U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

                                   (Mark One)
               [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
                                       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

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

                DELAWARE                                   13-3912047
-------------------------------                       -------------------
(State of other jurisdiction of                         (IRS Employer
 incorporation 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 under Section 12(b) of the Exchange Act:

                              NAME OF EACH EXCHANGE

                     Title of Each Class on Which Registered
                    ----------------------------------------
                                    None None

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:

                         COMMON STOCK, PAR VALUE $.0001
                                (Title of Class)

Check whether the issuer: (1) Filed all reports required to be filed by Section
13 or 14(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company'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. [X]

State issuer's revenues for its most recent fiscal year:  $12,041,588

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) $1,557,632.45 as of April 16, 2007


The number of shares outstanding of the issuer's common stock as of April 16,
2007 was 35,413,850.

Transitional Small Business Disclosure Format (check one):  YES [ ] NO [X]


<PAGE>


                                                      TABLE OF CONTENTS

PART I                                                                      PAGE

ITEM 1.  DESCRIPTION OF BUSINESS                                               1
ITEM 1A. RISK FACTORS                                                          6
ITEM 1B. UNRESOLVED COMMENTS                                                  11
ITEM 2.  DESCRIPTION OF PROPERTIES                                            11
ITEM 3.  LEGAL PROCEEDINGS                                                    11
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                  11

PART II

ITEM 5.  MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS         11
ITEM 6.  MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION            12
ITEM 7.  FINANCIAL STATEMENTS                                                 21
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL  DISCLOSURE                                            21
ITEM 8A. CONTROLS AND PROCEDURES                                              21
ITEM 8B. OTHER INFORMATION                                                    22
ITEM 9:  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS         22

PART III

ITEM 10: EXECUTIVE COMPENSATION.                                              28
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT       30
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.                33



ITEM 13.  EXHIBITS LIST AND REPORTS ON FORM 8-K                               34

ITEM 14:  PRINCIPAL ACCOUNTANT FEES AND SERVICES                              35

EX-31.1

EX-31.2

EX-32.1

EX-32.2

<PAGE>


                           FORWARD LOOKING STATEMENTS

THIS FORM 10-KSB AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY
HANKERSEN INTERNATIONAL CORP. ("HANKERSEN" or the "COMPANY") AND ITS
SUBSIDIARES, XIAN HANXIN SCIENCE AND 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 THE COMPANY'S FORM 10-SB12G, AND ARE HEREBY INCORPORATED HEREIN BY
REFERENCE. THE COMPANY 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.





<PAGE>



                                     PART I

ITEM I. DESCRIPTION OF BUSINESS.

HISTORY

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

BUSINESS OVERVIEW

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.
Hanxin currently owns 4 cork processing technology related patents in China.
Hanxin' s 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 its
objectives, Hanxin hopes to increase its sales and marketing efforts, acquire
other cork exporting companies in China and to establish its own cork
plantation. There can be no assurance that Hanxin will be able to achieve these
objectives.


Hanxin's objective is to utilize the cost advantages of being based in China in
order to become a leading cork processor. In order to achieve its objectives
Hanxin plans to increase its sales and marketing efforts, to seek to acquire
other cork exporting companies in China and to establish its own cork
plantation. There can be no assurance that Hanxin will be able to achieve these
objectives.


                                      -1-
<PAGE>


In 2005, the Company through Hanxin acquired a 75% equity interest of Cork
Import and Export Co. Ltd. ("Cork I&E"), a PRC corporation engages in cork
trading businesses.

PRODUCTS

CORK FLOORING PLANKS

Hanxin produces seven series of cork flooring planks with over 50 different
patterns, colors and granules. Cork floor accounted for approximately 70% of the
Company's revenue in 2006, 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, 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.

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 includes
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 higher than other basic materials and the
customer use it as raw material of cork art crafts.

MARKETING AND GROWTH STRATEGIES

The Company is currently selling its products through its own sales person and
through national and oversea distributors.

o        Domestic market:

         Hanxin's domestic marketing strategies are based on its existing market
channels, whereby it cooperates with local distributors and retail sellers to
create a sales network. Hanxin currently uses its Xian headquarter as the
headquarters of its sales network. It also has sales offices set up in Beijing,
Shanghai and Guangzhou. Hanxin intends to set up two other sales offices within
the central and northeast regions of China to attempt to increase its market
reach and facilitate its day-to-day operations.


                                      -2-
<PAGE>


o        International market:

         Hanxin's products overseas are sold internationally though overseas
distributors and agents. Its products are currently being exported to India, the
United States, Japan, and Germany. In the future, Hanxin intends to further
expand its oversea sales to other Asian and North American markets.
















                                      -3-
<PAGE>


MARKET OPPORTUNITIES AND COMPETITION

MARKET OPPORTUNITIES

Based on a study by the Chinese Floorboard, in 2005the production of wooden
floorboard reached 312 million square meters, an increase of 18% from 2004. The
total revenue of wooden floor is approximately US$ 4.5 billion. The study also
indicates that her the sales growth rate of floorboard increase 15% and 25% over
the next five years. We believe cork tile, a 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.

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 enlarge
the demand of wood flooring including cork flooring.

Cork flooring plank and wallboard has been used as building materials in Europe
for more than a century. Based on a report in July 2004 by the Xi'An Evening
news it is estimated that the demand for cork building material in China in 2004
was ten (10) to fifteen (15) million square meters.

