U.S.
SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





———————


FORM
10-K /A


———————


(Mark
One)


þ  ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For
the year ended December 31, 2008





OR




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


For the
transition period from _____ to _____




Commission
File Number 000-30115




———————


ASIA
CORK INC.


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


———————




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





3rd
Floor, A Tower of Chuang Xin


Information
Building


No. 72
Second Keji Road, Hi Tech Zone


Xi’An
China


(Address
of principal executive offices, including zip code.)




(0086)
29 - 8845 3409


(Issuer’s
Telephone Number, Including Area Code)




Securities
Registered Pursuant to Section 12(b) of the Exchange Act: NONE




Securities
Registered Pursuant to Section 12(g) of the Exchange Act:




COMMON
STOCK, $.0001 PAR VALUE


(Title
of Class)




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 406 of the Securities Act.  Yes  ̈  No þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes  ̈  No þ




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities Exchange 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.  ̈




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
issuer’s revenues for its most recent fiscal year: $21,378,041




As of
April 13, 2009 the aggregate market value of the common stock held by
non-affiliates was approximately $2,882,059, based upon the closing sale price
on April 13, 2009 of $.20 per share.




As of
April 13, 2009, there were 35,663,850 shares of common stock
outstanding.




Documents
incorporated by reference: NONE










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




TABLE OF
CONTENTS






PART
    IITEM I.
            BUSINESS
            
            1ITEM IA.
            RISK FACTORS
            
            4ITEM 1B.
            UNRESOLVED STAFF COMMENTS
            
            8ITEM 2.
            PROPERTIES
            
            8ITEM 3.
            LEGAL PROCEEDINGS
            
            8ITEM 4.
            SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
            
            8PART IIITEM 5.
            MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS
            
            9ITEM 6.
            SELECTED FINANCIAL INFORMATION
            
            10ITEM 7.
            MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL
      CONDITION
            
            10ITEM 7A.
            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
            
            17ITEM 8.
            FINANCIAL STATEMENTS AND SUPPLEMENT DATA
            
            17ITEM 9.
            CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            
            17ITEM 9B.
            OTHER INFORMATION
            
            17PART IIIITEM 10:
            DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE
      GOVERNANCE.
            
            18ITEM 11:
            EXECUTIVE COMPENSATION.
            
            20ITEM 12:
            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
      MANAGEMENT.
            
            21ITEM 13.
            CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS,AND DIRECTOR
    INDEPENDENCE.
            
            23ITEM 14.
            PRINCIPAL ACCOUNTANT
            
            23PART IVITEM 15.
            EXHIBITS LIST AND FINANCIAL STATEMENT SCHEDULES.
            
            24


i





FORWARD
LOOKING STATEMENTS




THIS FORM
10-K AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY ASIA CORK INC.
(“WE”) AND OUR SUBSIDIARES, XIAN HANXIN TECHNOLOGY CO., LTD. (“HANXIN”) AND
XI’AN CORK INVESTMENTS CONSULTATIVE MANAGEMENT CO. (“XI’AN”) OR THEIR
REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE “FORWARD-LOOKING
STATEMENTS” WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. FIFTEEN U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE
STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT
EXPECTATIONS OF HANKERSEN AND MEMBERS OF ITS MANAGEMENT TEAM AS WELL AS THE
ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE
CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.
IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT COULD CAUSE ACTUAL RESULTS
TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS ARE SET FORTH IN
THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS
EXHIBIT 99.1 TO OUR FORM 10-SB12G, AND ARE HEREBY INCORPORATED HEREIN BY
REFERENCE. WE UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING
STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED
EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.







ii


PART I




ITEM
      I.
            BUSINESS




History




Asia Cork
Inc. (f/k/a Hankersen International Corp.), was incorporated under the laws of
the State of Delaware on August 1, 1996. We were 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, we, through Kushi Sub, Inc., a newly formed Delaware
corporation and wholly-owned subsidiary of us ("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. We 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 own 95% of the
outstanding shares of our common stock.




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
our operating and business activities are conducted through Hanxin.




During
the year ended December 31, 2005,  Hanxinacquired a
75% equity interest of Cork Import and Export Co. Ltd. (“Cork I&E”), a PRC
corporation that engages in cork trading businesses.




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




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




Business
Overview




Hanxin is
engaged in development, manufacture and distribution of cork products including
cork wood floor, wall and decorating materials. We sell our products directly to
customers in China through our own sales team, and we distribute our products to
customers overseas through unrelated distributors and sales agents. The
countries our products were distributed through these sales agents include
India, the United States of America, Germany and Japan. Mr. Fangshe Zhang,
our Chairman and a principal shareholde r who currently owns fourteen
cork processing technology related patents in China, leased three of them to Hanxin for a
five-year lease term ending April 16, 2011, and donated three others to Hanxin
in year 2008.




Our
objective is to utilize the cost advantages of being based in China in order to
become a leading cork flooring producer. In order to achieve our objectives, we
intend to, among other things, increase our sales and marketing efforts, enhance
production capacity, ensure our raw material incoming source, acquire other cork
manufacturing factories and other cork exporting companies in China, export our
cork products to oversea countries by our own sales network, and establish our
own cork plantation in the world. There is no assurance that we will be able to
achieve these objectives.




We may
purchase a factory’s facilities through an unrelated
agent who has been handling the negotiation for us. We have paid deposits
$2,022,719 (equivalent to RMB 13,800,000) to the agent as of December 31,
2008 and $1,891,810 (equivalent to RMB 13,800,000) as of the year ended
December 31, 2007. 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 facilities.


1


In order
to expand our business and improve the efficiency of production, we plan to
acquire one of our current raw material suppliers, Sichuan Hanxin Cork
Merchandises Co. (“ Sichuan Hanxin ”), which also has
cork product manufacture business. We have made a deposit of $1,465,738
(equivalent to RMB10 million) to Sichuan Hanxin
with this amount to be applied against the purchase of raw materials from the
supplier if the acquisition does not occur.




In
addition, we commenced the construction of our fifth workshop in September,
2008, expecting an increase of our production capacity with the completion of
construction and installation of four production line equipments in the
workshop. We have completed the construction of the workshop; however, due to
the adverse market conditions in the home and commercial improvement industry,
we stopped purchasing new production facilities for the fifth workshop after
completion of one of the four production lines as of December 31, 2008. We
have not determined when the additional production lines will be
completed.




Provided
that our expansion plans above mentioned can succeed, we expect that our
production capacity will increase substantially. However, as a result of adverse
market conditions, we are reducing our expansion plans.




Products




Cork Flooring
Planks




Hanxin
produces seven series of cork flooring planks with over 50 different patterns,
colors and granules. Cork floor accounted for 69% of our revenue in 2007, and is
the main product line for Hanxin. Hanxin intends to develop additional series of
product lines modeled its existing products. The special features of cork
material have enabled it to be an ideal flooring material. With its elasticity,
cork is a natural floor cushion, is sound proofed, comfortable to walk on and,
unlike other materials, it does not get the appearance of being “worn out”. Cork
flooring can also be crafted into many different designs and patterns, many of
which are difficult to achieve using other raw materials. This series of
products accounted for approximately 70% of our sales revenue for the year ended
December 31, 2008.




Cork Wallboard and Art
Crafts




Hanxin
produces 16 types of cork wallboard and three types of cork art crafts with
different patterns. All these products utilize Hanxin’s special staining
technology to create different colors. Hanxin’s cork art crafts include
ornaments and decorations. Wallboard can also be used as decorative
material.




Cork Granule and Sheet
Roll




Hanxin
also sells semi-finished cork products to other manufacturers which use cork
granule and sheet roll as raw materials. Cork granule comes in varies sizes and
is the early stage of cork material processing. Cork Sheet/Roll is a type of
thin cork material, which needs advanced processing techniques and vital
manufacturing requirements. It costs more than other basic materials and the
customers use it as raw material of cork art crafts.




Marketing
and Growth Strategies




As
previously discussed, we sell our products in China through our own sales
persons, local distributors and retail sellers. The overseas markets primarily
are approached through unrelated overseas distributors and agents.




·
            Domestic
      market:




Our
domestic marketing strategies are based on our existing market channels, whereby
we work with our own sales persons, domestic distributors and domestic retail
sellers to create a China sales network. We currently use our Xian office as the
headquarters of our sales network, and have many sales representatives
throughout Beijing, Shanghai and Guangzhou. We intend to hire more sales
representatives in the two major cities: Jinan and Shenyang, within the central
and northeast regions of China to attempt to increase our market reach and
facilitate our day-to-day operations in 2008. Commencing from the third quarter
of 2007, we began to retain the SHUTA cork company, which had an existing sales
network in China, to assist us with the promotion and sales of cork flooring
tile and wall title. We expect to promote our market share in China through the
cooperation with the SHUTA cork company.




·
            International
      market:


2


Previously,
our products were sold internationally though unrelated national distributors
and agents (those are our independent clients). Our products are currently being
exported to India, the United States, Japan, and Germany by those unrelated
national distributors and agents. In the near future, we expect to start our own oversea export sales network to Asian and
North American markets.




As of
December 31, 2008, none of our customers accounted for more than 10% of our
sales.




Market
Opportunities and Competition




Market
Opportunities




According
to a media report called “Real Estate Market Analysis & Report of China in
2007”, construction and sales of residential real estate in PRC increased during
2007 increased 5% and 24.7% respectively as compared to 2006, and it is expected
that this increase will continue in 2008. The growth for demand of flooring
products is directly attributed to the growth in real estate markets. The
increase of the real estate industry will hopefully continue to increase the
demand of wood flooring including cork flooring. We believe cork tile, the soft
wood flooring which is different from other hard wood flooring, will enjoy
similar or even a higher growth rate because of its distinct characteristics and
multi purposes.




Competition




The
increasing real estate market has resulted in an increase of various types of
flooring. Based on various studies, sales of flooring have been increasing and
will continue to increase during the next five years. We believe it is currently
a leading manufacturer and producer of cork flooring in China, including
technology, in volume of production and in total sales. We produced about
650,000 square meters of cork flooring planks and boards in 2007.




In term
of domestic competition, we believe we have several competitive advantages over
its competitors:




·
            Proximity
      to raw material resources




According
to a report from the website “Introduction of Cork”, the world reserves of cork
resources are mainly concentrated in Mount Qinba of Shaanxi PRC, which is where
our factory is located, and a minority of provinces at the same latitude which
accounts for more than 65% of total bark production in PRC.




Advantages
in Products




Hanxin
produces high end cork product for decoration. The products have high quality
and a variety of patterns. Production requires proprietary processing and
manufacturing technology that creates barriers to other domestic
competitors.




Hanxin
believes that it will be able to compete on an international basis based on the
cost advantages of doing business in China. Hanxin’s cost advantages arise
primarily from two sources: low labor costs and competitive raw material costs.
In addition, with the support of local government, Hanxin enjoys the advantages
of favorable tax and other beneficial policies.




Production
Process




Hanxin
has designed certain production processes in order to ensure the quality of its
products. As discussed previously, our Chairman and a principal shareholder of
currently owns four cork processing technology related patents in China, and has
licensed three of them to Hanxin.




Quality
      Control




3


We
      place great emphasis on the quality of its products and quality control
      system. In particular:




·
            In
      March, 2005, Hanxin cork floor was approved by State plywood Quality
      Supervision and Test Center for formaldehyde emission, TS water immersion
      testing. (Certification No. Floor
  2005-65/66/6768)




·
            In
      March, 2005, Hanxin cork wallboard was approved by State plywood Quality
      Supervision and Test Center for formaldehyde emission testing.
      (Certification No. Floor
2005-64)




·
            In
      February 2005, Hanxin cork floor passed material sound absorption
      testing by Acoustics Research Center from Tong Ji
    University




·
            In
      October. 2003, Hanxin cork floor was approved by Xi’an Institute of
      Supervision & Testing on Product Quality in standard testing of
      GB18580, GB/T18102-2000, GB/T18103-2000 with Certification
      NO.G0300708.




·
            In
      Nov. 2003, Hanxin cork wallboard was approved by Xi’an Institute of
      Supervision & Testing on Product Quality in standard testing of
      Q/HX01-2001 with Certification
NO.G0300742.




·
            In
      October 2001, Hanxin’s products and standards were certified by the
      Xi’an Quality Technology Supervision Bureau, the governmental agency
      responsible for the inspection of commodities being imported and exported
      to and from China




·
            Currently,
      Hanxin is working on ISO9000: 2000 and ISO14001
      certifications.




Employees




We have
approximately 237 employees, and believe our relationship with our employees is
good.




ITEM
      IA.
            RISK
      FACTORS




In a
market environment that is difficult to predict and that involves significant
risks and uncertainties, many of which will be beyond the control of us.
Additional risks and uncertainties not presently known to us, or that are not
currently believed to be important to you, if they materialize, also may
adversely affect us.




RECENT
ADVERSE MARKET CONDITIONS HAVE CAUSED A DECLINE IN REVENUE AND INCREASE IN
OUTSTANDING ACCOUNTS RECEIVABLE THAT HAVE ADVERSELY AFFECTED OUR LIQUIDITY AND
RAISE DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.




Our
business has been adversely affected by a decline in revenues and difficulty in
collecting outstanding accounts receivable. In addition, we had negative cash
flow in operating activities for the year ended December 31, 2008. 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
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. We have had ongoing discussions and negotiations with a number of
additional financing alternatives. However, the Company has no definitive
agreements to provide funding at this time.




HANXIN
MAY NOT BE ENTITLED TO CERTAIN BENEFITS THAT IT RECEIVES FROM THE CHINESE
GOVERNMENT, WHICH MAY HAVE AN ADVERSE AFFECT ON ITS BUSINESS.




