorporated on August 1, 1996, under the laws of the State of Delaware. Until August 2005, the Company had no operations and the sole purpose of the Company was to locate and consummate a merger or acquisition with a private entity.

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

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

In August 2005, the Company, through Kushi Sub, Inc., a newly formed Delaware corporation and wholly-owned subsidiary of the Company ("Acquisition Sub") acquired all the ownership interest in Hanxin (Cork) International Holding Co., Ltd. ("Hanxin International"), a British Virgin Islands limited liability corporation, organized in September 2004. The Company acquired Hanxin International in exchange for shares of common stock and shares of the Series A Preferred Stock of the Company. The capitalizations are described in further detail in Note 13 to the accompanying consolidated financial statements.

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

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 engages in cork trading businesses.

Hanxin International has no other business activities but owns 100% of Xi'An Cork Investments Consultative Management Co., Ltd. ("Xi'An"), which owns 92% of Xian Hanxin Technology Co., Ltd. ("Hanxin"), incorporated in July 2002, both Xi'An and Hanxin are People's Republic of China (PRC) corporations. Most of the Companys activities are conducted through Hanxin.



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

c)

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

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



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

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



d)

Use of estimates:

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reporting amounts of revenues and expenses during the reported period. Significant estimates in 2009 and 2008 include the estimated useful lives and fair values of the assets. Actual results could differ from those estimates.

e)

Revenue recognition:

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

f)

Recent Accounting Pronouncements:

In June 2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue 03-6, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share (EPS) pursuant to the two-class method. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented shall be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of FSP EITF 03-6-1. The adoption of this FSP EITF 03-6-1 did not have a material effect on the Companys financial position.

In May 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.162, The Hierarchy of Generally Accepted Accounting Principles. SFAS 162 indicates the entity (not its auditor) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. Accordingly, the GAAP hierarchy should reside in the accounting literature established by the FASB and is issuing SFAS 162 to achieve that result. SFAS 162 also identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).SFAS 162 is effective 60 days following the SECs



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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 had adopted SFAS No. 160 on its condensed consolidated results of operations, financial position, and financial disclosure in year 2009.

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



2.

INVENTORIES

Inventories as of March 31, 2009 and December 31, 2008, consisted of the following:

|                    |  |                |           |  |                   |   |           | 
|------------------- |  | -------------- | --------- |  | ----------------- | - | --------- | 
|                    |  | March 31,
2009 |           |  | December 31, 2008 |  
|                    |  | (Unaudited)    |           |  | (Audited)         |  
|Raw materials       |  | $              | 1,850,269 |  |                   | $ | 2,073,501 | 
|Work in process     |  |                | 534,654   |  |                   |   | 210,526   | 
|Finished goods      |  |                | 232,224   |  |                   |   | 427,459   | 
|Packaging and other |  |                | 15,095    |  |                   |   | 44,525    | 
|Total               |  | $              | 2,632,242 |  |                   | $ | 2,756,011 | 





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3.

LOAN TO UNRELATED PARTY

Hanxin had prepaid RMB10 million as deposits to purchase the land use right from one of its major sales distributors in Shaanxi Province, Shaanxi Shuta Wood Products Co., Ltd. (Shaanxi Shuta). However, Hanxin terminated the agreement in August 2008 and had all deposits refunded in August and September 2008.



In 2008, Shaanxi Shuta opened cork retail chain stores dedicated to sell Hanxins products exclusively. Shaanxi Shuta incurred heavy losses because Hanxin could not achieve its 500,000 square meters floor and board production plan in 2008 and had delayed many purchase orders. In order to avoid losing a very important distribution channel and to assist Shaanxi Shuta to recover from this situation, Hanxin loaned RMB10 million (equivalent to $1,463,351) to Shaanxi Shuta for one year starting from October 27, 2008. This loan is non-interest bearing and unsecured.

4.