COMPETITION

The Company believes it is currently a leading manufacturer and producer of cork
flooring in China, including technology, in volume of production and in total
sales. The Company produced about 600,000 square meters of cork flooring planks
in 2006 and believes it has approximately 25 % of the current cork wood flooring
market in China.

In term of domestic competition, the Company believes it have several
competitive advantages over its competitors:

o        Proximity to raw material resources

China has about 23% of the world reserves of cork resources, and the Company is
located near the largest China reserve, Mount Qinba, which accounts for more
than half of total bark production in China.

o        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.


                                      -4-
<PAGE>

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 a production process in order to ensure the quality of its
products. Hanxin currently owns 4 cork processing technology related patents in
China.


QUALITY CONTROL

Hanxin places great emphasis on the quality of its products and quality control
system. In Particular:

     o    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)

     o    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)

     o    In Feb. 2005, Hanxin cork floor passed material sound absorption
          testing by Acoustics Research Center from Tong Ji University

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

     o    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.

     o    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

     o    Currently, under the supervision of Professionals team, Hanxin is
          working on ISO9000: 2000 and ISO14001 certifications.

EMPLOYEES

Hanxin has approximately 251 employees. Hanxin believes its relationship with
its employees is good.


                                      -5-
<PAGE>


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
the Company. 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 the Company.

         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.


         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.


                                      -6-
<PAGE>


         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.

         DUE TO VOLATILITY, ANY QUARTER-TO-QUARTER COMPARISONS IN THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY 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 the
Company's 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 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 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.




         THERE IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET OF THE
COMPANY'S SECURITIES AND THERE CAN BE NO ASSURANCE THAT ONE WILL EVER BE
ESTABLISHED.

         There can be no assurances that a market for the Company's common stock
will be established. The Company's common stock will be influenced by a number
of factors relating to Hanxin, including:

     o    the issuance of new equity securities;

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


                                      -7-
<PAGE>


     o    variations in quarterly operating results;

     o    change in financial estimates by securities analysts;

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

     o    investor perceptions of the Company and the technologies industries
          generally;

     o    general economic and other national conditions; and

     O    regulation of the OTCBB


         CONTROL BY PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS.

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

         POSSIBLE NEED FOR ADDITIONAL FINANCING.

         The Company may need additional financing in the future. The ultimate
success of the Company may depend upon its ability to raise additional capital.
The Company has 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 the Company. If not
available, the Company's operations will be limited to those that can be
financed with its modest capital.


         THE COMPANY'S 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.

         The Company's 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.


                                      -8-
<PAGE>


         BROKER-DEALER REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY OF THE
COMPANY'S 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 the Company's 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 the Company's
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 the Company will acquire a favorable
business opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's Common Stock will be increased thereby.

         INDEMNIFICATION OF OFFICERS AND DIRECTORS.

         The Company's Articles of Incorporation and applicable Delaware Law
provide for the indemnification of its 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 the Company. The Company will
also bear the expenses of such litigation for any of its directors, officers,
employees, or agents, upon such person's promise to repay the Company 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 the Company which it will be unable to recoup.


                                      -9-
<PAGE>


         DIRECTOR'S LIABILITY LIMITED.

         The Company's Articles of Incorporation exclude personal liability of
its directors to the Company and its stockholders for monetary damages for
breach of fiduciary duty except in certain specified circumstances. Accordingly,
the Company will have a much more limited right of action against its 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 its officers and directors,
the Company 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 the Company's 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 the Company. In the event the President of 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.

         The Company has not paid dividends on its Common Stock and does not
anticipate paying such dividends in the foreseeable future.

         RULE 144 SALES.

         All 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.


                                      -10-
<PAGE>




ITEM 1B.   UNRESOLVED COMMENTS

         There were no unresolved comments from the Securites and Exchange
Commission during the fiscal year ending December 31, 2006.


ITEM 2.     DESCRIPTION OF PROPERTIES

         Hanxin owns one property in Xi'an, which is for approximately 10,360.3
square meters. It is used for entertainment space, and leased out to unrelated
parties. Hanxin leases an office space about 436 square meters in Xi'an for
approximately $1,676 per month. The lease for this office space expired on
December 31, 2007. Hanxin also leases a parcel of land which is approximately
53,120 square meters and is used as a cork processing plant. The lease fee for
this processing plant is about $1,281 per month, and the lease agreement will
expire on February 28, 2008. We plan to purchase a factory in Xian before year
2008, and the company had deposit part of fund into this plan.


ITEM 3.     LEGAL PROCEEDINGS

         The Company is not currently a party to any material legal proceeding.

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

         None.
                                     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 HKRS.OB Our common stock became eligible for trading on April 6, 2006. As
of March 31, 2007, there were approximately 85 registered holders of record of
our common stock. The following table sets forth the range of high and low bid
information for the period from April 6, 2006 through December 31, 2006.

PERIOD                                                  HIGH BID        LOW BID
--------------------------------------------------------------------------------

2006
Second Quarter (April 6, 2006 through June 30, 2006)       None          None
Third Quarter                                             $.35           $.10
Fourth Quarter                                            $.25           $.10


                                      -11-
<PAGE>



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

         The Company has never declared dividends or paid any cash dividends on
its capital stock. The Company currently intends to retain all future earnings,
if any, for use in the operation and development of its business and, therefore,
does not expect to declare or pay any cash dividends on its Common Stock in the
foreseeable future.