Hanxin
takes advantage of favorable tax rates and other beneficial governmental
policies afforded to it as a result of the nature of its business. In the event
that the program offered to Hanxin is amended or rescinded or Hanxin’s business
no longer meets the eligibility requirements of the program, it may not be able
to enjoy the benefits of these programs and as a result may have to pay higher
income taxes, which may have a material adverse affect on Hanxin.




The
Chinese government might adjust the current industrial policies and tax rates
with the growth of political and economic environment in China, which may
negatively impact Hanxin’s business.  4
 HANXIN
MUST BE ABLE TO EFFECTIVELY IMPROVE ITS PRODUCT AND IF IT IS UNABLE TO IMPROVE
ITS PRODUCT, ITS BUSINESS MAY BE ADVERELY AFFECTED.




Management
believes that Hanxin’s cork products enjoy technical advantages over its
competitors in China. If Hanxin is unable to improve and develop its products,
Hanxin may not be able to compete effectively.




HANXIN
IS DEPENDENT ON ITS RAW MATERIALS. ANY SHORTAGES OF THE NECESSARY MATERIALS WILL
HAVE A MATERIALLY ADVERSE EFFECT ON ITS BUSINESS




The
supply of cork raw material is the base of production. The shortfall of raw
material will impair the development and production of Hanxin’s products. The
supply of these raw materials can also be adversely affected by any material
change in the climate or other environmental conditions, which may have a
material adverse impact on the costs of raw materials and the results of
operations and financial condition of Hanxin.




HANXIN
IS DEPENDENT ON KEY PERSONNEL, AND THE LOSS OF ANY




KEY
EMPLOYEES, OFFICERS AND/OR DIRECTORS MAY HAVE A MATERIALLY ADVERSE EFFECT ON
HANXIN’S OPERATIONS.




Hanxin’s
success will be substantially dependent on the continued services of its
executive officers and other key personnel, who generally have extensive
experience in the cork industry and have been employed by Hanxin for substantial
periods of time. The loss of the services of any key employees, or Hanxin’s
failure to attract and retain other qualified and experienced personnel on
acceptable terms, could have a material adverse effect on its business and
results of operations.




WE
DO NOT OWN MOST OF CORK PROCESSING TECHNOLOGY
RELATED PATENTS WE ARE USING AND ARE SUBJECT TO THE TERMS AND CONDITIONS OF A
LICENSING AGREEMENT.




We are
dependent on the patents licensed to use from our Chairman and principal
shareholder.  He, who currently owns fourteen cork processing technology related patents in
China, leased three of them to Hanxin for a five-year lease
term ending April 16, 2011, and donated three others to Hanxin in year
2008.   As a result, our business activities related to exploiting
these patents are dependent on the license granted to us from him. In the event
that the license is terminated, such a result would have a material adverse
effect on the company as it would prevent us from using them in our business and
deriving revenue associated therewith.




DUE
TO VOLATILITY, ANY QUARTER-TO-QUARTER COMPARISONS IN OUR CONSOLIDATED FINANCIAL
STATEMENTS MAY NOT BE MEANINGFUL




Hanxin’s
business is subject to fluctuations, which may cause its operating results to
fluctuate from quarter-to-quarter. This fluctuation may result in volatility or
have an adverse effect on the market price of our common stock.




CHANGES
IN THE EXTENSIVE REGULATIONS TO WHICH HANXIN IS SUBJECT COULD INCREASE ITS COST
OF DOING BUSINESS OR AFFECT ITS ABILITY TO GROW.




The
governments of countries where Hanxin’s unrelated
distributors and agents exports products, including, but not limited to
India, the United States, Germany and Japan, may, from time to time, consider
regulatory proposals relating to raw materials, market, and environmental
regulation, which, if adopted, could lead to disruptions in supply and/or
increases in operational costs, and hence indirectly affect Hanxin’s
profitability. To the extent that Hanxin increases its product prices as a
result of such changes, its sales volume and revenues may be adversely affected.
Furthermore, these governments may change certain regulations or impose
additional taxes or duties on certain Chinese imports from time to time. Such
regulations, if effected, may have a material adverse impact on Hanxin’s
operations revenue and/or profitability.  5
 THERE
IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET OF OUR SECURITIES AND
THERE CAN BE NO ASSURANCE THAT ONE WILL EVER BE ESTABLISHED.




There can
be no assurances that a market for our common stock will be established. Our
common stock will be influenced by a number of factors relating to Hanxin,
including:




·
            the
      issuance of new equity securities;




·
            competitive
      developments, including announcements by competitors of new products or
      services or significant contracts, acquisitions, strategic partnerships,
      joint ventures or capital
commitments;




·
            variations
      in quarterly operating results;




·
            change
      in financial estimates by securities
analysts;




·
            the
      depth and liquidity of the market for Company's common
    stock;




·
            our
      investor perceptions and the technologies industries
      generally;




·
            general
      economic and other national conditions;
and




·
            regulation
      of the OTCBB




CONTROL
BY PRINCIPAL SHAREHOLDERS, OFFICERS ,   AND
DIRECTORS.




Our
principal shareholders, officers and directors beneficially own approximately
sixty percent (60%) of our Common Stock. As a result, such persons may have
the ability to control us and direct our affairs and business. Such
concentration of ownership may also have the effect of delaying, deferring or
preventing change in control of us. See “Security Ownership Of Certain
Beneficial Owners And Management.”




POSSIBLE
NEED FOR ADDITIONAL FINANCING.




We may
need additional financing in the future. The ultimate success of we may depend
upon our ability to raise additional capital. We have not investigated the
availability, source, or terms that might govern the acquisition of additional
capital and will not do so until it determines a need for additional financing.
If additional capital is needed, there is no assurance that funds will be
available from any source or, if available, that they can be obtained on terms
acceptable to us. If not available, our operations will be limited to those that
can be financed with our modest capital.




OUR
COMMON STOCK IS DEEMED TO BE A "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS.




Our
common stock could be considered to be a "penny stock" if it meets one or more
of the definitions in Rules 15g-2 through 15g-6 promulgated under
Section 15(g) of the Securities Exchange Act of 1934, as amended. These
include but are not limited to the following: (i) the stock trades at a price
less than $5.00 per share; (ii) it is not traded on a "recognized" national
exchange; (iii) it is not quoted on the NASDAQ Stock Market, or even if so, has
a price less than $5.00 per share; or (iv) is issued by a company with net
tangible assets less than $2.0 million, if in business more than a
continuous three years, or with average revenues of less than $6.0 million
for the past three years. The principal result or effect of being designated a
"penny stock" is that securities broker-dealers cannot recommend the stock but
must trade in it on an unsolicited basis.  6
 BROKER-DEALER
REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY OF OUR COMMMON STOCK WHICH MAY
RESULT IN SHAREHOLDERS BEING UNABLE TO SELL THEIR SHARES.




Section 15(g)
of the Securities Exchange Act of 1934, as amended, and Rule 15g-2
promulgated thereunder by the SEC require broker-dealers dealing in penny stocks
to provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the document
before effecting any transaction in a penny stock for the investor's
account.




Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any penny
stock to that investor.  This procedure requires the broker-dealer to
(i) obtain from the investor information concerning his or her financial
situation, investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny stocks are
suitable for the investor and that the investor has sufficient knowledge and
experience as to be reasonably capable of evaluating the risks of penny stock
transactions; (iii) provide the investor with a written statement setting forth
the basis on which the broker-dealer made the determination in (ii) above; and
(iv) receive a signed and dated copy of such statement from the investor,
confirming that it accurately reflects the investor's financial situation,
investment experience and investment objectives. Compliance with these
requirements may make it more difficult for holders of our common stock to
resell their shares to third parties or to otherwise dispose of them in the
market or otherwise.




NO
ASSURANCE OF SUCCESS OR PROFITABILITY.




There is
no assurance that we will acquire a favorable business opportunity. Even if we
should become involved in a business opportunity, there is no assurance that we
will generate revenues or profits, or that the market price of our Common Stock
will be increased thereby.




INDEMNIFICATION
OF OFFICERS AND DIRECTORS.




Our
Articles of Incorporation and applicable Delaware Law provide for the
indemnification of our directors, officers, employees, and agents, under certain
circumstances, against attorney’s fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on behalf of us. We will also bear the expenses of such litigation
for any of its directors, officers, employees, or agents, upon such person’s
promise to repay us therefore if it is ultimately determined that any such
person shall not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by us which it will be unable to
recoup.




DIRECTOR’S
LIABILITY LIMITED.




Our
Articles of Incorporation exclude personal liability of our directors to us and
our stockholders for monetary damages for breach of fiduciary duty except in
certain specified circumstances. Accordingly, we will have a much more limited
right of action against our directors than otherwise would be the case. This
provision does not affect the liability of any director under federal or
applicable state securities laws.




DEPENDENCE
UPON OUTSIDE ADVISORS.




To
supplement the business experience of our officers and directors, we may be
required to employ accountants, technical experts, appraisers, attorneys, or
other consultants or advisors. The selection of any such advisors will be made
by our officers and directors without any input from stockholders. Furthermore,
it is anticipated that such persons may be engaged on an “as needed” basis
without a continuing fiduciary or other obligation to us. In the event the
Company considers it necessary to hire outside advisors, he may elect to hire
persons who are affiliates, if they are able to provide the required
services.




NO
FORESEEABLE DIVIDENDS.




We have
not paid dividends on its Common Stock and do not anticipate paying such
dividends in the foreseeable future.  7
 RULE
144 SALES.




Some  of the outstanding shares of Common Stock held
by present stockholders are “restricted securities” within the meaning of
Rule 144 under the Securities Act of 1933, as amended.




As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other
applicable exemptions from registration under the Act and as required under
applicable state securities laws. Rule 144 provides in essence that a
person who has held restricted securities for more than one year may, under
certain conditions, sell every three months, in brokerage transactions, a number
of shares that does not exceed the greater of 1.0% of a company’s outstanding
common stock or the average weekly trading volume during the four calendar weeks
prior to the sale. As a result of revisions to Rule 144 which became
effective on or about April 29, 1997, there will be no limit on the amount
of restricted securities that may be sold by a non-affiliate after the
restricted securities have been held by the owner for a period of two years. A
sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registrations of shares of Common Stock of
present stockholders, may have a depressive effect upon the price of the Common
Stock in any market that may develop.




ITEM
      1B.
              UNRESOLVED
      STAFF COMMENTS


There
were no unresolved comments from the Securities and Exchange Commission during
the year ended December 31, 2008.




ITEM
      2.
            PROPERTIES




Hanxin
owns one property in Xi’an called “YuLerYuan” which is for approximately
10,360.3 square meters. It was used for an entertainment space, and leased out
to an unrelated party. However, in 2007, we renovated the space and built an
additional student dormitory in YuLerYuan, and the constructions were completed
in June 2008. Thus, the student dormitory was leased $21,590 (equivalent to
RMB150,000) per month to the university located at the YuLerYuan and this
agreement was extend to February 28, 2010.




Hanxin
also leases an office space about 436 square meters in Xi’an for approximately
$2,354 (equivalent to RMB16,352 included rent and maintenance fee) per month.
The lease for this office space expires on December 31, 2008, and has been
renewed for one more year until December 31, 2009.Hanxin also leases the
right to use a parcel of land which is approximately 53,120 square meters and is
used as our cork processing plant. The lease fee for this processing plant is
about $1,439 (equivalent to RMB10,000) per month, and the lease had been
extended to October 2047. Hanxin had built a fifth removable workshop on
the leased land since year 2007, and has completed the construction of the
workshop in third quarter year 2008. Commencing in October 2008, Hanxin
started to install production line facilities in the fifth workshop. Due to the
adverse market conditions in the home and commercial improvement industry, we
stopped purchasing new production facilities for the fifth workshop after
completion of one of the four production lines as of December 31, 2008. We
have not determined when the additional production lines will be
completed.




If our
funds and cash inflow available, we may also complete the acquisition of a cork
manufacturing enterprise in Sichuan District of PRC in year 2009.




ITEM 3.
            LEGAL
      PROCEEDINGS




We are
not currently a party to any material legal proceeding.




ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS




None.  8


PART II




ITEM 5.
            MARKET
      FOR THE COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS




Our
common stock is traded on Over-The-Counter Bulletin Board under the symbol
AKRK.OB. Our common stock became eligible for trading on April 6, 2006. As
of April 13, 2009, there were approximately 87 holders of record of our
common stock. The following table sets forth the range of high and low bid
information for the year ended December 31, 2008.




Period
            
            High
      Bid
            
            Low
      Bid2008First
      quarter
            
            
            $  0.20
            
            
            $  0.09Second
      quarter
            
            
            $  0.43
            
            
            $  0.07Third
      quarter
            
            
            $  0.30
            
            
            $  0.21Fourth
      quarter
            
            
            $0.244
            
            
            $  0.112007First
      quarter
            
            
            $0.185
            
            
            $  0.10Second
      quarter
            
            
            $  0.14
            
            
            $  0.05Third
      quarter
            
            
            $  0.16
            
            
            $0.105Fourth
      quarter
            
            
            $  0.25
            
            
            $  0.15




The above
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.




(a) Transfer Agent




Our
transfer agent is Executive Registrar, whose address is 3615 Huron St Ste 104,
Englewood, CO 80110-3494, and their contact number is (303) 783
9055.




(b)
Stockholders




As of
April 13, 2009, there were approximately 87 record holders of our common
stock. As of April 13, 2009, we have not paid any cash dividends on shares
of our common stock and do not plan to do so. We currently plan to retain future
earnings to fund the development and growth of our business.