PROPERTY AND EQUIPMENT

As of March 31, 2009 and December 31, 2008, property and equipment consisted of the following:

|                               |  |  |                |     |  |                |           |           |                   |   |           |           | 
|------------------------------ |  |  | -------------- | --- |  | -------------- | --------- | --------- | ----------------- | - | --------- | --------- | 
|                               |  |  |                |     |  | March 31,
2009 |           |           | December 31,
2008 |  
|                               |  |  | Estimated Life |     |  | (Unaudited)    |           |           | (Audited)         |  
|Building and improvement       |  |  | 27-35          |     |  | $              | 4,886,973 |           |                   | $ | 4,894,945 |          
|Manufacturing equipment        |  |  | 1-8            |     |  |                | 837,400   |           |                   |   | 838,766   |          
|Office furniture and equipment |  |  | 5              |     |  |                | 31,090    |           |                   |   | 31,141    |          
|Vehicle                        |  |  |                | 2-8 |  |                |           | 12,506    |                   |   |           | 12,527    | 
|Machinery improvement          |  |  | 3              |     |  |                | 80,484    |           |                   |   | 80,616    |          
|Subtotal                       |  |  |                |     |  |                |           | 5,848,454 |                   |   |           | 5,857,995 | 
|Less: Accumulated depreciation |  |  |                |     |  |                | 1,117,188 |           |                   |   | 1,044,366 |          
|Total                          |  |  |                |     |  |                | $         | 4,731,266 |                   |   | $         | 4,813,629 | 



For the three months ended March 31, 2009 and 2008, depreciation expenses amounted to $74,494 and $56,645 respectively.

5.

DEPOSIT FOR PURCHASE OF FIXED ASSETS

Hanxin intended to purchase a factorys fixed assets through an unrelated agent who will do the negotiation for the Company, and both parties signed the Entrust Purchase Agreement on November 10, 2005. Hanxin had paid deposits $2,019,425 (equivalent to RMB 13,800,000) to the agent as of March 31, 2009, and the same deposit was valued at $2,022,719 (equivalent to RMB 13,800,000) as of December 31, 2008. The agency agreement has no firm commitment on the purchase but it states a maximum price of RMB 50,000,000 that the Company is willing to pay for the fixed assets. The deposit is fully refundable if the purchase does not close by September 30, 2009.

6.

DEPOSIT FOR ACQUISITION

Hanxin intended to acquire Sichuan Hanxin Cork Merchandises Co, Ltd. (SHCM), one of its cork raw material providers located in Sichuan Province China, and signed a strategic cooperation agreement with SHCM on March 26, 2007. The purchase price of SHCM shall not exceed $2,926,702 (RMB20 million) based upon the agreement. As of March 31, 2009, Hanxin had paid a $1,463,351 (equivalent to RMB10 millions) deposit to SHCM. Hanxin anticipates applying the whole deposited amount to payments for raw materials if the acquisition does not occur before the end of year 2009.

7.

INVESTMENT  AT COST

On June 28, 2005, the Company purchased a 12% equity interest of Shaanxi DeRong Technology Information Development Co. Ltd. (DeRong), a PRC corporation, for $2,048,692 (equivalent to RMB 14 million). DeRong owns a cork tree forest plantation in China. The investment is for long term and is stated at cost.

8.

INTANGIBLE ASSETS

The Company purchased the right to use a parcel of land for 40 years on September 27, 2001. The purchase price is being amortized over the term of the right. In addition, the company was assigned ownership of three patent rights



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from its major stockholder and Chairman, Mr. Fangshe Zhang, during the quarter ended June 30, 2008. These patents were assigned without any payment due to Mr. Zhang. These three patent rights are used as part of a vital technique for the production of the Companys products. The application and filing costs of these three patent rights were $4,199 (equivalent to RMB28,800). As of March 31, 2009 and December 31, 2008, intangible assets, less accumulated amortization consisted of the following:

|                               |  |                |         |  |                   |   |         | 
|------------------------------ |  | -------------- | ------- |  | ----------------- | - | ------- | 
|                               |  | March 31,
2009 |         |  | December 31,
2008 |  
|                               |  | (Unaudited)    |         |  | (Audited)         |  
|Intangible assets              |  | $              | 207,992 |  |                   | $ | 208,332 | 
|Less: Accumulated amortization |  |                | 38,446  |  |                   |   | 37,154  | 
|Total                          |  | $              | 169,546 |  |                   | $ | 171,178 | 



For the three months ended March 31, 2009 and 2008, amortization expense amounted to $1,352 and $1,215 respectively.