ITEM 6.    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, 2006 and 2005 should be read in
conjunction with the consolidated financial statements, including footnotes.

         OVERVIEW

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

Hanxin is a manufacturing company based in China, which produces cork-building
material sold under the Hanxin brand name. Approximately 75% of Hanxin's sales
in 2006 were to customers in China, with the remaining sales being made to
customers in India, the United States, Germany and Japan. Hanxin currently owns
4 cork processing technology related patents in China.

Hanxin' s 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 its
objectives, Hanxin hopes to increase its sales and marketing efforts, acquire
other cork exporting companies in China and to establish its own cork
plantation. There can be no assurance that Hanxin will be able to achieve these
objectives.

         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.


                                      -12-
<PAGE>


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

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

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

         CRITICAL ACCOUNTING POLICIES

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


                                      -13-
<PAGE>


A summary of significant accounting policies is included in Note 3 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 2 to 35 years. Expenditures for major renewals and betterments that extend
the useful lives of property and equipment are capitalized. Expenditures for
maintenance and repairs are charged to expense as incurred. We review the
carrying value of long-lived assets for impairment at least annually or whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of long-lived assets is measured by
comparison of its carrying amount to the undiscounted cash flows that the asset
or asset group is expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property, if any, exceeds its fair market value.

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

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2006 AS COMPARED TO YEAR ENDED DECEMBER 31, 2005

         REVENUES

         For the year ended December 31, 2006, our revenues were $12,041,588 as
compared to $12,156,152 for the year ended December 31, 2005, a decrease of
$114,564 or approximately 1%. The reason for the decrease is primarily due to
the change of our pricing structure as a result of the change in our applicable
value added tax rate (VAT). As of December 2005, our small taxpayer status ended
and the Company became a general taxpayer for VAT purposes. The Company began to
charge 17% VAT instead of 4% VAT on its invoices to the customers. In order to
stay competitive in the market and with some long term sale contracts signed
with customers, the Company maintains its selling prices and did not shift the
VAT to its customers. The decrease in net revenue was also attributed by the
tightening of our receivable credit policy. The Company limited sales to certain
customers with receivables outstanding exceeding no more than half or one year
depending upon a particular customers' credit limit. This policy reduced sales
on one hand but improved the Company's overall financial position. For the year
ended December 31, 2006, our revenue from cork wood floor and other cork wood
products sales were $366,316 less than the revenue from cork wood floor products
and other cork wood products sales for year ended December 31, 2005. This
decreased amount was offset by additional revenue of $100,099 and $151,653 from
tree skin and cork paper products sales respectively for the year ended December
31, 2006.

                                      -14-
<PAGE>


         COST OF SALES AND GROSS PROFIT

         For the year ended December 31, 2006, cost of sales amounted to
$9,333,361 or 77.51% of net revenues as compared to cost of sales of $7,044,695
or 57.95% of net revenues for the year ended December 31, 2005, a percentage
increase of 19.5% This increase was primarily a result of a price increase in
raw materials, workers' salaries and benefits, patent lease cost, and product
mix. During the year ended December 31, 2006, the Company sold raw material
(tree skins) at lower margins to a business partner. Gross profit for the year
ended December 31, 2006 was $2,708,227 or 22.49% of revenues, as compared to
$5,111,457 or 42.05% of revenues for the year ended December 31, 2005. The
Company is 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, 2006, total operating expenses were $1,926,056
as compared to $2,107,278 for the year ended December 31, 2005, a decrease of
$181,222 or 8.6%.

Included in this decrease were:

* For the year ended December 31, 2006, selling expenses amounted to $1,363,494
as compared to $1,311,619 for the year ended December 31, 2005, an increase of
$51,875 or 4 %. For the year ended December 31, 2006, we experienced an increase
in sales commission expenses of approximately $35,403 and in salary expenses of
approximately $14,819. Another reason for the increase in selling expenses was
the increase in shipping and freight charges of $12,322 for the merchandises
ship out to the clients. The increase was offset by a decrease of $20,204 in
advertising costs.

* For the year ended December 31, 2006, general and administrative expenses were
$562,562 as compared to $795,659 for the year ended December 31, 2005, a
decrease of $233,097 or 29.30%. The decrease in general and administrative costs
were primarily attributable to a $458,025 decrease in business development
consulting fees rent, and other office expenses associated with decreased
operations. The decrease was offset by, a increase of $251,797 employees'
salaries, bonus, employees benefits, directors conference fees, entertainment
fees as well as technical, legal, accounting and professional fees during 2006
in connection with our SEC filings and continued compliance with the provisions
of the Sarbanes-Oxley Act of 2002, including new provisions which will be
effective in year 2007..


         OTHER INCOME (EXPENSE)

For the year ended December 31, 2006, other income amounted to $47,855 as
compared to other expense of $27,890 for the year ended December 31, 2005. Other
income (expense) for the years ended December 31, 2006 and 2005 was associated
with reverse-merger acquisition costs of $0 and $198,059 respectively and rental
income from its entertainment facility.

                                      -15-
<PAGE>


         For the year ended December 31, 2006, net interest income was $50,952
as compared to net interest income of $46,664 for the year ended December 31,
2005, an increase of $4,288. This was attributable to (i) loans made to its
related party DeRong during first nine months of 2006 and (ii) interest income
from bank deposits which increased for the year ended December 31, 2006.