(c)
Dividend Policy.




We have
not declared or paid cash dividends or made distributions in the past, and we do
not anticipate that we will pay cash dividends or make distributions in the
foreseeable future. We currently intend to retain and reinvest future earnings,
if any, to finance our operations.




(d)
Securities authorized for issuance under equity compensation plans




None.




ISSUANCE
OF UNREGISTERED SHARES




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. Each investor
also received warrants exercisable for 4 years to purchase shares of our common
stock at an exercise price equal to the share price per share of common stock in
the Financing or, if the Financing has not occurred within 12 months of the
offering, at $.228 per share. Under the warrants, investors can purchase an
amount of shares for an aggregate consideration up the amount of their
investment.  Our obligations under the promissory notes are secured by
7,630,814 shares of common stock pledged by Mr. Pengcheng Chen, our Chief
Executive Officer, and by Mr. Zhang, our Chairman.  9


ITEM
      6.
            SELECTED
      FINANCIAL INFORMATION




Following
is a summary of our operations and financial condition from 2005 through 2008.
You are urged to review the detailed audited financial statements and
accompanying footnotes for a complete understanding of our
operations.




Name
            
            2008
            
            
            2007
            
            
            2006
            
            
            2005Net
      sales
            
            $
            21,378,041
            
            
            $
            16,050,938
            
            
            $
            12,041,588
            
            
            $
            12,156,152Income
      (loss) from operation
            
            $
            3,969,689
            
            
            $
            2,593,556
            
            
            $
            782,171
            
            
            $
            3,004,179Income
      (loss) before income taxes
            
            $
            3,609,311
            
            
            $
            2,269,147
            
            
            $
            830,026
            
            
            $
            2,976,289Net
      income (loss)
            
            $
            2,732,154
            
            
            $
            1,762,041
            
            
            $
            632,960
            
            
            $
            2,273,562Net
      income (loss) per common share
            
            $
            0.08
            
            
            $
            0.05
            
            
            $
            0.04
            
            
            $
            0.39Total
      assets
            
            $
            22,348,075
            
            
            $
            17,399,105
            
            
            $
            14,028,936
            
            
            $
            12,103,863Total
      liabilities
            
            $
            2,905,432
            
            
            $
            2,440,163
            
            
            $
            1,919,878
            
            
            $
            1,082,059Working
      capital
            
            $
            8,900,759
            
            
            $
            3,668,430
            
            
            $
            4,775,190
            
            
            $
            6,767,792Stockholder’s
      equity
            
            $
            17,640,621
            
            
            $
            13,436,624
            
            
            $
            10,744,975
            
            
            $
            9,721,207





No cash
dividends have been paid during any of the four-year periods stated
above.




ITEM
      7.
            MANAGEMENT’S
      DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION




The
following analysis of our consolidated financial condition and results of
operations for the years ended December 31, 2008 and 2007 should be read in
conjunction with the consolidated financial statements, including
footnotes.




Overview




We,
through its subsidiaries, engage in developing, manufacturing and marketing of
cork wood floor, wall and decorating materials.




Hanxin is
a manufacturing company based in China, which produces cork-building material
sold under the Hanxin brand name. Approximately 75% of Hanxin's products sold in
year 2008 were to customers in China by our own sales persons, and domestic
distributors and agents, with the remaining sales being made to customers in
India, the United States, Germany and Japan through unrelated national
distributors and agents. Our Chairman and a principal shareholder, who currently own fourteen
cork processing technology related patents in China, leased
three of them to Hanxin for a five-year lease term ending April 16, 2011, and
donated three others to Hanxin in year 2008.




Foreign
Exchange Considerations




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




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




10


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 4 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.




We 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 1 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.




Our
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.  11
 RESULTS
OF OPERATIONS




YEAR
ENDED DECEMBER 31, 2008 AS COMPARED TO YEAR ENDED DECEMBER 31, 2007




Revenues




For the
year ended December 31, 2008, our revenues were $21,378,041 as compared to
$16,050,938 for the year ended December 31, 2007, an increase of $5,327,103
or approximately 33.19%. The reason for the increase is primarily due to our
selling efforts, increased sales of our major finished goods (wood materials,
floors, and boards) increased as compared to the sales quantities in year 2007.
Also, we increased our unit sales prices by 20% commencing from
October 2007. For the year ended December 31, 2008, our revenues from
wood materials, boards, and floor sales were $1,005,315, 103,676, and $2,532,052
respectively more than the revenue from sales of those items during the year
ended December 31, 2007. Even though we had decreased sales on the tree
skin raw material for the year ended December 31, 2008.




However,
adverse market conditions for home and commercial renovation has recently
significantly adversely affected revenues. Our revenues for the fourth quarter
of 2008 declined to $3,536,742, compared to $8,958.570 for the third quarter,
$6,366,384 for the second quarter and $2,516,345 for the traditionally slow
first quarter. Fourth quarter revenues for 2008 were also below third and fourth
quarter revenues for 2007.  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
year ended December 31, 2008, cost of sales amounted to $13,937,361 or
65.19% of net revenues as compared to cost of sales of $10,990,041 or 68.47% of
net revenues for the year ended December 31, 2007, a percentage
decrease of 3.28%. The decrease was primarily due to reduction of waste of
materials resulting in more efficient work from repaired and improved machinery
and equipment used by us. Accordingly, gross profit for the year ended
December 31, 2008 increased $2,379,783 to $7,440,680 from $5,060,897 in the
year ended December 31, 2007. We are currently working with a vendor of raw
materials to secure future price by proposing long term supplier
contracts.




Operating
Expenses




For the
year ended December 31, 2008, total operating expenses were $3,470,991
as compared to $2,467,341 for the year ended December 31, 2007, an increase
of $1,003,650
or 40.68% .




Included
in this increase were:




* For the
year ended December 31, 2008, selling expenses amounted to $2,711,764 as
compared to $1,954,225 for the year ended December 31, 2007, an increase of
$757,539 or 38.76%. For the year ended December 31, 2008, we experienced a
significant increase in sales commission expenses of $749,433 and in freight
expenses of $44,505 with our increased revenue.




* For the
year ended December 31, 2008, general and administrative expenses were $759,227 as compared to $513,116 for the year ended
December 31, 2007, an increase of
$ 246,111or47.96% .
The increase in general and administrative costs was primarily attributable to
increases in consulting fees, advisory fees, legal fees and professional
fee s in connection with our SEC filing, name change,
and USA capital market fund raising and public relationship advisory charges in
the current year.




Other
Income (Expense)




For the year ended December 31, 2008, other expense
amounted to $360,378
as compared to other expense of $324,409 for the year ended December 31,
2007. Other (expense) income, net for the years ended December 31, 2008 and
2007 were primarily related to net rental income $159,495 and $78,226
respectively from our leasing entertainment facility. These rental net
incomes had been offset by the franchise taxes $10,116 and $55,000 accrued in
the year 2008 and 2007, respectively. Also, this rental income was primarily
offset by the donation made by the Company during the second quarter of 2008 in
the amount of $72,975 in connection with the earthquake in Sichuan
PRC.




12


For the
year ended December 31, 2008, net interest expense was $275,105
as compared to net interest expense of $6,270 for the year ended
December 31, 2007 ,
an increase of $268,835 . This was attributable to the Company
acquired a convertible note for USA investors in amount of $700,000
(approximately RMB4.8 million) in June 2008 with 18% annual rate and
mature date due in June 2009 and offered common stocks
purchase warrant with convertible note . Thus, the Company had incurred
more interest expense in the current year as compared to
year 2007.




For the
year ended December 31, 2008, the Company incurred less loss on disposition
of fix assets than 2007 by $182,763 or (53.42%). Since the loss incurred in year
2008 was not deductible for the tax purpose in P.R. China, the Company had
recognized deferred income taxes assets for the time difference.




Income
Taxes




Net
income taxes expenses increased by $ 248,582
to $ 597,453
for the year ended December 31, 2008 as compared to $348,871 for the year
ended December 31, 2007. This increase was due to an increase in net income
before income taxes in year 2008, although it had been offset with deferred
income taxes benefits $23,905 in year 2008.




Minority
Interest




For the
year ended December 31, 2008, we reported a minority interest in income of
subsidiary of $279,704
as compared to $158,235 for the year ended December 31, 2007. The minority
interests income of subsidiaries were attributable to Hanxin and Cork I&E,
which we allocated to the minority stockholders, and reduced our net
income.




LIQUIDITY
AND CAPITAL RESOURCES




Operating
working capital (cash plus accounts receivable plus inventory less accounts
payable and accrued expenses) increased by $3,579,466
from $2,760,789 as of December 31, 2007 to $6,340,255
as of December 31, 2008. The increase was primarily due to a increase in
accounts receivable of $2,526,233 from $2,429,772 at December 31, 2007 to
$4,956,005 at December 31, 2008, a increase in inventory of $1,835,871 from
$920,140 at December 31, 2007 to $2,756,011 at December 31, 2008, and
an increase in accounts payable and accrued expenses of $438,847from $956,519 at December 31, 2007 to $1,395,366
at December 31, 2008. Those increases had been offset by the cash and
equivalents decreased by $343,791 from $367,396 as of December 31, 2007 to
$23,605 as of December 31, 2008. The net increase in working capital was
primarily due to increased sales from our customers and increased inventories to
assure manufacture during the year ended December 31, 2008.




Cash used
in operating activities was ($364,209)
for the year ended December 31, 2008 as compared to $2,074,461 provided for
the year ended December 31, 2007. The increase in cash used in operating
activities was a result of an increase of net income, accounts receivable, and
inventories for the year ended December 31, 2008.




Net cash
used in investing activities decreased $1,750,976 to $302,732 for the year ended
December 31, 2008 from $2,053,708 for the year ended December 31,
2007. This change was primarily due to the payments for land used right
purchase, deposit for acquisition, and construction in progress for amounts of
$1,370,877, $1,370,877, and $1,253,703 in year 2007, these amounts had been
offset by the proceeds from repayment of unrelated parties in amount of
$1,922,066 in year 2007.




Financing
activities for the year ended December 31, 2008 was $568,084 net cash
provided as compared to ($388,956) net cash used in for the year ended
December 31, 2007. This change was primarily attributable to acquire a
convertible note in amount $700,000 from USA investor s in June, 2008.




In 2007,
we entered into an agreement to purchase land use right in Shaanxi BaoJi
District P.R. China from Shaanxi Shuta Wood Products Co., Ltd. (“Shaanxi
Shuta”), one of our most important sales distributors in Shaanxi Province P.R.
China. We terminated the land purchase agreement on August 19, 2008 and the
deposits were refunded to us in August and September 2008. Shaanxi Shuta had opened cork retail chain stores
exclusively selling our products but we could not achieve its 500,000 square
meters floor and board production plan in year 2008 and had delayed many
purchase orders from Shaanxi Shuta. As a result, Shaanxi Shuta had to readjust
its year 2008 sales strategies and incurred heavy losses. In order to avoid
losing a very important distribution channel, and to assist Shaanxi Shuta to
recover, we loaned RMB10 million (equivalent to $1,465,738) to the Shaanxi
Shuta for a one year term starting from October 27, 2008. This loan does
not bear interest and is unsecured.




13


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
warrants are exercisable at any time after the consummation of the Financing
through the fourth anniversary of the consummation of the Financing (the
"Financing Expiration Date"). Each holder is entitled to purchase the number of
shares of common stock equal to the initial principal amount of such investor's
promissory note DIVIDED BY the lowest cash purchase price paid for the Company's
common stock (or the conversion price or exercise price if the Financing
consists of convertible securities or warrants, respectively) in the Financing
(the "Financing Based Conversion Price") at an exercise price equal to the
Financing Based Conversion Price. If the Financing did not occur within 12
months of the issuance of the warrant, the warrant is exercisable from and after
such date and through the fourth anniversary of the issuance date of the
warrant. In such event, the holder is entitled to purchase the number of shares
of common stock equal to 50% of the initial principal amount of the promissory
note DIVIDED BY $0.228 at an exercise price equal to $0.228, subject to certain
adjustments as set forth in the warrant. The interest payable
regarding the convertible notes has been accrued and recorded as of
December 31, 2008. The Company’s obligations under the promissory notes are
secured by shares of common stock pledged by Mr. Pengcheng Chen, the
Company’s Chief Executive Officer, and by Mr. Zhang




Our
business has been adversely affected by a decline in revenues and difficulty in
collecting outstanding accounts receivable. During the fourth quarter of 2008,
our accounts receivable outstanding for over half year increased promptly to
approximately amounts of $1,551,836 (equivalent to RMB10,587,400) and the cash
and equivalents had dropped down significantly to $23,605 as of
December 31, 2008. In addition, we had negative cash flow in operating
activities for the year ended December 31, 2008. 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 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.




OPERATING
RISK




(a)
Country risk




Our
revenues are mainly derived from the sale of wood floors, boards, and basis
materials products in the Peoples Republic of China (PRC). We expect to expand
our sales to the countries outside the PRC by our own sales network, however,
there are no assurances that we will be able to achieve such an expansion
successfully in the future. Therefore, a downturn or stagnation in the economic
environment of the PRC and the countries that our products are sold by unrelated distributor or agents could have a material
adverse effect on our financial condition.




(b)
Product risk




In
addition to competing with other Chinese companies, we could have to compete
with larger US and European companies who have greater funds available for
expansion, marketing, research and development and the ability to attract more
qualified personnel if access is allowed into the PRC market. If U.S. and
European companies do gain access to the PRC markets, they may be able to offer
products at a lower price. There can be no assurance that we will remain
competitive should this occur.