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



|     |        
|---- | -------
|2009 | $ 5,412
|2010 | 5,412  
|2011 | 5,412  
|2012 | 5,412  
|2013 | 5,412  



9.

LOAN PAYABLE

Loan payable as of March 31, 2009 and December 31, 2008 consisted of the following:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                |         |  |                   |   |         | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- |  | ----------------- | - | ------- | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | March 31, 2009 |         |  | December 31, 2008 |  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | (Unaudited)    |         |  | (Audited)         |  
|On November 30, 2007, the Company obtained a short-term loan RMB3.9 million (equivalent at that time to $534,642 ) from Xian Xitaoyuan Credit Bank by pledging the Company's building in YuLerYuan with bank, The loan interest is 8.37 per month. The Company had paid principal RMB3.9 million back to bank on June 30, 2008. On the same day, the company borrowed RMB3 million (equivalent to $439,722) from the same bank again, but the new interest rate had been increased to 9.967 per month. The expiration date for this new short-term loan is June 30, 2009. |  | $              | 439,005 |  |                   | $ | 439,722 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |                |         |  |                   |   |         | 
|Total Loan Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $              | 439,005 |  |                   | $ | 439,722 | 



10.

CONVERTIBLE NOTES

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 March 31, 2009.

The Companys obligations under the promissory notes are secured by an aggregate of 7,630,814 shares of common stock pledged by Mr. Pengcheng Chen, the Companys Chief Executive Officer, Mr. Fangshe Zhang, the Companys Chairman (the Escrow Shares). In the event that subsequent to the issuance of the Convertible Notes,



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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.

TAX PAYABLE

The Company and its U. S. subsidiary will file consolidated Federal income tax and state franchise tax annual report individually. Its PRC subsidiaries file income tax returns under the Income Tax Law of the PRC concerning Foreign Investment Enterprises and Foreign Enterprises and local income tax laws. The Companys BVI subsidiary is exempt from income taxes.

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

On March 31, 2009 and December 31, 2008, taxes payable consisted the following:

|                               |  |                |         |  |                   |   |         | 
|------------------------------ |  | -------------- | ------- |  | ----------------- | - | ------- | 
|                               |  | March 31,
2009 |         |  | December 31,
2008 |  
|                               |  | (Unaudited)    |         |  | (Audited)         |  
|Value-added tax                |  | $              | 87,773  |  |                   | $ | 177,287 | 
|Corporate income tax provision |  |                | 77,068  |  |                   |   | 74,883  | 
|Local taxes and surcharges     |  |                | 7,188   |  |                   |   | 13,491  | 
|Franchise tax                  |  |                | 17,397  |  |                   |   | 9,558   | 
|Total                          |  | $              | 189,426 |  |                   | $ | 275,219 | 



The deferred income tax assets results from loss on disposition of fixed assets that are not deductible.



The components of the provisions for income taxes were as follows:



|                                   |  |                                  |       |  |           |   |        | 
|---------------------------------- |  | -------------------------------- | ----- |  | --------- | - | ------ | 
|                                   |  | For Three Months Ended March 31, |      
|                                   |  | 2009                             |       |  | 2008      |  
|                                   |  | (Unaudited)                      |       |  | (Audited) |  
|Current taxes:                     |  |                                  |       |  |           |   |        | 
|Current income taxes in P.R. China |  | $                                | 2,414 |  |           | $ | 76,791 | 
|Deferred taxes                     |  |                                  | 1,866 |  |           |   |      | 
|Total provision for income taxes   |  | $                                | 4,280 |  |           | $ | 76,791 | 



12.

DUE TO STOCKHOLDERS/OFFICERS

Amounts due to stockholders/officers are unsecured, non-interest bearing, and have not set repayment date.  As of March 31, 2009 and December 31, 2008, the total net amounts due to the stockholders/officers were $177,410 and $177,699, respectively, which represented the net amounts lent by stockholders/officers to the Company.





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13.