         INCOME TAXES

Income taxes decreased by $348,571 to $133,580 for the year ended December 31,
2006 as opposed to $482,151 for the year ended December 31, 2005. This decrease
was due to lower pre-tax income.

         MINORITY INTEREST

For the year ended December 31, 2006, we reported a minority interest in income
of subsidiary of $63,486 as compared to $220,576 for the year ended December 31,
2005. The minority interest in income of subsidiary is attributable to Hanxin,
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) decreased by $684,008 from $3,321,210 as
of December 31, 2005 to $2,637,202 as of December 31, 2006. The decrease was
primarily due to a decrease in accounts receivable of $303,813 from $2,284,854
at December 31, 2005 to $1,981,041 at December 31, 2006, a decrease in inventory
of $161,482 from $859,656 at December 31, 2005 to $698,174 at December 31, 2006,
and a increase in accrued expenses of $331,646 from $218,930 at December 31,
2005 to $550,576 at December 31, 2006. The decrease in working capital was
primarily due to improved collections of accounts receivable from our clients,
and less inventory carried as of December 31, 2006.

Cash provided by operating activities was $1,270,429 for the year ended December
31, 2006 as compared to $2,036,338 provided for the year ended December 31,
2005. The decrease in cash provided by operating activities for the year ended
December 31, 2006 primarily reflected reduction of net income and increase of
advances to the suppliers for more raw materials purchase in the near future.

Net cash used in investing activities increased to $3,397,162 for the year ended
December 31, 2006 as compared to $2,530,314 for the year ended December 31,
2005. This change was due primarily from the result of a payment of $1,383,888
for construction in process and $1,922,067 for advance to unrelated party to
earn higher interest income in year 2006. This advance had been paid off by this
unrelated party on March 12, 2007. For this advance, we received 1% interest per
month, compare to the loan from the bank, we paid 0.714 and 0.663% per month to
the bank.


                                      -16-
<PAGE>



Financing activities for the year ended December 31, 2006 provided reflecting
$2,027,202 as compared to $42,477 net cash used for the year ended December 31,
2005. This change is primarily attributable to more collection of due from
shareholders and officers and getting more loan from the bank during the year
ended December 31, 2006


OPERATING RISK

(a) Country risk

The Company's revenues are mainly derived from the sale of paper products in the
Peoples Republic of China (PRC). The Company hopes to expand its operations to
countries outside the PRC, however, such expansion has not been commenced and
there are no assurances that the Company will be able to achieve such an
expansion successfully. Therefore, a downturn or stagnation in the economic
environment of the PRC could have a material adverse effect on the Company's
financial condition.

(b) Product risk

In addition to competing with other Chinese companies, the Company 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 the Company will
remain competitive should this occur.

(c) Exchange risk

The Company can not guarantee that the current exchange rate will remain steady,
therefore there is a possibility that the Company 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.

(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, the Company's ability to operate
the PRC subsidiaries could be affected.


                                      -17-
<PAGE>


(e) Key personnel risk

The Company's future success depends on the continued services of executive
management in China. The loss of any of their services would be detrimental to
the Company and could have an adverse effect on business development. The
Company does 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 the Company's revenues is derived via the operations of the Company's
Chinese subsidiaries. Economic, governmental, political, industry and internal
company factors outside of the Company's 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 the Company's products and services and those of the
subsidiaries.

OFF BALANCE SHEET ARRANGEMENTS


Under SEC regulations, we are required to disclose our off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors. An off-balance sheet arrangement means
a transaction, agreement or contractual arrangement to which any entity that is
not consolidated with us is a party, under which we have:

o   Any obligation under certain guarantee contracts;

o Any retained or contingent interest in assets transferred to an unconsolidated
entity or similar arrangement that serves as credit, liquidity or market risk
support to that entity for such assets;

o Any obligation under a contract that would be accounted for as a derivative
instrument, except that it is both indexed to our stock and classified in
stockholder's equity in our statement of financial position; and

o Any obligation arising out of a material variable interest held by us in an
unconsolidated entity that provides financing, liquidity, market risk or credit
risk support to us, or engages in leasing, hedging or research and development
services with us.

As of the date of this report, we do not have any off-balance sheet arrangements
that we are required to disclose pursuant to these regulations. In the ordinary
course of business, we enter into operating lease commitments, purchase
commitments and other contractual obligations. These transactions are recognized
in our financial statements in accordance with generally accepted accounting
principles in the United States.


                                      -18-
<PAGE>


FEDERAL INCOME TAX ASPECTS OF INVESTMENT IN THE COMPANY

         The discussion contained herein has been prepared by the Company 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 affect upon the
Company 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 the Company with respect to the Common Stock will
be characterized as dividends that are taxable as ordinary income to the extent
of the Company's 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 the Company's 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.

         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

         The Company does 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.


                                      -19-
<PAGE>


         The Company does 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, the Company, 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 the Company, 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


                                      -20-
<PAGE>

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

ITEM 7.  FINANCIAL STATEMENTS

SEE "FINANCIAL STATEMENTS" BEGINNING ON PAGE F-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.