(c)
Exchange risk




We can
not guarantee that the current exchange rate will remain steady, therefore there
is a possibility that we could post the same amount of profit for two comparable
periods and because of a fluctuating exchange rate actually post higher or lower
profit depending on exchange rate of Chinese Renminbi converted to US dollars on
that date. The exchange rate could fluctuate depending on changes in the
political and economic environments without notice.  14
 (d)
Political risk




Currently,
PRC is in a period of growth and is openly promoting business development in
order to bring more business into PRC. Additionally PRC allows a Chinese
corporation to be owned by a United States corporation. If the laws or
regulations are changed by the PRC government, our ability to operate the PRC
subsidiaries could be affected.




(e) Key
personnel risk




Our
future success depends on the continued services of executive management in
China. The loss of any of their services would be detrimental to us and could
have an adverse effect on business development. We do not currently maintain
key-man insurance on their lives. Future success is also dependent on the
ability to identify, hire, train and retain other qualified managerial and other
employees. Competition for these individuals is intense and
increasing.




(f)
Performance of subsidiaries risk




All of
our revenues are derived via the operations of our Chinese subsidiaries.
Economic, governmental, political, industry and internal company factors outside
of our control affect each of the subsidiaries. If the subsidiaries do not
succeed, the value of the assets and the price of our common stock could
decline. Some of the material risks relating to the partner companies include
the fact that the subsidiaries are located in China and have specific risks
associated with that and the intensifying competition for our products and
services and those of the subsidiaries.




Off
Balance Sheet Arrangements




We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition or results of
operations.




Federal
Income Tax Aspects of Investment in us




The
discussion contained herein has been prepared by us and is based on existing law
as contained in the Code, amended United States Treasury Regulations (“Treasury
Regulations”), administrative rulings and court decisions as of the date of this
Registration Statement. No assurance can be given that future legislative
enactments, administrative rulings or court decisions will not modify the legal
basis for statements contained in this discussion. Any such development may be
applied retroactively to transactions completed prior to the date thereof, and
could contain provisions having an adverse effect upon us and the holders of the
Common Stock. In addition, several of the issues dealt with in this summary are
the subject of proposed and temporary Treasury Regulations. No assurance can be
given that these regulations will be finally adopted in their present
form.




Basis
in Common Stock




The tax
basis that a Shareholder will have in his Common Stock will equal his cost in
acquiring his Common Stock. If a Shareholder acquires Common Stock at different
times or at different prices, he must maintain records of those transactions so
that he can accurately report gain or loss realized upon disposition of the
Common Stock.




Dividends
on Common Stock




Distributions
made by us with respect to the Common Stock will be characterized as dividends
that are taxable as ordinary income to the extent of our current or accumulated
earnings and profits (“earnings and profits”), if any, as determined for U.S.
federal income tax purposes. To the extent that a distribution on the Common
Stock exceeds the holder’s allocable share of our earnings and profits, such
distribution will be treated first as a return of capital that will reduce the
holder’s adjusted tax basis in such Common Stock, and then as taxable gain to
the extent the distribution exceeds the holder’s adjusted tax basis in such
Common Stock. The gain will generally be taxed as a long-term capital gain if
the holder’s holding period for the Common Stock is more than one
year.




15


The
availability of earnings and profits in future years will depend on future
profits and losses which cannot be accurately predicted. Thus, there can be no
assurance that all or any portion of a distribution on the Common Stock will be
characterized as a dividend for general income tax purposes. Corporate
shareholders will not be entitled to claim the dividends received deduction with
respect to distributions that do not qualify as dividends. See the discussion
regarding the dividends received deduction below.




Redemption
of Common Stock




We do not
have the right to redeem any Common Stock. However, any redemption of Common
Stock, with the consent of the holder, will be a taxable event to the redeemed
holder.




We do not
believe that the Common Stock will be treated as debt for federal income tax
purposes. However, in the event that the Common Stock is treated as debt for
federal tax purposes, a holder generally will recognize gain or loss upon the
redemption of the Common Stock measured by the difference between the amount of
cash or the fair market value of property received and the holder’s tax basis in
the redeemed Common Stock. To the extent the cash or property received are
attributable to accrued interest, the holder may recognize ordinary income
rather than capital gain. Characterization of the Common Stock as debt would
also cause a variety of other tax implications, some of which may be detrimental
to either the holders, us, or both (including, for example, original issue
discount treatment to the Investors). Potential Investors should consult their
tax advisors as to the various ramifications of debt characterization for
federal income tax purposes.




Other
Disposition of the Common Stock




Upon the
sale or exchange of shares of Common Stock, to or with a person other than us, a
holder will recognize capital gain or loss equal to the difference between the
amount realized on such sale or exchange and the holder’s adjusted basis in such
stock. Any capital gain or loss recognized will generally be treated as a
long-term capital gain or loss if the holder held such stock for more than one
year. For this purpose, the period for which the Common Stock was held would be
included in the holding period of the Common Stock received upon a
conversion.




State,
Local and Foreign Taxes




In
addition to the federal income tax consequences described above, prospective
investors should consider potential state, local and foreign tax consequences of
an investment in the Common Stock.




ERISA
Considerations for Tax-Exempt Investors/Shareholders




General
Fiduciary Requirements




Title I
of ERISA includes provisions governing the responsibility of fiduciaries to
their Qualified Plans. Qualified Plans must be administered according to these
rules. Keogh plans that cover only partners of a partnership or self-employed
owners of a business are not subject to the fiduciary duty rules of ERISA, but
are subject to the prohibited transaction rules of the Code.




Under
ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a Qualified Plan is considered to be
a fiduciary of such Qualified Plan (subject to certain exceptions not here
relevant).




ERISA
Section 404(a)(1) requires a fiduciary of a Qualified Plan to “discharge
his duties with respect to a plan solely in the interest of the participants and
beneficiaries and (A) for the exclusive purpose of: (i) providing benefits to
participants and their beneficiaries, and (ii) defraying reasonable expenses of
administering the plan; (B) with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man acting in a like capacity
and familiar with such matters would use in the conduct of an enterprise of a
like character and with like aims; (C) by diversifying the investments of a plan
so as to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and (D) in accordance with the documents and
instruments governing the plan.” Fiduciaries who breach the duties that ERISA
imposes may suffer a wide variety of legal and equitable remedies, including (i)
the requirement to restore qualified plan losses and to pay over any fiduciary’s
profits to the qualified plan; (ii) removal as fiduciary of the qualified plan;
and (iii) liability for excise taxes that Section 4975 of the Code
imposes




16




ITEM 7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
  RISK





Not
Applicable.




ITEM 8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENT DATA




The
information required by Item 8 appears after the signature page to this
report.




ITEM
      9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE




None.




ITEM 9A.
              CONTROLS
      AND PROCEDURES





We are
responsible for establishing and maintaining adequate internal control over
financial reporting in accordance with Exchange Act Rule 13a-15. With the
participation of our Chief Executive Officer and Chief Financial Officer, our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2008 based on the criteria
established in Internal
Control-Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management
concluded that our internal control over financial reporting was effective as of
December 31, 2008, based on those criteria. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.




This
annual report does not include an attestation report of the Company’s registered
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission




This
annual report does not include an attestation report of the Company’s registered
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission




ITEM 9B.
              OTHER
      INFORMATION




None.




17


PART III




ITEM 10.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CORPORATE
    GOVERNANCE


The
following table sets forth the names, ages, principal offices and positions and
the date each such person became a director or executive officer. Executive
officers are elected annually by our Board of Directors. Each executive officer
holds his office until he resigns, is removed by the Board or his successor is
elected and qualified. Directors are elected annually by our stockholders at the
annual meeting. Each director holds his office until his successor is elected
and qualified or his earlier resignation or removal.




Name
            
            Age
            
            Positions
      HeldFangshe
      Zhang
            
            51
            
            ChairmanPengcheng
      Chen
            
            33
            
            CEO/DirectorYi
      Tong
            
            37
            
            Chief
      Financial Officer/DirectorYi
      Zhang
            
            37
            
            Chief
      Operating OfficerPingjun
      Zhang
            
            60
            
            Chief
      Technical OfficerGenshe
      Bai
            
            49
            
            DirectorShengli
      Liu
            
            41
            
            Director




The
directors named above will serve until the annual meeting of our stockholders.
Thereafter, directors will be elected for one-year terms at the annual
stockholders’ meeting. Officers will hold their positions at the pleasure of the
Board of Directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between our
sole directors and officers and any other person pursuant to which any director
or officer was or is to be selected as a director or officer.




Biographical
Information




Mr. Fangshe
Zhang, Chairman




Mr. Zhang
founded Hanxin in 2001 and has acted as its Chairman of the Board of Directors
since its inception. Prior to forming Hanxin, Mr. Zhang was the general
manager of Xi’an Dong Da Terrestrial Heat Heating Co., Ltd., a company whose
primary business was the development of terrestrial heat. Mr. Zhang is a
technical expert in cork processing technology, currently holding fourteen
patents in China.




Mr. Pengcheng
Chen, CEO/Director




Mr. Chen
is our Chief Executive Officer and a director since
2004 , and has worked at Hanxin since 2002. From 1997 to 1998 he worked
for Xi'an Tangcheng Hotel as an assistant general manager. From 1998 to 2000 he
served as general manager of Xi'an Qingye Virescence Co. Ltd, a gardening
engineering company.




Mr. Yi
Zhang, Chief Operating Officer




Mr. Zhang
is our Chief Operating Officer and has worked at Hanxin since April 2004.
From April 2002 to August 2004 he was general manager of Shanxi Litian
Science & Technology Co., Ltd, a wine trading company f rom November 1993 to March 2002 he worked at
Xi’an Xianyang International Airport where from 1996 to 2002 he served as
operating manager.




Mr. Yi
Tong, Chief Financial Officer /Director




Mr. Tong
is our Chief Financial Officer and a director
since 2004. Mr. Tong has previously worked for several financial
institutions. From May 2003 to February 2004 he served as chief
representative of Federal International Finance Inc., Canada. From
August 2001 to May 2003 he worked as a senior manager for China Dragon
Securities Co., Ltd. and from April 2001 to August 2001 he worked as
project manager of China Eagle Securities Co., Ltd.




Mr. Pingjun
Zhang, Chief Technical Officer




Mr. Zhang
is our Chief Technical Officer since 2004 and has
worked for Hanxin since 1999. From 1985 through 1999 he was the design manager
of Xi’an Chemical Co., Ltd., a chloralkali chemical company.




18


Mr. Genshe
Bai, Director




Mr. Bai
is a director of us since 2002. From 1996 to 2002 he worked as the general
manager of Xi’an Commodity Development Co., Ltd., a company engaged in the
purchase and sale of commodities. From 1980-1996 Mr. Bai worked as a
manager of the auditing department for Xi’an Commodity Bureau, a governmental
agency responsible for the regulation of commodities.




Mr. Shengli
Liu, Director




Mr. Liu
is a director of us since 2004 and has worked for
Hanxin since 2002. From 1997 to 2002 he was the director for the 12th section of
Xikang railway project of China Railway 18th Bureau Group Co., Ltd. From 1989 to
1997 he worked as a manger in the metals division of the Xi'an Commodity
Bureau.




INVOLVEMENT
IN CERTAIN LEGAL PROCEEDINGS




No event
listed in Sub-paragraphs of Subparagraph (f) of Item 401 of Regulation S-K,
has occurred with respect to any of our present executive officers or directors
or any nominee for director during the past five years which is material to an
evaluation of the ability or integrity of such director or officer.




SECTION 16(A) BENEFICIAL
OWNERSHIP REPORTING REQUIREMENTS.




For
companies registered pursuant to section 12(g) of the Exchange Act,
Section




16(a) of
the Exchange Act requires our executive officers and directors, and persons, who
beneficially own more than ten percent of our equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish us with copies of all
Section 16(a) forms they file. To our knowledge, based solely on a review
of the copies of reports filed with the Securities and Exchange Commission,
Section 16(a) filing requirements applicable to our officers, directors and
greater than ten percent beneficial owners were met during the Company's
last fiscal year and there has been no change in beneficial
ownership.




All
officers and directors owning shares of common stock have filed the required
reports under Section 16(A) of the Act.




BOARD
COMMITTEES




Our board
of directors is currently composed of four directors: Mr.  Pengcheng Chen, Mr. Yi Tong, Mr. Genshe Bai, and
Mr. Shengli Liu. All board action requires the approval of a majority of
directors in attendance at a meeting at which a quorum is present. We currently
do not have standing audit, nominating or compensation committees. Our entire
board of directors handles the functions that would otherwise be handled by each
of the committees.




CODE OF
ETHICS




The
Company has a Code of Business Conduct and Ethics, which is applicable to all
directors, officers and employees of the Company. The Code is designed to deter
wrongdoing and to promote:




·
            Honest
      and ethical conduct, including the ethical handling of actual or apparent
      conflicts of interest between personal and professional
      relationships;




·
            Full,
      fair, accurate, timely and understandable disclosure in reports and
      documents that we file with, or submit to, the SEC, and in other public
      communications that we made;




·
            Compliance
      with applicable governing laws, rules and
  regulations;




·
            The
      prompts internal reporting of violations of the Code to the appropriate
      person or persons; and




·
            Accountability
      for adherence to this Code.  19




ITEM 11.
              EXECUTIVE
      COMPENSATION.