STOCKHOLDERS EQUITY

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

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

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

In May 2008, the board of directors of the Company authorized, and on July 31, 2008 the Company issued, 150,000 shares of the Companys common stock to its attorney for services rendered. In June 2008, the board of directors of the Company authorized, and on August 14 2008 the Company issued, 100,000 shares of the Companys common stock to HAWK Associates, Inc (Hawk), its investor relations firm for services rendered pursuant to the agreement. Accordingly the Company has 35,663,850 shares of issued and outstanding common stock as of May 15, 2009.

In June 2008, the Company was assigned ownership of three patent rights from its major shareholder, Mr. Fangshe Zhang. These patents were assigned without any payment due to Mr. Fangshe Zhang. The application and filing costs of these three patents were RMB28,800 (equivalent to $4,199). In connection therewith, the Company recorded $4,199 of intangible assets, and same amount of additional paid in capital as of March 31, 2009.

14.

COMMITMENTS

The Company leases its office space and production land under operating lease agreements that are expiring on December 31, 2009 and October, 2047 respectively. The following is a schedule of future minimum rental land payments required under these operating leases as of March 31, 2009.

|                                       |  |  |        |         | 
|-------------------------------------- |  |  | ------ | ------- | 
|For the Quarter Ending March 31,       |  |  | Amount |        
|2010                                   |  |  | $      | 74,188  | 
|2011                                   |  |  |        | 17,553  | 
|2012                                   |  |  |        | 17,553  | 
|2013                                   |  |  |        | 17,553  | 
|2014                                   |  |  |        | 17,553  | 
|Thereafter                             |  |  |        | 589,501 | 
|Total minimum rental payments required |  |  | $      | 733,901 | 



Rent and properties maintenance expenses amounted to $29,118 and $36,170 for the three months ended March 31, 2009 and 2008, respectively.



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The Company also leases three patent rights from its Chairman, Mr. Fangshe Zhang, under operating lease agreements that expire on April 16, 2011. The following is a schedule of future minimum rental payments required under these operating leases as of March 31, 2009.

|                                       |  |  |        |         | 
|-------------------------------------- |  |  | ------ | ------- | 
|For the Quarter Ending March 31,       |  |  | Amount |        
|2010                                   |  |  | $      | 351,068 | 
|2011                                   |  |  |        | 351,068 | 
|2012                                   |  |  |        | 15,603  | 
|Total minimum rental payments required |  |  | $      | 717,739 | 



Patent lease expenses amounted to $87,767 and $83,773 for the three months ended March 31, 2009 and 2008, respectively.

On June 15, 2008, the Company signed an agreement with Hawk to provide investor relations consulting and advisory services. The term of this agreement is effective through June 30, 2009. Hawk is paid a retainer fee of $7,500 per month and the payments are due at the beginning of each month. Hawk was also issued 100,000 restricted 144 shares of the Companys common stock on August 14, 2008.

15.

CONCENTRATIONS OF BUSINESS AND CREDIT RISK

Financial Risks:

The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information.

Concentrations Risks:

For the three months ended March 31, 2009 and 2008, none of the Companys customers accounted for more than 10% of its sales.

Major Suppliers:

The Following summaries purchases of raw materials from major suppliers (each 10% or more of purchases):

|                             |  |                      |         |  |           |  |   |            |  |  |       |  
|---------------------------- |  | -------------------- | ------- |  | --------- |  | - | ---------- |  |  | ----- | -
|                             |  | Purchases
from Major |         |  | Number of |  |   | Percentage | 
|Three Months Ended March 31, |  | Suppliers            |         |  | Suppliers |  |   | of Total   | 
|2009                         |  | $                    | 119,480 |  |           |  | 2 |            |  |  | 76.60 | %
|2008                         |  | $                    | 514,077 |  |           |  | 3 |            |  |  | 50.73 | %



Geographical Risks:

Substantially all of the Companys assets and operations were in the PRC for the three months ended March 31, 2009 and 2008. Accordingly, the Companys business, financial condition and results of operations may be influenced by the political, economic and legal environment in PRC, and by the general state of the economy of PRC. The Companys operations in PRC are subject to special considerations and significant risks not typically associated with companies in the United States. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by, among other things, changes in the political, economic and social conditions in PRC, and by changes in governmental policies with respect to laws and regulations, changes in PRC's cork manufacture industry and regulatory rules and policies, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation.