ITEM 8A.    CONTROLS AND PROCEDURES

         The Company's Chief Executive Officer and Chief Financial Officer (the
"Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for the Company. The Certifying Officers have
concluded (based on their evaluation of these controls and procedures as of a
date within 90 days of the filing of this report) that the design and operation
of the Company's disclosure controls and procedures (as defined in Rule
13a-14(c) under the Securities Exchange Act of 1934) adequately meet intended
objectives and are effective. As of this date, given the small size of the
Company and its limited operations and over the last year, the Company utilized
a preliminary and basic standard of internal controls and procedures related to
its financial reporting for the period covered by this report. Management is in
the process of developing and adopting new and more stringent controls and
procedures and anticipates such controls and procedures to be in place prior to
the end of fiscal year 2006.

         Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Company reports filed under the Exchange
Act are accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.

         No significant changes were made in the Company's internal controls or
in other factors that could significantly affect those controls subsequent to
the date of the evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.


                                      -21-
<PAGE>


ITEM 8B. OTHER INFORMATION

None.

ITEM 9:  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         The directors and executive officers currently serving the Company are
as follows:


NAME                       AGE                 POSITIONS HELD

Fangshe Zhang              49                Chairman
Pengcheng Chen             31                CEO/Director
Yi Tong                    35                Chief Financial Officer/Director
Yi Zhang                   35                Chief Operating Officer
Pingjun Zhang              58                Chief Technical Officer
Genshe Bai                 47                Director
Shengli Liu                39                Director

         The directors named above will serve until the annual meeting of the
Company's 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 the sole directors and officers of the Company 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, holding more than six patents in
China.

MR. PENGCHENG CHEN, CEO/DIRECTOR

Mr. Chen is the Chief Executive Officer and a director of the Company 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.


                                      -22-
<PAGE>


MR. YI ZHANG, CHIEF OPERATING OFFICER

Mr. Zhang is the Company's 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 From
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

Mr. Tong is the Company's Chief Financial Officer and has worked for Hanxin
since February 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 the Company's Chief Technical Officer 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.

MR. GENSHE BAI, DIRECTOR

Mr. Bai is a director of the Company and has been affiliated with Hanxin 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 the Company 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.

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.


                                      -23-
<PAGE>


INDEMNIFICATION OF OFFICERS AND DIRECTORS

         Article Ninth of the Company's Certificate of Incorporation provides
for indemnification of the Company's officers and directors to the fullest
extent permitted under the General Corporation Law of the State of Delaware
("DGCL").

                  SECTION 145 of the DGCL, as amended, applies to the Company
and the relevant portion of the DGCL provides as follows:

                  145. Indemnification of Officers, Directors, Employees and
Agents; Insurance.

                          (a) A corporation may indemnify any person who was or
                  is a party or is threatened to be made a party to any
                  threatened, pending or completed action, suit or proceeding,
                  whether civil, criminal, administrative or investigative
                  (other than an action by or in the right of the corporation)
                  by reason of the fact that he is or was a director, officer,
                  employee or agent of the corporation, or is or was serving at
                  the request of the corporation as a director, officer,
                  employee or agent of another corporation, partnership, joint
                  venture, trust or other enterprise, against expenses
                  (including attorneys' fees), judgments, fines and amounts paid
                  in settlement actually and reasonably incurred by him in
                  connection with such action, suit or proceeding if he acted in
                  good faith and in a manner he reasonably believed to be in or
                  not opposed to the best interests of the corporation, and,
                  with respect to any criminal action or proceeding, had no
                  reasonable cause to believe his conduct was unlawful. The
                  termination of any action, suit or proceeding by judgment,
                  order, settlement, conviction, or upon a plea of nolo
                  contendere or its equivalent, shall not, of itself, create a
                  presumption that the person did not act in good faith and in a
                  manner which he reasonably believed to be in or not opposed to
                  the best interests of the corporation, and, with respect to
                  any criminal action or proceeding, had reasonable cause to
                  believe that his conduct was unlawful.

                                  (b) A corporation may indemnify any person who
                  was or is a party or is threatened to be made a party to any
                  threatened, pending or completed action or suit by or in the
                  right of the corporation to procure a judgment in its favor by
                  reason of the fact that he is or was a director, officer,
                  employee or agent of the corporation, or is or was serving at
                  the request of the corporation as a director, officer,
                  employee or agent of another corporation, partnership, joint
                  venture, trust or other enterprise against expenses (including
                  attorneys' fees) actually and reasonably incurred by him in
                  connection with the defense or settlement of such action or
                  suit if he acted in good faith and in a manner he reasonably


                                      -24-
<PAGE>

                  believed to be in or not opposed to the best interests of the
                  corporation and except that no indemnification shall be made
                  in respect of any claim, issue or matter as to which such
                  person shall have been adjudged to be liable to the
                  corporation unless and only to the extent that the Court of
                  Chancery or the court in which such action or suit was brought
                  shall determine upon application that, despite the
                  adjudication of liability but in view of all the circumstances
                  of the case, such person is fairly and reasonably entitled to
                  indemnity for such expenses which the Court of Chancery or
                  such other court shall deem proper.

                          (c) To the extent that a director, officer, employee
                  or agent of a corporation has been successful on the merits or
                  otherwise in defense of any action, suit or proceeding
                  referred to in subsections (a) and (b) of this section, or in
                  defense of any claim, issue or matter therein, he shall be
                  indemnified against expenses (including attorneys' fees)
                  actually and reasonably incurred by him in connection
                  therewith.