COMPENSATION
PHILOSOPHY




Our
boards of directors have historically determined the compensation to be paid to
our executive officers based on our financial and operating performance and
prospects, and contributions made by the officers’ to our success. Each of the
named officers will be measured by a series of performance criteria by the board
of directors, on a yearly basis. Such criteria will be based on certain
objective parameters such as job characteristics, required professionalism,
management skills, interpersonal skills, related experience, personal
performance and overall corporate performance.




Our board
of directors have not adopted or established a formal policy or procedure for
determining the amount of compensation paid to our executive officers. As our
executive leadership and board of directors grow, our board of directors may
decide to form a compensation committee charged with the oversight of executive
compensation plans, policies and programs.




We
provide our executive officers solely with a base salary to compensate them for
services rendered during the year. Our policy of compensating our executives
with a cash salary has served us well. To date, we have not believed it
necessary to provide our executives discretionary bonuses, equity incentives, or
other benefits in order for us to continue to be successful. However, as the
Company grows and the operations become more complex, the Board of Directors may
deem it in the best interest of the Company to provide such additional
compensation to existing executives and in order to attract new
executives.




SUMMARY COMPENSATION
TABLE




The
following table discloses executive compensation received for the fiscal year
ended December 31, 2008 as well as the preceding three years.




SUMMARY
COMPENSATION TABLE




Annual
      Compensation
            
            
            Long-Term
              Compensation
      AwardsName
      and Principal Position
            Year
            
            Salary
            
            
            Bonus
            
            
            Restricted
              Stock
              Award
            
            
            Securities
              Underlying
              Options
            
            
            Total
              CompensationFangshe
      Zhang,
            2008
            
            $
            3,013
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            3,013Chairman
            2007
            
            $
            3,971
            
            
            $
            3,945
            
            
            $
            - 0
      -
            
            
            $
            -0
      -
            
            
            $
            7,9162006
            
            $
            3,972
            
            
            $
            3,844
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            7,816Pengcheng
      Chen,
            2008
            
            $
            5,182
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            5,182Chief
      Executive Officer
            2007
            
            $
            6,143
            
            
            $
            3,945
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            10,0882006
            
            $
            5,766
            
            
            $
            3,844
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            9,610Yin
      Tong,
            2008
            
            $
            3,013
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            3,013Chief
      Financial Officer
            2007
            
            $
            3,656
            
            
            $
            13,151
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            16,8072006
            
            $
            3,588
            
            
            $
            3,588
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            7,176Yi
      Zhang,
            2008
            
            $
            3,013
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            3,013Chief
      Operating Officer
            2007
            
            $
            3,656
            
            
            $
            6,575
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            10,2312006
            
            $
            3,588
            
            
            $
            3,203
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            6,791Pingjun
      Zhang,
            2008
            
            $
            3,013
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            3,013Chief
      Technical Officer
            2007
            
            $
            3,656
            
            
            $
            6,575
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            10,2312006
            
            $
            3,306
            
            
            $
            3,203
            
            
            $
            - 0
      -
            
            
            $
            - 0
      -
            
            
            $
            6,509





EMPLOYEE STOCK OPTION
PLAN




None




COMPENSATION OF INDEPENDENT
DIRECTORS




None. No
compensation had been paid to any director solely in connection with their role
as a director.  20


EMPLOYMENT
AGREEMENTS




Each
major employee and consultant of Hanxin is required to sign an employment
agreement. The employment agreements run for a period of one (1) year, however,
an employee may be fired for cause.




ITEM 12.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT




The
following table sets forth as of April 13, 2009, information with respect
to the beneficial ownership of our outstanding Common Stock by (i) each director
and executive officer of us, (ii) all directors and executive officers of us as
a group, and (iii) each shareholder who was known by us to be the beneficial
owner of more than 5% of our outstanding Common Stock. Except as otherwise
indicated, the persons or entities listed below have sole voting and investment
power with respect to all shares of Common Stock beneficially owned by them. The
table is based on 35,663,850 shares outstanding.




Title
      of Class
            
            Name
      and Address
              of
      Beneficial Owner of
              Shares
            
            Position
            
            Number
      of
              shares
      held by
              Owner
            
            Percent
              of
      ClassCommon
            
            Pengcheng
      Chen (1)
            
            CEO/Director
            
            11,361,457
      (1)
            
            31.86%Common
            
            Fangshe
      Zhang (2)
            
            Chairman
            
            9,892,096
      (2)
            
            27.74%Common
            
            Yi
      Tong
            
            CFO/Director
            
            ––
            
            ––Common
            
            Yi
      Zhang
            
            Chief
      Operating Officer
            
            ––
            
            ––Common
            
            Pingjun
      Zhang
            
            Chief
      Technical Officer
            
            ––
            
            ––Common
            
            Genshe
      Bai
            
            Director
            
            ––
            
            ––Common
            
            Shengli
      Liu
            
            Director
            
            ––
            
            ––Common
            
            Executive
      Officers & Directors as a Group
            
            
            
            21,253,553
            
            59.60%


———————


(1)
            Having
      an address at No. 23, Tiyu Street, Chang’an District, Xi’an, China.
      Includes (i) 1,380,000 shares of common stock and (ii) 9,981,457 shares of
      common stock issued from the conversion of 338 shares of Series A
      Preferred Stock




(2)
            Having an address at No. 5,
      Beisan Street, Beida Village, Dongda Town, Chang'an County, Xi'an, China.
      Includes (i) 1,200,000 shares of common stock and (ii) 8,692,096 shares of
      common stock issued from theconversion of 294 shares of
      Series A Preferred Stock




Management
has no plans to issue any additional securities to management, promoters or
their affiliates or associates and will do so only if such issuance is in the
best interests of shareholders of us and complies with all applicable federal
and state securities rules and regulations.




LONG TERM EQUITY
COMPENSATION PLAN




On
September 30, 2005, shareholders owning a majority of our Common Stock
approved, adopted and ratified our Long Term Equity Compensation Plan (the
“Plan”) in order to optimize our profitability and growth through incentives
which are consistent with our goals and which link the interests of select
employees, directors and consultants with those of our shareholders. We believe
that the Plan also promotes teamwork and provides employees, directors and
consultants with an incentive to strive for excellence. The Plan is described as
follows:




The Plan
provides for the granting of non-qualified stock options, incentive stock
options (within the meaning of Section 422 of the Code), stock appreciation
rights ("SARs"), restricted stock and restricted stock unit awards, performance
shares and other cash or share-based awards. The maximum number of shares of
common stock that may be issued in connection with awards under the Plan is
3,500,000. In the event of any merger, reorganization, recapitalization, stock
split, stock dividend, or other change in corporate structure that affects our
common stock, an adjustment may be made to the (a) maximum number of shares
available for grants under the Plan and/or kind of shares that may be delivered
under the Plan, (b) the individual award limits under the Plan and (c) number,
kind and/or price of shares subject to outstanding awards granted under the
Plan, by our Board of Directors of, to prevent dilution or enlargement of
rights. Shares of stock covered by an award under the Plan that is cancelled,
expired, forfeited or settled in cash will again be available for issuance in
connection with future grants of awards under the Plan. As of the date of this
prospectus, no awards have been made under the Plan.




21


Our Board
of Directors has broad authority to administer the Plan, including the authority
to determine when and to whom awards will be made, determine the type and size
of awards, determine the terms and conditions of awards, construe and interpret
the Plan and award agreements, establish rates and resolutions for the Plan's
administration, and amend outstanding awards. Generally, the Plan is open to
directors, employees and consultants who are selected by the Board of
Directors.




Stock Options.
Options granted under the Plan may be "incentive stock options," as defined in
Section 422 of the Code, or "nonqualified stock options" which are stock
options that do not qualify as incentive stock options. An incentive stock
option must expire within ten years from the date it is granted (five years in
the case of options granted to holders of more than 10% of the total combined
voting power of all classes of our stock and the stock of our subsidiaries). The
exercise price of an incentive stock option must be at least equal to the fair
market value on the date such incentive stock option is granted (110% of fair
market value in the case of options granted to holders of more than 10% of the
total combined voting power of all classes of our stock). The exercise price of
a non-qualified stock option must be at least equal to the fair market value of
the shares on the date such option is granted. Subject to such restrictions as
the Compensation Committee may impose, the exercise price of options granted
under the Plan may be paid (i) in cash or its equivalent, (ii) by delivery, or
attesting to the ownership, of previously-acquired shares of our common stock,
(iii) pursuant to a cashless exercise program, (iv) by such other methods as the
compensation committee may permit or (v) by any combination of (i), (ii), (iii)
and (iv). As of the date of this prospectus, no non-qualified stock options had
been granted under the Plan.




SARs. The Board of
Directors may grant a SAR in connection with all or any portion of an option
grant as well as independent of any option grant. A SAR entitles the participant
to receive the amount by which the fair market value of a specified number of
shares on the exercise dates exceeds an exercise price established by the
committee. The excess amount will be payable in common stock, in cash, or in a
combination of shares and cash.




Restricted Stock.
Restricted Stock Units and Performance Shares. These awards may be granted in
such amounts and subject to such terms and conditions as determined by the Board
of Directors. Holders of restricted stock may generally exercise full voting
rights and may be credited with regular dividends paid with respect to the
underlying shares while they are so held; however, stock dividends or other
non-cash distributions made with respect to restricted stock awards generally
will be subject to the same restrictions as the restricted stock award.
Generally, after the last day of the applicable period of restriction, the
shares become freely transferable.




Restricted
stock units and performance shares are conditional grants of a right to receive
a specified number of shares of common stock or an equivalent amount of cash (or
a combination of shares and cash) if certain conditions are met. Each restricted
stock unit and performance share must have an initial value equal to the fair
market value of a share on the date of grant. Restricted stock units may have
conditions relating to continued service or employment only or continued
employment or service and attainment of performance goals, as determined by the
Compensation Committee. Performance shares may be granted based on a performance
period of one or more years or other periods, as determined by the Compensation
Committee.




The Board
of Directors must determine the performance objectives for grants of performance
shares and the range of the number of shares to be paid to an employee if the
relevant measure of performance is met within the performance period. Recipients
of restricted stock units and performance shares may receive dividend
equivalents with respect to their awards.




Other Awards. Subject
to the terms of the Plan, the Board of Directors may grant other awards such as
deferred share, share or cash awards based on attainment of performance or other
goals or shares in lieu of cash under other incentive or bonus programs. Payment
under such awards may be made in such manner and at such times as the Board of
Directors may determine.




22


Except as
otherwise provided in a participant's award agreement, upon the occurrence of a
change in control of our company, all outstanding stock options and SARs become
immediately exercisable, any restriction imposed on restricted stock, restricted
stock units, performance shares or other awards will lapse, and any performance
shares or other awards with performance-related vesting conditions will be
deemed earned at the target level (or if no target level is specified, the
maximum level). Unless a participant's award agreement provides otherwise, if a
participant's employment or service terminates following a change in control,
any of the participant's stock options or SARs that were outstanding on the date
of the change in control and that were vested as of the date of termination of
employment or service will remain exercisable for a period ending not before the
earlier of the first anniversary of the termination of the participant's
employment or service or the expiration of the stated term of the
award.




The Plan
may be amended, suspended or terminated at any time by our Board of Directors,
provided that no amendment that requires shareholder approval in order for the
Plan to comply with any applicable stock exchange listing standards or
securities laws will be effective unless the requisite shareholder approval is
obtained, and no amendment or termination may be made without approval of a
participant to the extent the amendment or termination materially adversely
affects the participant's outstanding awards.




As of the
date hereof, no options, SARS, restricted stock or other awards have been issued
under the Plan.




ITEM 13.
              CERTAIN
      RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.




As of
December 31, 2008, amounts due to stockholder/officer are unsecured,
non-interest bearing and due on demand. The total net amount due to the
stockholder/officer was $177,699 which represented the net amount lent by
officers to us.




Mr. Fangshe
Zhang, our Chairman and a principal shareholder leases us three cork processing
technology related patents in China. During the years ended December 31,
2008 and December 31, 2007 respectively, we paid him license fees for these
patents in the aggregate amount of $345,444 and $315,615.




ITEM 14.
              PRINCIPAL
      ACCOUNTANT





Audit
Fees




We
accrued an aggregate of approximately $66,000 in fees for professional services
rendered by MS Group CPA LLC in connection with the review of our Quarterly
Reports and audit of our financial statements for the year ended
December 31, 2008.




Audit-Related
Fees




None




Tax
Fees




None




All
Other Fees




None




It is the
policy of the Company that all services other than audit, review or attest
services must be pre-approved by the Board of Directors. No such services have
been performed by MS Group CPA LLC.  23


PART
IV




ITEM 15.
              EXHIBITS
      LIST AND FINANCIAL STATEMENT
SCHEDULES.




(a)   Exhibits:




3(a)
            
            Articles of Incorporation*3(b)
            
            Bylaws*4(b)
            
            Specimen Stock Certificate*2.1
            
            Spin - Off Agreement, dated September 19, 1996, between
      us and Kushi Macrobiotics Corp.*2.2
            
            Amended and Restated Agreement and Plan of Merger by and among
      Kushi Macrobiotics Corp. and American Phoenix Group, Inc. and us , dated
      August 12, 1996*2.3
            
            Agreement and Plan of Merger, dated as of July 11, 2005,
      by and among Kushi Natural Foods Corporation, Kushi Sub, Inc., Hanxin
      (Cork) International Holding Co., Ltd., Xi’An Cork Investments
      Consultative Management Co. and Xian Hanxin Science and Technology Co.,
      Ltd. ***2.4
            
            Amendment to Agreement and Plan of Merger dated as of
      September 30, 2005. ****10.1
            
            Loan Agreement dated as of October 27, 2008 with Shaanxi
      Shuta Wood Products Co., Ltd20.
            