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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following analysis of our consolidated financial condition and results of operations for the three months ended March 31, 2009 and 2008, should be read in conjunction with the consolidated financial statements, including footnotes, and other information presented in our annual report on Form 10-K as filed with the Securities and Exchange Commission on April 16, 2009.

Overview

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

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

On July 11, 2008, the Company's wholly owned subsidiary, Asia Cork Inc. was merged into its parent, the Company as approved by the Board of Directors of the Company pursuant to the Delaware General Corporation Law. The Company is the surviving company of the merger and Certificate of Incorporation is otherwise unchanged. The wholly-owned subsidiary was formed in July 2008 and had no material assets. The Certificate of Merger was filed with the Secretary of State of Delaware on July 11, 2008.

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

Business Overview

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

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



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Because revenues from our operations in the PRC accounted for 100% of our consolidated net revenues, how we report net revenues from our PRC-based operations is of particular importance to understanding our financial statements. Transactions and balances originally denominated in U.S. dollars are presented at their original amounts. Transactions and balances in other currencies are converted into U.S. dollars in accordance with Statement of Financial Accounting Standards (SFAS) No. 52, "Foreign Currency Translation," and are included in determining comprehensive net income or loss. For foreign operations with the local currency as the functional currency, assets and liabilities are translated from the local currencies into U.S. dollars. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income or loss.

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

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

Critical Accounting Policies

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

A summary of significant accounting policies is included in Note 1 to the consolidated financial statements. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition

The Company record property and equipment at cost. Depreciation is provided using the straight-line method over the estimated economic lives of the assets, which are from 2 to 35 years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. We review the carrying value of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.



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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 collectability 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 MARCH 31, 2009 COMPARED TO THREE MONTHS ENDED MARCH 31, 2008

|                                                                     |  |                                  |         |   |  |             |   |           |                      |  |   |            |   |  |  |         |  
|-------------------------------------------------------------------- |  | -------------------------------- | ------- | - |  | ----------- | - | --------- | -------------------- |  | - | ---------- | - |  |  | ------- | -
|                                                                     |  | For Three Months Ended March 31, |         |   |  |             |   |           |                     
|                                                                     |  | 2009                             |         |   |  | 2008        |   |           |                      |  |   |            |  
|                                                                     |  | (Unaudited)                      |         |   |  | (Unaudited) |   |           | (Decrease)/ Increase | 
|Revenues                                                             |  | $                                | 902,504 |   |  |             | $ | 2,516,345 |                      |  | $ | (1,613,841 | ) |  |  | -64.13  | %
|Cost of Goods Sold                                                   |  |                                  | 689,587 |   |  |             |   | 1,683,099 |                      |  |   | (993,512   | ) |  |  | -59.03  | %
|Gross Profit                                                         |  |                                  | 212,917 |   |  |             |   | 833,246   |                      |  |   | (620,329   | ) |  |  | -74.45  | %
|Gross Profit Percentage                                              |  |                                  | 23.59   | % |  |             |   | 33.11     | %                    |  |   |            |   |  |  |         |  
|Operating Expenses                                                   |  |                                  |         |   |  |             |   |           |                      |  |   |            |   |  |  |         |  
|Selling expenses                                                     |  |                                  | 125,165 |   |  |             |   | 279,294   |                      |  |   | (154,129   | ) |  |  | -55.19  | %
|General and administrative expense                                   |  |                                  | 104,442 |   |  |             |   | 73,469    |                      |  |   | 30,973     |   |  |  | 42.16   | %
|Total Operating Expenses                                             |  |                                  | 229,607 |   |  |             |   | 352,763   |                      |  |   | (123,156   | ) |  |  | -34.91  | %
|(Loss) Income From Operations                                        |  |                                  | (16,690 | ) |  |             |   | 480,483   |                      |  |   | (497,173   | ) |  |  | -103.47 | %
|Other Income (Expense)                                               |  |                                  |         |   |  |             |   |           |                      |  |   |            |   |  |  |         |  
|Interest (expense) income, net                                       |  |                                  | (12,621 | ) |  |             |   | (12,553   | )                    |  |   | (68        | ) |  |  | 0.54    | %
|Other income, net                                                    |  |                                  | 24,725  |   |  |             |   | 34,143    |                      |  |   | (9,418     | ) |  |  | -27.58  | %
|Total Other Income                                                   |  |                                  | 12,104  |   |  |             |   | 21,590    |                      |  |   | (9,486     | ) |  |  | -43.94  | %
|(Loss) Income Before Taxes                                           |  |                                  | (4,586  | ) |  |             |   | 502,073   |                      |  |   | (506,659   | ) |  |  | -100.91 | %
|Income Tax Provision                                                 |  |                                  | 4,280   |   |  |             |   | 76,791    |                      |  |   | (72,511    | ) |  |  | -94.43  | %
|(Loss) Income Before Noncontrolling Interest                         |  |                                  | (8,866  | ) |  |             |   | 425,282   |                      |  |   | (434,148   | ) |  |  | -102.08 | %
|Less: Net (loss)  income attributable to the noncontrolling interest |  |                                  | (3,035  | ) |  |             |   | 35,100    |                      |  |   | (38,135    | ) |  |  | -108.65 | %
|Net (Loss) Income Attributable to Asia Cork Inc.                     |  | $                                | (5,831  | ) |  |             | $ | 390,182   |                      |  | $ | (396,013   | ) |  |  | -101.49 | %