                          (d) Any indemnification under subsections (a) and (b)
                  of this section (unless ordered by a court) shall be made by
                  the corporation only as authorized in the specific case upon a
                  determination that indemnification of the director, officer,
                  employee or agent is proper in the circumstances because he
                  has met the applicable standard of conduct set forth in
                  subsections (a) and (b) of this section. Such determination
                  shall be made (1) by the Board of Directors by a majority vote
                  of a quorum consisting of directors who were not parties to
                  such action, suit or proceeding, or (2) if such a quorum is
                  not obtainable, or, even if obtainable a quorum of
                  disinterested directors so directs, by independent legal
                  counsel in a written opinion, or (3) by the stockholders.

                          (e) Expenses (including attorneys' fees) incurred by
                  an officer or director in defending any civil, criminal,
                  administrative or investigative action, suit or proceeding may
                  be paid by the corporation in advance of the final disposition
                  of such action, suit or proceeding upon receipt of an
                  undertaking by or on behalf of such director or officer to
                  repay such amount if it shall ultimately be determined that he
                  is not entitled to be indemnified by the corporation as
                  authorized in this section. Such expenses (including
                  attorneys' fees) incurred by other employees and agents may be
                  so paid upon such terms and conditions, if any, as the board
                  of directors deems appropriate.


                                      -25-
<PAGE>


                          (f) The indemnification and advancement of expenses
                  provided by, or granted pursuant to, the other subsections of
                  this section shall not be deemed exclusive of any other rights
                  to which those seeking indemnification or advancement of
                  expenses may be entitled under any by-law, agreement, vote of
                  stockholders or disinterested directors or otherwise, both as
                  to action in his official capacity and as to action in another
                  capacity while holding such office.

                          (g) A corporation shall have power to purchase and
                  maintain insurance on behalf of any person who is or was a
                  director, officer, employee or agent of the corporation, or is
                  or was serving at the request of the corporation as a
                  director, officer, employee or agent of another corporation,
                  partnership, joint venture, trust or other enterprise against
                  any liability asserted against him and incurred by him in any
                  such capacity, or arising out of his status as such, whether
                  or not the corporation would have the power to indemnify him
                  against such liability under this section.

                          (h) For purposes of this section, references to "the
                  corporation" shall include, in addition to the resulting
                  corporation, any constituent corporation (including any
                  constituent of a constituent) absorbed in a consolidation or
                  merger which, if its separate existence had continued, would
                  have had power and authority to indemnify its directors,
                  officer and employees or agents, so that any person who is or
                  was a director, officer, employee or agent of such constituent
                  corporation, or is or was serving at the request of such
                  constituent corporation as a director, officer, employee or
                  agent of another corporation, partnership, joint venture,
                  trust or other enterprise, shall stand in the same position
                  under this section with respect to the resulting or surviving
                  corporation as he would have with respect to such constituent
                  corporation if its separate existence had continued.

                          (i) For purpose of this section, references to "other
                  enterprises" shall include employee benefit plans; references
                  to "fines" shall include any excise taxes assessed on a person
                  with respect to any employee benefit plan; and references to
                  "serving at the request of the corporation" shall include any
                  service as a director, officer, employee or agent of the
                  corporation which imposes duties on, or involves services by,
                  such director, officer, employee, or agent with respect to an


                                      -26-
<PAGE>

                  employee benefit plan, its participants, or beneficiaries; and
                  a person who acted in good faith and in a manner he reasonably
                  believed to be in the interest of the participants and
                  beneficiaries of an employee benefit plan shall be deemed to
                  have acted in a manner "not opposed to the best interests of
                  the corporation" as referred to in this section.

                          (j) The indemnification and advancement of expenses
                  provided by, or granted pursuant to, this section shall,
                  unless otherwise provided when authorized or ratified,
                  continue as to a person who has ceased to be a director,
                  officer, employee or agent and shall inure to the benefit of
                  the heirs, executors and administrators of such a person.

         Insofar as indemnification for liabilities arising under the Securities
Act of 1933, may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.

CONFLICTS OF INTEREST

         There is no procedure in place which would allow the Company's
management to resolve potential conflicts in an arms-length fashion.
Accordingly, they will be required to use their discretion to resolve them in a
manner which they consider appropriate.




                                      -27-
<PAGE>


                                                     PART III


ITEM 10:     EXECUTIVE COMPENSATION.

The following table discloses executive compensation received for the fiscal
year ended December 31, 2006 as well as the preceding two years.
<TABLE>
<CAPTION>


                                                 SUMMARY COMPENSATION TABLE

                                                                         LONG-TERM
                                        ANNUAL COMPENSATION          COMPENSATION AWARDS
                                        -------------------          -------------------
                                                                   RESTRICTED SECURITIES
NAME AND                                                              STOCK    UNDERLYING      TOTAL
PRINCIPAL POSITION        YEAR         SALARY         BONUS           AWARD     OPTIONS     COMPENSATION
--------------------------------------------------------------------------------------------------------
<S>                       <C>          <C>            <C>            <C>        <C>       <C>
Fangshe Zhang,            2006         $3,972         $3,844         $  -0-     $  -0-         $7,816
Chairman                  2005         $2,833         $2,478         $  -0-     $  -0-         $5,311

Pengcheng Chen,           2006         $5,766         $3,844         $  -0-     $  -0-         $9,610
Chief Executive Officer   2005         $2,777         $2,478         $  -0-     $  -0-         $5,255