            Information Statement filed with the Securities and Exchange
      Commission on August 26, 2004 *****21
            
            Our subsidiaries:  (i) Kushi Sub, Inc; (ii) Xi’An
      Cork Investments Consultative Management Co.; and (iii) Xian Hanxin
      Technology Co., Ltd (iv) Cork Import and Export Co.,
  Ltd.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 the Chief Executive Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 **32.2
            
            Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
      ***
            
            Incorporated
      by reference to the like numbered exhibit to our Registration Statement
      on   Form 10-SB.**
            
            Filed
      herewith***
            
            Incorporated
      by reference to our report on Form 8-K filed on August 9,
      2005.****
            
            Incorporated
      by reference to our report on Form 8-K/A filed on January 18,
      2006.*****
            
            Incorporated
      by reference to our Information Statement on Schedule 14-C filed on
      October 18, 2005 (Preliminary) and November 8, 2005
      (Definitive).





(b)   Reports
on Form 8-K:




None.  24


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Exchange Act, we have
caused this report to be signed on its behalf by the undersigned, thereby duly
authorized.




ASIA
      CORK INC.By:
            /s/
      Pengcheng
      ChenPengcheng
      Chen, ChiefExecutive
      Officer


DATE:
February 11 , 2010




Pursuant
to the requirements of the Exchange Act, this report has been duly signed below
by the following persons on behalf of us and in the capacities and on the dates
indicated.




Name
            
            Title(s)
            
            Date/s/
      Fangshe
      Zhang
            
            Chairman
            
            February
      11, 2010Fangshe
      Zhang/s/
      Pengcheng
      Chen
            
            Chief
      Executive Officer/
            
            February
      11, 2010Pengcheng
      Chen
            
            Director/s/
      Yi Tong
            
            Chief
      Financial Officer/
            
            February
      11, 2010Yi
      Tong
            
            Director/s/
      Yi Zhang
            
            Chief
      Operating Officer
            
            February
      11, 2010Yi
      Zhang/s/
      Pingjun
      Zhang
            
            Chief
      Technical Officer
            
            February
      11, 2010Pingjun
      Zhang/s/
      Genshe
      Bai
            
            Director
            
            February
      11, 2010Genshe Bai/s/
      Shengli
      Liu
            
            Director
            
            February
      11, 2010Shengli
      Liu


25


CONTENTS
            
            PageReport
      of Independent Registered Public Accounting Firm
            
            
            F-2Consolidated
      Financial Statements:Consolidated
      Balance Sheets
            
            
            F-3Consolidated
      Statements of Operations
            
            
            F-4Consolidated
      Statements of Stockholders’ Equity and Comprehensive
Income
            
            
            F-5Consolidated
      Statements of Cash Flows
            
            
            F-6Notes
      to Consolidated Financial Statements
            
            F-7
      to F-17


F-1


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and Stockholders of




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




We have
audited the accompanying consolidated balance sheets of Asia Cork Inc. (f/k/a
Hankersen International Corp.) and Subsidiaries (the “Company”) as of years
ended December 31, 2008 and 2007, and the related consolidated statements
of operations, stockholders’ equity and comprehensive income, and cash flows for
each of the years in the two-year period ended December 31, 2008. The
management of Asia Cork Inc. (f/k/a Hankersen International Corp.) and
Subsidiaries is responsible for these financial statements. Our responsibility
is to express an opinion on these financial statements based on our
audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Asia Cork Inc. (f/k/a
Hankersen International Corp.) and Subsidiaries as of December 31, 2008 and
2007, and the results of its operations and its cash flows for each of the years
in the two-years period ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America.




The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has negative cash flow in
operating activities and difficulty in collecting outstanding accounts
receivable, and lacks of cash and equivalents to satisfy its current
obligations. These events raise substantial doubt about the Company’s ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 2. The consolidated financial statements did not include
any adjustments that might result from the outcome of this
uncertainty.








MS
      Group CPA LLCMS Group
      CPA LLCEdison,
      New JerseyApril 12,
      2009





F-2


ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
BALANCE SHEETS




As
      of December 31,2008
              
              
              2007AssetsCurrent
      AssetsCash
      and equivalents
              
              $
              23,605
              
              
              $
              367,396Accounts
      receivable, net of allowance for doubtful accounts of $23,787 and $12,210,
      respectively
              
              
              4,956,005
              
              
              
              2,429,772Inventories
              
              
              2,756,011
              
              
              
              920,140Advance
      to suppliers
              
              
              2,562,357
              
              
              
              2,375,174Loan
      to unrelated party
              
              
              1,465,738
              
              
              
              -Deferred
      income taxes assets
              
              
              7,757
              
              
              
              -Prepayments
      and other current assets
              
              
              34,718
              
              
              
              16,111Total
      Current Assets
              
              
              11,806,191
              
              
              
              6,108,593Property
      and Equipment - Net
              
              
              4,813,629
              
              
              
              1,754,830Deposit
      for Purchase of Fixed Assets
              
              
              2,022,719
              
              
              
              1,891,810Deposit
      for Purchase of Intangible Assets
              
              
              -
              
              
              
              1,370,877Deposit
      for Acquisition
              
              
              1,465,738
              
              
              
              1,370,877Construction
      in Progress
              
              
              -
              
              
              
              2,821,817Investment
      - At Cost
              
              
              2,052,034
              
              
              
              1,919,228Intangible
      Assets- Net
              
              
              171,178
              
              
              
              161,073Deferred
      Income Taxes Assets
              
              
              16,586
              
              
              
              -Total
      Assets
              
              
              22,348,075
              
              
              
              17,399,105Liabilities
      and Stockholders' EquityCurrent
      LiabilitiesAccounts
      payable and accrued expenses
              
              
              1,395,366
              
              
              
              956,519Loan
      payable
              
              
              439,722
              
              
              
              534,642Convertible
      note, net
              
              
              574,276
              
              
              
              -Customer
      deposit
              
              
              10,118
              
              
              
              -Taxes
      payable
              
              
              275,224
              
              
              
              767,764Due
      to stockholders/officers
              
              
              177,699
              
              
              
              166,199Other
      current liabilities
              
              
              33,027
              
              
              
              15,039Total
      Current Liabilities
              
              
              2,905,432
              
              
              
              2,440,163Total
      Liabilities
              
              
              2,905,432
              
              
              
              2,440,163Minority
      Interest
              
              
              1,802,022
              
              
              
              1,522,318Stockholders'
      EquitySeries
      A preferred stock, $0.0001 par value, 5,000,000 shares
      authorized,zero
      shares issued and outstanding, respectively.
              
              
              -
              
              
              
              -Common
      stock, $0.0001 par value, 200,000,000 shares authorized,35,663,850
      and 35,413,850 issued and outstanding, respectively.
              
              
              3,566
              
              
              
              3,541Additional
      paid-in capital
              
              
              4,485,446
              
              
              
              4,396,772Additional
      paid-in capital  stock warrant
              
              
              279,386
              
              
              
              -Reserve
      funds
              
              
              2,236,716
              
              
              
              1,741,715Retained
      earnings
              
              
              7,966,783
              
              
              
              5,729,630Accumulated
      other comprehensives income
              
              
              2,668,724
              
              
              
              1,564,966Total
      Stockholders' Equity
              
              
              17,640,621
              
              
              
              13,436,624Total
      Liabilities and Stockholders' Equity
              
              $
              22,348,075
              
              
              $
              17,399,105
 F-3
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
STATEMENTS OF OPERATIONS




For
      The Years Ended December 31,2008
              
              
              2007Revenues
              
              $
              21,378,041
              
              
              $
              16,050,938Cost
      of Goods Sold
              
              
              13,937,361
              
              
              
              10,990,041Gross
      Profit
              
              
              7,440,680
              
              
              
              5,060,897Operating
      ExpensesSelling
      expenses
              
              
              2,711,764
              
              
              
              1,954,225General
      and administrative expense
              
              
              759,227
              
              
              
              513,116Total
      Operating Expenses
              
              
              3,470,991
              
              
              
              2,467,341Income
      From Operations
              
              
              3,969,689
              
              
              
              2,593,556Other
      Income (Expense)Interest
      (expense), net
              
              
              (275,105
              )
              
              
              (6,270
              )Other
      income, net
              
              
              74,091
              
              
              
              23,988Loss
      on disposition of fix assets
              
              
              (159,364
              )
              
              
              (342,127
              )Total
      Other (Expense) Income
              
              
              (360,378
              )
              
              
              (324,409
              )Income
      Before Taxes and Minority Interest
              
              
              3,609,311
              
              
              
              2,269,147Provision
      for Income Taxes
              
              
              597,453
              
              
              
              348,871Income
      Before Minority Interest
              
              
              3,011,858
              
              
              
              1,920,276Minority
      Interest
              
              
              279,704
              
              
              
              158,235Net
      Income
              
              $
              2,732,154
              
              
              $
              1,762,041Other
      Comprehensive Income:Foreign
      Currency Translation Gain
              
              
              1,103,758
              
              
              
              929,608Comprehensive
      Income
              
              $
              3,835,912
              
              
              $
              2,691,649Net
      Income Per Common Share-
      Basic
              
              $
              0.08
              
              
              $
              0.05-
      Diluted:
              
              $
              0.08
              
              
              $
              0.05Weighted
      Common Shares Outstanding-
      Basic
              
              
              35,514,406
              
              
              
              35,413,850-
      Diluted:
              
              
              36,469,571
              
              
              
              35,413,850
    F-4
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




Common
      Stock,
            
            
            Additional
      Paid-in Capital
            
            
            Additional
      Paid-in Capital Stock Warrant
            
            
            Reserve
      Fund
            
            
            Retained
      Earnings/(Accumulated Deficit)
            
            
            Other
      Comprehensive Income
            
            
            Total
      Shareholders' EquityNo.
      of Shares
            
            
            AmountBalance,
      December 31, 2006
            
            
            35,413,850
            
            
            $
            3,541
            
            
            $
            4,396,772
            
            
            $
            -
            
            
            $
            1,432,992
            
            
            $
            4,276,312
            
            
            $
            635,358
            
            
            $
            10,744,975Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,762,041
            
            
            
            -
            
            
            
            1,762,041Appropriation
      of reserve funds
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            308,723
            
            
            
            (308,723
            )
            
            
            -
            
            
            
            -Foreign
      currency translation gain
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            929,608
            
            
            
            929,608Balance,
      December 31, 2007
            
            
            35,413,850
            
            
            $
            3,541
            
            
            $
            4,396,772
            
            
            $
            -
            
            
            $
            1,741,715
            
            
            $
            5,729,630
            
            
            $
            1,564,966
            
            
            $
            13,436,624Patent
      rights donation
            
            
            -
            
            
            
            -
            
            
            
            4,199
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4,199Issued convertible note with
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -stock warrant in June 2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            279,386
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            279,386Issued
      common stocks on July 31,2008 for service received
            
            
            150,000
            
            
            
            15
            
            
            
            43,485
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            43,500Issued
      common stocks on August 14,2008
      for service received
            
            
            100,000
            
            
            
            10
            
            
            
            40,990
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            41,000-Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            2,732,154
            
            
            
            -
            
            
            
            2,732,154Appropriation
      of reserve funds
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            495,001
            
            
            
            (495,001
            )
            
            
            -
            
            
            
            -Foreign
      currency translation gain
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,103,758
            
            
            
            1,103,758Balance,
      December 31, 2008
            
            
            35,663,850
            
            
            $
            3,566
            
            
            $
            4,485,446
            
            
            $
            279,386
            
            
            $
            2,236,716
            
            
            $
            7,966,783
            
            
            $
            2,668,724
            
            
            $
            17,640,621


See notes
to consolidated financial statements.