Revenues

For the three months ended March 31, 2009, our revenues were $902,504 as compared to $2,516,345 for the three months ended March 31, 2008, a decrease of $1,613,841 or 64.13%. The reason for the decrease is primarily due to adverse market condition for home and commercial renovation has recently significantly adversely affected revenues. While we have successfully grown our revenues over recent years, we cannot predict when the industry will recover.

Cost of Sales and Gross Profit

For the three months ended March 31, 2009, cost of sales amounted to $689,587 or 76.41% of net revenues as compared to cost of sales of $1,683,099 or 66.89% of net revenues for the three months ended March 31, 2008. Gross profit for the three months ended March 31, 2009 was $212,917 or 23.59% of revenues, as compared to $833,246 or 33.11% of revenues for the three months ended March 31, 2008. The gross margin decreased mainly as a result of decreased sales in certain finished goods (wood materials and floors), which had the high-unit profit margin, and slightly reduced unit sales price in the first quarter 2009 that were made to attract sales.

Operating Expenses

For the three months ended March 31, 2009, total operating expenses were $229,607 as compared to $352,763 for the three months ended March 31, 2008, an decrease of $123,156 or 34.91%. This decrease was attributable to a decrease in selling expenses, freight costs, and commissions associated with our decreased revenue. Even though



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this decrease had been offset with the increase in general and administrative costs, we still incurred less operating expenses in the first quarter 2009 as compared to the first quarter of 2008. The increase in general and administrative expenses was mainly attributable to professional fees that increased in the first quarter 2009 as compared to the first quarter of 2008.

Other Income (expense)

For the three months ended March 31, 2009, other income, net, amounted to $12,104 as compared to other income net of $21,590 for the three months ended March 31, 2008, a decrease of $9,486 or 43.94%. Other income for the three months ended March 31, 2009 and 2008 is related to the income received from the rental of our entertainment facility. This rental income was primarily offset by the franchise taxes accrued for the State of Delaware.

For the three months ended March 31, 2009, net interest expense was $12,621 as compared to net interest expenses of $12,553 for three months ended March 31, 2008, a slightly increase of $68, or 0.54%. This increase was primarily attributable to the Company acquiring convertible debt in second quarter of 2008, accordingly, more interest expenses had been accrued in the current quarter as compared to same period of last year. However, there was less bank loan in China during the first quarter 2009 as compared to the first quarter 2008, that incurred less interest expenses for the bank loan in the first quarter 2009. As a result, the net interest expenses in the first quarter 2009 had slightly increased as compared to net interest expenses in the first quarter 2008.