Yin Tong,                 2006         $3,588         $3,588         $  -0-     $  -0-         $7,176
Chief Financial Officer   2005         $2,409         $1,983         $  -0-     $  -0-         $4,392


Yi Zhang,                 2006         $3,588         $3,203         $  -0-     $  -0-         $  -0-
Chief Operating Officer   2005         $2,465         $1,983         $  -0-     $  -0-         $4,448


Pingjun Zhang,            2006         $3,306         $3,203         $  -0-     $  -0-         $6,509
Chief Technical Officer   2005         $2,229         $1,859         $  -0-     $  -0-         $4,088
--------------------------------------------------------------------------------------------------------

</TABLE>




                                      -28-
<PAGE>


ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth as of April 16, 2007, information with
respect to the beneficial ownership of the Company's outstanding Common Stock by
(i) each director and executive officer of the Company, (ii) all directors and
executive officers of the Company as a group, and (iii) each shareholder who was
known by the Company to be the beneficial owner of more than 5% of the Company's
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 35,413,850 shares
outstanding.

Title     Name and Address                              Number of        Percent
of         of Beneficial                                shares held by   of
Class     Owner of Shares        Position               Owner            Class
--------------------------------------------------------------------------------
Common   Pengcheng Chen(1)      CEO/Director            11,361,458(1)    32.08%

Common   Fangshe Zhang(2)       Chairman                 9,892,097(2)    27.93%

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 &                           21,253,555       60.01%
         Directors as a Group
--------------------------------------------------------------------------------

(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) 9,981,458 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) 8,692,097 shares of common stock issued from the conversion 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 the Company and
complies with all applicable federal and state securities rules and regulations.


                                      -29-
<PAGE>


LONG TERM EQUITY COMPENSATION PLAN

         On September 30, 2005, shareholders owning a majority of the Company's
Common Stock approved, adopted and ratified the Company's Long Term Equity
Compensation Plan (the "Plan") in order to optimize the Company's 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. The Company believes 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.

         The Company's 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.


                                      -30-
<PAGE>


         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.

         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.


                                      -31-
<PAGE>


         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 12.    CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.


         As of December 31, 2006, amounts due to stockholder/officer are
unsecured, non-interest bearing and due on demand. The total net amount due to
the stockholder/officer was $121,684 which represented the net amount lent by
officers to the Company.
















                                      -32-
<PAGE>

                                     PART IV

ITEM 13.     EXHIBITS LIST AND REPORTS ON FORM 8-K.

(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 the Company 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 the Company,
        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. ****

20.     Information Statement filed with the Securities and Exchange Commission
        on August 26, 2004 *****

21      Subsidiaries of the Company: (i) Kushi Sub, Inc; (ii) Xi'An Cork
        Investments Consultative Management Co.; and (iii) Hanxin Science and
        Technology 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 **


                                      -33-
<PAGE>


*       Incorporated by reference to the like numbered exhibit to the Company's
        Registration Statement on Form 10-SB.

**      Filed herewith

***     Incorporated by reference to the Company's report on Form 8-K filed on
        August 9, 2005.

****    Incorporated by reference to the Company's report on Form 8-K/A filed on
        January 18, 2006.

*****   Incorporated by reference to the Company's Information Statement on
        Schedule 14-C filed on October 18, 2005 (Preliminary) and November 8,
        2005 (Definitive).

(b)      REPORTS ON FORM 8-K:

None.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES


We paid or accrued an aggregate of approximately $60,000 in fees for
professional services rendered by MS Group CPA LLC in connection with the
preparation of our Quarterly Reports and audit of our financial statements for
the fiscal year ending December 31, 2006.



                                      -34-
<PAGE>



                                   SIGNATURES

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

                                        HANKERSEN INTERNATIONAL CORP.

                                        BY: /S/ PENGCHENG CHEN
                                        ---------------------------------
                                        Pengcheng Chen, Chief Executive Officer

DATE:  April 13, 2007

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

NAME                            TITLE(S)                                    DATE

/s/ Fangshe Zhang               Chairman                         April 13, 2007
-----------------------
Fangshe Zhang

/s/ Pengcheng Chen              Chief Executive Officer/         April 13, 2007
-----------------------         Director
Pengcheng Chen

/s/ Yi Tong                                                      April 13, 2007
-----------------------         Chief Financial Officer/
Yi Tong                         Director

/s/ Yi Zhang                                                     April 13, 2007
-----------------------         Chief Operating Officer
Yi Zhang

/s/ Pingjun Zhang
-----------------------         Chief Technical Officer          April 13, 2007
Pingjun Zhang

/s/ Genshe Bai
-----------------------         Director                         April 13, 2007
Genshe Bai

/s/ Shengli Liu
-----------------------         Director                         April 13, 2007
Shengli Liu


                                      -35-
<PAGE>



CONTENTS                                                                   PAGE

Report of Independent Registered Public Accounting Firm                      F-2
Consolidated Financial Statements
    Consolidated Balance Sheets                                              F-3
    Consolidated Statements of Operations                                    F-4
    Consolidated Statements of Stockholders' Equity                          F-5
    Consolidated Statements of Cash Flows                                    F-6
    Notes to Consolidated Financial Statements                       F-7 to F-17











                                      F-1
<PAGE>



             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Stockholders
Hankersen International Corp. (f/k/a Kushi Natural Foods Corp.)