F-5
 ASIA CORK INC. AND
SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


CONSOLIDATED
STATEMENTS OF CASH FLOWS




For
      the Year Ended December 31,2008
              
              2007Cash
      Flows From Operating ActivitiesNet
      Income
              
              $             2,732,154
              
              $             1,762,041Adjustments
      to Reconcile Net Income to Net Cash(Used in) Provided by Operating
      ActivitiesDepreciation
      and amortization
              
              286,352
              
              248,581Bad
      debt adjustment
              
              10,539
              
              (1,496)Loss
      on disposition of fix assets
              
              159,364
              
              342,127Minority
      interest
              
              279,704
              
              158,235Consulting
      fees adjusted from deferred
              
              21,320
              
              -Interest
      expenses for discount on convertible note
              
              153,662
              
              -Deferred
      income taxes benefits
              
              (23,905)
              
              -Issued
      common stocks for legal fees
              
              43,500
              
              -Changes
      in operating assets and liabilities:Accounts
      receivable
              
              (2,215,522)
              
              (291,558)Inventories
              
              (1,657,504)
              
              (161,894)Advance
      to suppliers
              
              (21,350)
              
              (732,019)Prepayments
      and other current assets
              
              3,320
              
              25,905Accounts
      payable and accrued expenses
              
              348,540
              
              287,326Customer
      deposits
              
              10,118
              
              -Taxes
      payable
              
              (510,352)
              
              433,419Other
      current liabilities
              
              15,851
              
              3,794Net
      Cash (Used in) Provided by Operating Activities
              
              (364,209)
              
              2,074,461Cash
      Flows From Investing ActivitiesProceeds
      from withdraw deposit for purchase of intangible assets
              
              1,370,877
              
              -Payment
      for the deposit for purchase of intangible assets
              
              -
              
              (1,370,877)Proceeds
      from return the deposit for purchase of fix assets
              
              -
              
              25,628Payment
      for deposit for acquisition
              
              -
              
              (1,370,877)Payment
      for purchase of equipment
              
              (589)
              
              (5,945)Payment
      for unrelated parties
              
              (1,465,738)
              
              -Payment
      for construction in progress
              
              (207,282)
              
              (1,253,703)Proceeds
      from repayment of unrelated party
              
              -
              
              1,922,066Net
      Cash Used in Investing Activities
              
              (302,732)
              
              (2,053,708)Cash
      Flows From Financing ActivitiesProceeds
      from long-term debt
              
              439,722
              
              534,642Payments
      to long-term debt
              
              (571,638)
              
              (959,614)Proceeds
      from convertible note
              
              700,000
              
              -Payments
      to stockholders/officers
              
              -
              
              (419,543)Proceeds
      from stockholders/officers
              
              -
              
              455,559Net
      Cash Provided by (Used in) Financing Activities
              
              568,084
              
              (388,956)Net
      Decrease in Cash and Equivalents
              
              (98,857)
              
              (368,203)Effect
      of Exchange Rate Changes on Cash
              
              (244,934)
              
              170,866Cash
      and Equivalents at Beginning of Period
              
              367,396
              
              564,733Cash
      and Equivalents at End of Period
              
              $                  23,605
              
              $                367,396SUPPLEMENT
      DISCLOSURES OF CASH FLOW INFORMATIONInterest
      paid for the years ended December 31, 2008 and 2007,
      respectively
              
              $                  52,418
              
              $                  70,923Income
      taxes paid for the years ended December 31, 2008 and 2007,
      respectively
              
              $                794,835
              
              $                153,007SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING ANDFINANCING
      ACTIVITIESConstruction
      in process transferred out to property
              $             3,385,406
              
              $                           -Shareholder
      donated intangible assets into the Company without payment
              
              $                    4,199
              
              $                           -Issued
      common stocks for legal fees and part of consulting
      fees
              
              $                  84,500
              
              $                   -


F-6


ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES





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 18 to the accompanying consolidated financial
statements.




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




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




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





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




2.
            NEGATIVE
      CASH FLOW IN OPERATING ACTIVITIES DURING TRANSACTION PERIOD AND MANAGEMENT
      PLANS




During
the fourth quarter of 2008, due to adverse market conditions for home and
commercial renovation and decoration, the Company’s accounts receivable
outstanding for over half year increased promptly to the amounts of $ 1,551,836 (equivalent to RMB 10,587,400) and the cash and equivalents had dropped down
significantly to $23,605 as of December 31, 2008. In addition, the Company
had negative cash flow in operating activities for the year ended
December 31, 2008. 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.  F-7
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




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.





3.
              OF
      PRESENTATION




Principle
of consolidation




The
accompanying consolidated financial statements present the financial position,
results of operations and cash flows of the Company and all entities in which
the Company has a controlling voting interest. The consolidated financial
statements also include the accounts of any variable interest entities in which
the Company is considered to be the primary beneficiary and such entities are
required to be consolidated in accordance with accounting principles generally
accepted in the United States (“US GAAP”). These consolidated financial
statements include the financial statements of Asia Cork Inc. and its
subsidiaries. All significant intercompany transactions and balances are
eliminated in consolidation.




The
accompanying consolidated financial statements are prepared in accordance with
US GAAP. This basis of accounting differs from that used in the statutory
accounts of some of the Company’s subsidiaries, which were prepared in
accordance with the accounting principles and relevant financial regulations
applicable to enterprises with foreign investment in the PRC (“PRC GAAP”).
Necessary adjustments were made to the Subsidiary’s statutory accounts to
conform to US GAAP to be included in these consolidated financial
statements.




4.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING
POLICIES





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
collectability 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.




Advertising
costs




Advertising
costs are booked as expenses as incurred. The Company incurred $1,539 and
$237,369 for the years ended December 31, 2008 and 2007,
respectively.




Shipping
and handling costs




Shipping
and handling costs are classified as cost of sales and recognized when the
related sale is recognized. The Company incurred $524 and $471 for the years
ended December 31, 2008 and 2007, respectively.




Cash
and equivalents




The
Company considers all highly liquid temporary cash investments with an original
maturity date of three months or less from when purchased, to be cash
equivalents.




Inventories




The
Company values inventories, consisting of finished goods, work in progress, raw
materials, packaging material, and other, at the lower of cost or market. Cost
is determined on the weighted average cost method.  F-8
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




Property
and Equipment




Property
and equipment are recorded at cost. Expenditures for major additions and
betterments are capitalized. Maintenance and repairs are charged to operations
as incurred. Depreciation of property and equipment is computed by the
straight-line method over the assets estimated useful lives. Leasehold
improvements are amortized over the lesser of the lease term or the asset's
useful lives. Upon sale or retirement of plant and equipment, the related cost
and accumulated depreciation are removed from the accounts and any gain or loss
is reflected in the Company’s Consolidated Statements of
Operations.




Impairment
of long-lived assets




The
Company evaluates the recoverability of its other long-lived assets, including
amortizing intangible assets, if circumstances indicate impairment may have
occurred pursuant to SFAS No. 144. This analysis is performed by comparing
the respective carrying values of the assets to the current and expected future
cash flows, on an undiscounted basis, to be generated from such assets. If such
analysis indicates that the carrying value of these assets is not recoverable,
the carrying value of such assets is reduced to fair value through a charge to
the Company’s Consolidated Statements of Operation.




Intangible
assets




Intangible
assets include land use right. With the adoption of SFAS No. 142,
intangible assets with a definite life are amortized on a straight-line basis.
The land use right is being amortized over its estimated life of 40 years.
Intangible assets with a definite life are tested for impairment whenever events
or circumstances indicate that a carrying amount of an asset (asset group) may
not be recoverable. An impairment loss would be recognized when the carrying
amount of an asset exceeds the estimated undiscounted cash flows used in
determining the fair value of the asset. The amount of the impairment loss to be
recorded is calculated by the excess of the asset’s carrying value over its fair
value. Fair value is generally determined using a discounted cash flow analysis.
Costs related to internally develop intangible assets are expensed as
incurred.




Comprehensive
income (loss)




SFAS
No. 130, “Reporting Comprehensive Income”, established standards for the
reporting and display of comprehensive income, its components and accumulated
balances in a full set of general purpose financial statements. SFAS
No. 130 defines comprehensive income to include all changes in equity
except those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS No. 130 requires that all items that are
required to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is presented with
the same prominence as other financial statements. The Company’s only current
component of comprehensive income is the foreign currency translation
adjustment.




Concentration
of credit risk




The
Company's financial instruments consist primarily of cash, which is invested in
money market accounts, accounts receivable, and accounts payable. The Company
considers the book value of these instruments to be indicative of their
respective fair value. The Company places its temporary cash investments with
high credit quality institutions to limit its exposure. Almost all of the
Company's sales are credit sales which are primarily to customers whose ability
to pay is dependent upon the industry economics prevailing in their respective
areas; however, concentrations of credit risk with respect to trade accounts
receivable is limited due to generally short payment terms. The Company also
performs ongoing credit evaluations of its customers to help further reduce
credit risk.  F-9
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




Fair
value of financial instruments




The
carrying amounts reported in the balance sheet for cash, accounts receivable,
inventories, advances to suppliers, prepayments and other current assets,
accounts payable, accrued expenses, loan payable, taxes payable, and other
current liabilities approximate fair value based on the short-term maturity of
these instruments. The Company's loans payable approximates the fair value of
such instruments based upon management's best estimate of interest rates that
would be available to the Company for similar financial arrangements on
December 31, 2008.




Income
taxes




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




The
Company follows Statement of Financial Accounting Standards No. 109 -
Accounting for Income Taxes, which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this method,
deferred tax assets and liabilities are based on the differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to
reverse.




Foreign
currency translation




The
reporting currency of the Company is the U.S. dollar. The functional currencies
of the Company's subsidiaries are local currencies, primarily the Chinese
Renminbi. The financial statements are translated into U.S. dollars using
period-end rates of exchange for assets and liabilities and average rates of
exchange for the period for revenues and expenses. Translation adjustments
resulting from the process of translating the local currency financial
statements into U.S. dollars are included in other comprehensive income or
loss.




Basic
and diluted net income per share




The Company accounts for net income per
common share in accordance with SFAS 128, “Earnings per Share”
(“EPS”).  SFAS 128 requires the disclosure of the potential dilution
effect of exercising or converting securities or other contracts involving the
issuance of common stock. Basic net income per share is determined based on the
weighted average number of common shares outstanding for the
period.  Diluted net income per share is determined based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised into common stock.




Stock-Based
Compensation




The
Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) Emerging
Issues Task Force (EITF) Issue No. 96-18, “Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.  The fair value of the option issued is
used to measure the transaction, as this is more reliable than the fair value of
the services received.  Fair value is measured as the value of the
Company’s common stock on the date that the commitment for performance by the
counterparty has been reached or the counterparty’s performance is
complete.  The fair value of the equity instrument is charged
directly to compensation expense and additional paid-in
capital.




F-10


ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




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.
Estimates, by their nature, are based on judgment and available information.
Accordingly, actual results could differ from those estimates.




Segment
Reporting




The
Company operates and manages its business as a single operating
segment.




New
accounting pronouncements




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




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




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


F-11
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




5.
              INVENTORIES





Inventories
on December 31, 2008 and 2007 consisted of the following:




December
      31,2008
            
            
            2007Raw
      materials
            
            $
            2,073,501
            
            
            $
            536,319Work
      in process
            
            
            210,526
            
            
            
            103,395Finished
      goods
            
            
            427,459
            
            
            
            249,932Packaging
      and other
            
            
            44,525
            
            
            
            30,494Total
            
            $
            2,756,011
            
            
            $
            920,140




6.
              LOAN
      TO UNRELATED PARTY
  There
were acquisition deposits RMB10 million prepared to purchase the land use
right in Shaanxi BaoJi District P.R. China from Shaanxi Shuta Wood Products Co.,
Ltd. (“Shaanxi Shuta”), one of Hanxin’s major sales distributors in Shaanxi
Province P.R. China. For the year ended December 31, 2008 and 2007, Shaanxi
Shuta had purchased $705,813 (equivalent RMB4,903,704) and $302,203 (equivalent
to RMB2,298,014) merchandises from Hanxin, respectively. However, Hanxin
terminated the land purchase agreement on August 19, 2008. Pursuant to the
Cancellation Agreement, the deposits had been refunded back to Hanxin in
August and September 2008.




In year
2008, Shaanxi Shuta opened cork retail chain stores exclusively selling Hanxin’s
products but Hanxin could not achieve its 500,000 square meters floor and board
production plan in year 2008 and had delayed many purchase orders from Shaanxi
Shuta; thus Shaanxi Shuta had to readjust its year 2008 sales strategies and
incurred heavy losses. In order to avoid losing a very important distribution
channel and to assist Shaanxi Shuta to recover from this situation, Hanxin had
loaned RMB10 million (equivalent to $1,465,738) to the Shaanxi Shuta for
one year term starting from October 27, 2008. This loan is no interest
bearing and unsecure.




7.
              PROPERTY
      AND EQUIPMENT


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




Estimated
      Life
            
            December
      31,2008
            
            
            
            2007Building
      and improvement
            27-35
            
            $
            4,894,945
            
            
            $
            1,507,241Manufacturing
      equipment
            1-8
            
            
            838,766
            
            
            
            1,128,887Office
      furniture and equipment
            5
            
            
            31,141
            
            
            
            28,575Vehicle
            2-8
            
            
            12,527
            
            
            
            11,716Machinery
      improvement
            3
            
            
            80,616
            
            
            
            75,398Subtotal
            
            
            
            5,857,995
            
            
            
            2,751,817Less
      Accumulated depreciation
            
            
            
            1,044,366
            
            
            
            996,987Total
            
            
            $
            4,813,629
            
            
            $
            1,754,830





For the
years ended December 31, 2008 and 2007, depreciation expenses amounted to
$281,185 and $244,003, respectively. Loss on disposal of fixed assets for the
years ended December 31, 2008 and 2007 were $159,364 and $342,127,
respectively.  F-12


ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




8.
              DEPOSIT
      FOR PURCHASE OF FIXED ASSETS




Hanxin
intended to purchase a factory’s facilities through
an unrelated agent who will do the negotiation for Hanxin, and both parties
signed the Entrust Purchase Agreement on November 10, 2005. Hanxin had paid
deposits $2,022,719 (equivalent to RMB 13,800,000) to the agent as of
December 31, 2008, and the same deposit was valued at $1,891,810
(equivalent to RMB 13,800,000) as of December 31, 2007. The agency
agreement has no firm commitment on the purchase but it states a maximum price
of RMB 50,000,000 that Hanxin is willing to pay for the facilities .




9.
              DEPOSIT
      FOR PURCHASE OF INTANGIBLE
ASSETS




Pursuant
to the terms of a Cancellation Agreement dated August 19, 2008, Hanxin and
Shaanxi Shuta terminated the Land Transfer Agreement by which Hanxin had
intended to purchase the right to use a parcel of land from Shaanxi Shuta in the
ShaanXi Baoji district of the PRC. The entire $1,472,776 (equivalent to RMB
10 million) deposit that had been previously paid to Shaanxi Shuta pursuant
to the Land Transfer Agreement was refunded to Hanxin in August 2008 and
September 2008. However, Hanxin loaned the same amount, RMB10 million,
back to Shaanxi Shuta on October 27, 2008. More detail situation listed in
the preceding Note 6.