Income Tax

Net income taxes expense decreased by $72,511 to $4,280 for the three months ended March 31, 2009 as compared to $76,791 for the three months ended March 31, 2008. This decline was primarily due to a decrease in net income before income taxes in the first quarter of 2009 as compared to the first quarter of 2008.

LIQUIDITY AND CAPITAL RESOURCES

Operating working capital (accounts receivable plus inventory less accounts payable and accrued expenses) decreased by approximately $391,099 from approximately $6,308,169 as of December 31, 2008 to approximately $5,917,070 as of March 31, 2009. The decrease was primarily due to a decrease in inventories and account receivable for amount of approximately $123,769 and $310,085 during the current year, respectively.

Cash used in operating activities was ($4,722) for the three months ended March 31, 2009 as compared to $146,374 provided for the three months ended March 31, 2008. The increase in cash used in operating activities for the three months ended March 31, 2009 was mainly due to a decrease of net income and an increased advance payment to suppliers.

On June 4 and June 12, 2008, the Company consummated an offering of convertible promissory notes and common stock purchase warrants for aggregate gross proceeds of $700,000. The notes mature one (1) year from the date of issuance and bear interest at an annual rate of 18%, payable at maturity in USD. Upon the successful closing of an equity or convertible debt financing for a minimum of $2,000,000 ("Financing"), the promissory notes will be convertible into shares of common stock at a 50% discount to the price per share of Common Stock sold in the Financing. It is unlike that a Financing will be achieved within the one year term of the promissory notes. Therefore, each investor has the option to be paid the principal and interest due under the promissory note or convert the note into shares of common stock at a conversion price of $0.228 per share. The promissory notes are secured by Common Stock pledged by Pengcheng Chen, our Chief Executive Officer and Fangshe Zhang, our Chairman.  However, at the present time we do not have sufficient cash or cash equivalents to repay the promissory should the investors demand payment upon maturity. The Company is seeking alternate financing, but there is no assurance it will be obtained.

We had approximately $ 8.78 million of net working capital (total current assets less total current liabilities) at March 31, 2009 compared to working capital of approximately $8.73 million at March 31, 2008. However, we had negative cash flow from operations for the three months ended March 31, 2009 of ($4,722) compared to positive cash flow from operations of $146,374 for the three months ended March 31 2008. We also had negative cash flow in operating activities for the year ended December 31, 2008 Moreover, our business has been adversely affected by a decline in revenues and difficulty in collecting outstanding accounts receivable. During the first quarter of 2009, our accounts receivable outstanding for over half year increased to approximately $2,521,196 (equivalent to RMB17,228,923) and the cash and equivalents had declined significantly to $18,979 as of March 31, 2009. These events raise substantial doubt about our ability to continue as a going concern unless we can collect the outstanding accounts receivable, market conditions improve, we can borrow the money either from shareholders or outside credit



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union, banks, or investors, and/or raise capital in the near term to (1) satisfy our current obligations, and (2) develop and market our more profitable products.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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-K for the fiscal year ended December 31, 2008.

INFLATION

During the period under review, inflation did not have a material impact on our financial performance.

Web Site Access to Our Periodic SEC Reports

You may read and copy any public reports we filed with the SEC at the SECs Public Reference Room at 100 F Street, N.E. Room 1580, Washington D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1800-SEC-0330. The SEC also maintains an Internet site http://www.sec.gov that contains reports and information statements, and other information we filed electronically

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.

CONTROLS AND PROCEDURES

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

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



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Part II - OTHER INFORMATION

Item 1.

Legal Proceedings

None

Item 1A

Risk Factors

Not applicable.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Submission of Matters to a Vote of Security Holders

None

Item 5.

Other Information

None

Item 6.

Exhibits

|        |  |                                                                                                                  
|------- |  | -----------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                  
|Number  |  | Description                                                                                                      
|31.1    |  | 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.



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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: | May 15, 2009 |  | By:            | /s/ Pengcheng Chen                     
|       |              |  |                | Pengcheng Chen, Chief Executive Officer
|       |              |  |                |                                        
|       |              |  |                |                                        
|       |              |  | By:            | /s/ Yi Tong                            
|       |              |  |                | Yi Tong, Chief Financial Officer       





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