10.
              DEPOSIT
      FOR ACQUISITION





Hanxin
intended to acquire a private company located in Sichuan China called Sichuan
Hanxin Cork Merchandises Co, Ltd. (“ Sichuan
Hanxin ”), and signed a strategic corporation agreement with Sichuan Hanxin on March 26, 2007. The purchase price
of Sichuan Hanxin shall not exceed $2,741,754 (RMB20 million) based upon
the agreement. As of December 31, 2008, Hanxin paid $1,465,738 (equivalent
to RMB10 millions) deposit to Sichuan Hanxin .
Sichuan Hanxin is a manufacturer for cork products
and is one of Hanxin’s current cork raw material providers. Hanxin anticipates
apply the whole deposited amount to the raw materials payments if the
acquisition does not occur before the end of year 2009.




11.           CONSTRUCTION
IN PROGRESS




Student
dormitory construction and interior decoration were completed in June 2008.
All costs of approximately $2.4 million (equivalent to RMB 16,525,621) had
been transferred to the property as of June 30, 2008. Although the
construction had been completed, Hanxin did not acquire the occupation
certificates and ownership certificates with respect to the dormitory. Hanxin
expects to receive these certificates before the end of year 2009. However,
there is no assurance to this matter.




The fifth
workshop was completed in September 2008. All costs of $963,182 (equivalent
to RMB 6,571,311) had been transferred to the property as of September 30,
2008. Commencing in October 2008, Hanxin started to install production line
facilities in the fifth workshop. Due to adverse market conditions for home and
commercial renovation and decoration, Hanxin’s revenue had dropped down and
accounts receivable outstanding for more than three months was increased
promptly in the fourth quarter 2008 as compared to the same period of 2007.
Simultaneously, Hanxin’s cash and equivalents balance, working capital, and cash
flow for operating activities were also tensional in the fourth quarter 2008. As
a result, Hanxin had stopped purchasing new production facilities for the fifth
workshop after completed one of four production lines installation as of
December 31, 2008. Hanxin has not determined when the additional production
lines will be completed.




As of
December 31, 2008 and 2007, the construction in progress consisted of the
following:




December
      31,2008
            
            
            2007Student
      dormitory construction
            
            $
            ––
            
            
            $
            2,204,922Fifth
      workshop construction
            
            
            ––
            
            
            
            616,895Total
      construction in progress
            
            $
            ––
            
            
            $
            2,821,817


F-13
 ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007






12.
              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 $2,052,034 (equivalent to RMB 14,000,000). DeRong owns a cork
tree forest plantation in China. The investment is stated at cost.




13.
              INTANGIBLE
      ASSETS





On
September 27, 2001, the Company purchased the right to use a parcel of land
for 40 years. The purchase price is being amortized over the term of the right.
In addition, during the quarter ended June 30, 2008, the Company acquired
ownership of three patent rights from its major stockholder and Chairman,
Mr. Fang She Zhang, with no payments. 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). On December 31, 2008 and 2007, intangible
assets, less accumulated amortization consisted of the following:




December
      31,2008
            
            
            2007Intangible
      assets
            
            $
            208,332
            
            
            $
            190,901Less:
      Accumulated amortization
            
            
            37,154
            
            
            
            29,828Total
            
            $
            171,178
            
            
            $
            161,073




For the
years ended December 31, 2008 and 2007, amortization expense amounted to
$5,167 and $4,578, respectively.




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




For
      the Year Ending December 31,
            
            Amount2009
            
            $
            5,4212010
            
            
            5,4212011
            
            
            5,4212012
            
            
            5,4212013
            
            
            5,421




14.
              LOANS
      PAYABLE




Loans
payable as of December 31, 2008 and 2007 consisted of the
following:


December
      31,2008
            
            
            2007On
      November 30, 2007, the Company obtained a short-term loan RMB3.9 million
      (equivalent at that time to $534,642) from Xian Xitaoyuan Credit Bank by
      pledging the Company’s building in YuLerYuan with bank. The loan interest
      is 0.837% 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 0.9967% per month The expiration date for this
      new short-term loan is June 30, 2009.
            
            $
            439,722
            
            
            $
            534,642Total
      Loan Payable
            
            $
            439,722
            
            
            $
            534,642


F-14


ASIA
CORK INC. AND SUBSIDIARIES


(F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007




15.
              CONVERTIBLE
      NOTE AND
WARRANTS





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
warrants are exercisable at any time after the consummation of the Financing
through the fourth anniversary of the consummation of the Financing (the
"Financing Expiration Date"). Each holder is entitled to purchase the number of
shares of common stock equal to the initial principal amount of such investor's
promissory note DIVIDED BY the lowest cash purchase price paid for the Company's
common stock (or the conversion price or exercise price if the Financing
consists of convertible securities or warrants, respectively) in the Financing
(the "Financing Based Conversion Price") at an exercise price equal to the
Financing Based Conversion Price. If the Financing did not occur within 12
months of the issuance of the warrant, the warrant is exercisable from and after
such date and through the fourth anniversary of the issuance date of the
warrant. In such event, the holder is entitled to purchase the number of shares
of common stock equal to 50% of the initial principal amount of the promissory
note DIVIDED BY $0.228 at an exercise price equal to $0.228, subject to certain
adjustments as set forth in the warrant. The interest payable regarding the
convertible notes has been accrued and recorded as of December 31,
2008.The
different amount between the option price in declared date and warrant
conversion price $0.228 time total entitled warrant shares had been charged
directly to discount on convertible note, and the sum was add to additional
paid-in capital-stock warrant in amount of $279,386 as of December 31,
2008.
  
 As of December 31, 2008 , 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, and
Mr. Zhang (the “Escrow Shares”). In the event that subsequent to the
issuance of the Convertible Notes, the value of the Escrow Shares is less than
150% of the outstanding principal amount of the promissory notes for 10
consecutive trading days, then the holder of the promissory notes shall have the
right to give the Company notice (the “Investor Notice”) to deposit or cause to
be deposited additional Escrow Shares such that the value of the Escrow Shares
based upon the volume weighted average price per share for the 20 trading days
preceding the date of the Investor Notice, is equal to 150% of the outstanding
principal amount of the promissory notes. The Company shall deposit or cause to
be deposited such additional Escrow Shares within 30 days of the date of the
Investor Notice. To the extent the Escrow Shares are not sufficient to meet the
threshold of 150% of the outstanding principal amount of the promissory notes
within 30 days after the Investor Notice, the Company shall grant to Investors a
security interest on the Company’s tangible assets to the extent permitted under
applicable law.
  Net of c onvertible note as of
December 31, 2008 and 2007 consisted of the following:
  Convertible
      NoteDecember
      31,2008
                  
                  
                  2007Convertible
      note
                  
                  $
                  700,000
                  
                  
                  $
                  -Less:
      Discount on convertible note
                  
                  
                  125,724
                  
                  
                  
                  -Convertible
      note, net
                  
                  $
                  574,276
                  
                  
                  $
                  -
 F-15
 ASIA
CORK INC. AND SUBSIDIARIES
 (F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
  16.
                    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” approved
by China State Council, thus its income is subject to 33% tax rate. Commencing
from January, 2008, based on the new regulation in the PR, CIE’s income is
subject to 25% tax rate.
  On
December 31, 2008 and 2007, taxes payable consisted the
following:
  December
      31,2008
                
                
                2007Value-added
      tax
                
                $
                177,287
                
                
                $
                393,969Corporate
      income tax provision
                
                
                74,888
                
                
                
                235,465Local
      taxes and surcharges
                
                
                13,491
                
                
                
                83,330Franchise
      tax
                
                
                9,558
                
                
                
                55,000Total
                
                $
                275,224
                
                
                $
                767,764
  The
deferred income taxes assets results from loss on disposition of fix assets that
are no deductible.
  The
components of the provisions for income taxes were as follows:
  For
      The Years Ended December 31,2008
                
                
                2007Current
      taxes:Current
      income taxes in P.R. China
                
                $
                621,358
                
                
                $
                348,871Deferred
      income taxes benefits
                
                
                23,905
                
                
                
                ––Total
      provision for income taxes
                
                $
                597,453
                
                
                $
                348,871
 F-16
  ASIA
CORK INC. AND SUBSIDIARIES
 (F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
  17.
                    DUE
      TO STOCKHOLDERS/OFFICERS
 Amounts
due to a stockholder/officer are unsecured, non-interest bearing and no set
repayment date. As of December 31, 2008 and 2007, the total net amounts due
to the stockholder/officer were $177,699 and $166,199, respectively, which
represented the net amounts lent by shareholders/officers to the
Company.
  18.
                    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,
  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 issued upon
conversion of the preferred stock.
  In
May 2008, the board of directors of the Company authorized, and on
July 31, 2008 the Company issued, 150,000 shares of the Company’s common
stock to its attorney for services rendered. In June 2008, the board of
directors of the Company authorized, and on August 14 2008 the Company
issued, 100,000 shares of the Company’s common stock to HAWK Associates, Inc
(“Hawk”), its investor relations firm for services rendered pursuant to the
agreement.Accordingly the Company
has 35,663,850 shares of issued and outstanding common stock as of
December 31, 2008.
  In
June 2008, the Company was assigned ownership of three patent rights from
its major shareholder, Mr. Fang She Zhang. These patents were assigned
without any payment due to Mr. Zhang. The application and filing costs of
these three patents was RMB28,800 (equivalent to $4,199). In connection
therewith, the Company recorded $4,199 of intangible assets, and same amount of
additional paid in capital as of December 31, 2008.
  F-17
 19.
                    BASIC
      AND DILUTED EARNING PER
SHARE
 The
following table sets forth the computation of basic and diluted net income per
share:
  For
      The Year Ended December 31,2008
                  
                  
                  2007Basic:Numerator:Net
      income for basic calculation
                  
                  $
                  2,732,154
                  
                  
                  $
                  1,762,041Denominator:Weighted
      average common shares
                  
                  
                  35,514,406
                  
                  
                  
                  35,413,850Net
      income per share — basic
                  
                  $
                  0.08
                  
                  
                  $
                  0.05Diluted:Numerator:Net
      income for basic calculation
                  
                  $
                  2,732,154
                  
                  
                  $
                  1,762,041Effect
      of dilutive securities issued
                  
                  
                  218,541
                  
                  
                  
                  -Net
      income for diluted calculation
                  
                  $
                  2,950,695
                  
                  
                  $
                  1,762,041Denominator:Denominator
      for basic calculation
                  
                  
                  35,514,406
                  
                  
                  
                  35,413,850Weighted
      average effect of dilutive securitiesConvertible
      debt
                  
                  
                  955,165
                  
                  
                  
                  -Denominator
      for diluted calculation
                  
                  
                  36,469,571
                  
                  
                  
                  35,413,850Net
      income per share — diluted
                  
                  $
                  0.08
                  
                  
                  $
                  0.05
  20.
                      LEASE
      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 December 31, 2008.
  For
      the Year Ending December 31,
                
                Amount2009
                
                $
                69,0892010
                
                
                17,2722011
                
                
                17,2722012
                
                
                17,2722013
                
                
                17,272Thereafter
                
                
                584,376Total
      minimum rental payments required
                
                $
                722,553
 
 Rent and
properties maintenance expenses amounted to $189,451 and $38,004 for the years
ended December 31, 2008 and 2007, respectively.
  The
Company also leases three patent rights from its Chairman, Mr. Fang s he 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 December 31,
2008.  F-18
 ASIA
CORK INC. AND SUBSIDIARIES
 (F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
  
  For
      the Year Ending December 31,
                
                Amount2009
                
                $
                345,4442010
                
                
                345,4442011
                
                
                101,714Total
      minimum rental payments required
                
                $
                792,602
  Patent
lease expenses amounted to $345,444 and $315,615 for the years ended
December 31, 2008 and 2007, respectively.
  On
June 15, 2008, the Company signed an agreement with Hawk to provide
investor relations consulting and advisory services. The term of this agreement
is effective through June 30, 2009. Hawk is paid a retainer fee of $7,500
per month and the payments are due at the beginning of each month. Hawk was also
issued 100,000 restricted 144 shares of the Company’s common stock on
August 14, 2008.
  21.
                    RESERVE
      FUND AND DIVIDENDS
 Under
laws of the PRC, net income after taxation can only be distributed as dividends
after appropriation has been made for the following: (i) cumulative prior years'
losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least
10% of net income after taxes, as determined under PRC accounting rules and
regulations, until the fund amounts to 50% of the Company's registered capital;
(iii) allocations of 5-10% of income after tax, as determined under PRC
accounting rules and regulations, to the Company's "Statutory Common Welfare
Fund", which is established for the purpose of providing employee facilities and
other collective benefits to employees in China; and (iv) allocations to any
discretionary surplus reserve, if approved by shareholders.
  As of
December 31, 2008 and 2007, the Company's PRC subsidiaries established and
segregated in retained earnings an aggregate amount of
$2,236,716 and $1,741,715 for the Statutory Surplus Reserve and
the Statutory Common Welfare Fund.
  The
Company has not declared or paid cash dividends or made distributions in the
past.
  22.
                    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
years ended December 31, 2008 and 2007, 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):  F-19
 ASIA
CORK INC. AND SUBSIDIARIES
 (F/K/A
HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007
  Year
      Ended December 31,
                
                Purchases
      from
                  Major
      Suppliers
                
                Number
      of
                  Suppliers
                Percentage
                  of
      Total2008
                
                $
                5,589,794
                
                3
                39.09
                %2007
                
                $
                2,761,972
                
                2
                27.50
                %
  Geographical
Risks:
  Substantially
all of the Company’s assets and operations were in the PRC for the years ended
December 31, 2008 and 2007. 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.
 F-20