We have audited the accompanying consolidated balance sheets of Hankersen
International Corp. (f/k/a Kushi Natural Foods Corp.) as of December 31, 2006
and 2005 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

We conducted our audit in accordance with 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
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit 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 Hankersen
International Corp. (f/k/a Kushi Natural Foods Corp.) as of December 31, 2006
and 2005, and the results of its consolidated operations, changes in
stockholders' equity, and cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.


MS Group CPA LLC
Edison New Jersey
February 14, 2007





                                      F-2
<PAGE>


<TABLE>
<CAPTION>

HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS

                                                              December 31,
                                                      --------------------------
Assets                                                     2006           2005
Current Assets:
<S>                                                   <C>            <C>
  Cash and equivalents                                $   564,733    $   574,774
  Accounts receivable, net of allowance for
    doubtful accounts of $9,955 and
    $16,995, respectively                               1,981,041      2,284,854
  Inventories                                             698,174        859,656
  Due from stockholders/officers                             --        1,380,292
  Loan to related party                                      --          978,910
  Advance to unrelated party                            1,922,067           --
  Advance to suppliers                                  1,488,089        962,678
  Prepayments and other current assets                     40,964         65,211
                                                      -----------    -----------
    Total Current Assets                                6,695,068      7,849,851

  Property and Equipment - Net                          2,207,104      2,365,014
  Deposit for Purchase of Fixed Assets                  1,793,929        743,476
  Construction in Progress                              1,383,888           --
  Investment - At Cost                                  1,793,929      1,734,777
  Land Use Right - Net                                    155,018        154,221
                                                      -----------    -----------

    Total Assets                                       14,028,936     12,103,863
                                                      ===========    ===========

Liabilities and Stockholders' Equity
Current Liabilities:
  Accounts payable                                         56,170        179,144
  Accrued expenses                                        550,576        218,930
  Loan payable                                            896,964        371,738
  Taxes payable                                           284,221        164,854
  Due to stockholders/officers                            121,684           --
  Other current liabilities                                10,263        147,393
                                                      -----------    -----------
  Total Current Liabilities                             1,919,878      1,082,059

Minority Interest                                       1,364,083      1,300,597

Stockholders' Equity
  Series A preferred stock, $0.0001 par value,
    5,000,000 shares authorized,
    0 and 1,000 shares issued and
    outstanding, respectively                                --                1
  Common stock, $0.0001 par value,
    200,000,000 shares authorized,
    35,413,850 and 5,764,786 shares issued
    and outstanding, respectively                           3,541            577
  Additional paid-in capital                            4,396,772      4,399,735
  Reserve funds                                         1,432,992      1,330,756
  Retained earnings                                     4,276,312      3,745,588
  Accumulated other comprehensives income                 635,358        244,550
                                                      -----------    -----------

    Total Stockholders' Equity                         10,744,975      9,721,207
                                                      -----------    -----------

    Total Liabilities and Stockholders' Equity        $14,028,936    $12,103,863
                                                      ===========    ===========

See notes to consolidated financial statements.
</TABLE>


                                      F-3
<PAGE>

<TABLE>
<CAPTION>

HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
                                                   For Years Ended December 31,
                                                  ------------------------------
                                                       2006             2005
                                                  ------------     ------------

<S>                                               <C>              <C>
Revenues                                          $ 12,041,588     $ 12,156,152

Cost of Goods Sold                                   9,333,361        7,044,695
                                                  ------------     ------------
Gross Profit                                         2,708,227        5,111,457

Operating Expenses
  Selling expenses                                   1,363,494        1,311,619
  General and administrative expense                   562,562          795,659
                                                  ------------     ------------
Total Operating Expenses                             1,926,056        2,107,278
                                                  ------------     ------------
Income From Operations                                 782,171        3,004,179
                                                  ------------     ------------
Other Income (Expense)
  Interest income, net                                  50,952           46,664
  Other income (expense), net                           68,618          (51,666)
  Loss on fix assets disposal                          (71,715)         (22,888)
                                                  ------------     ------------
Total Other Income (Expense)                            47,855          (27,890)

Income Before Taxes and Minority Interest              830,026        2,976,289

Income Tax Provision                                   133,580          482,151
                                                  ------------     ------------
Income Before Minority Interest                        696,446        2,494,138

Minority Interest                                       63,486          220,576
                                                  ------------     ------------
Net Income                                        $    632,960     $  2,273,562

Other Comprehensive Income:
Foreign Currency Translation Gain                      390,808          244,550
                                                  ------------     ------------
Comprehensive Income                              $  1,023,768     $  2,518,112
                                                  ============     ============
Net Income Per Common Share
  - Basic                                         $       0.04     $       0.39
                                                  ============     ============
  - Diluted:                                      $       0.02     $       0.32
                                                  ============     ============

Weighted Common Shares Outstanding*
  - Basic                                           15,660,645        5,764,786
                                                  ============     ============
  - Diluted:                                        35,413,850        7,140,200
                                                  ============     ============

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

See notes to consolidated financial statements.
</TABLE>


                                      F-4
<PAGE>
<TABLE>
<CAPTION>


HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005


                                Series A Preferred
                                      Stock                           Common Stock,
                             -----------------------         ---------------------------         Additional
                              No. of                             No. of                           Paid-in          Reserve
                              Shares          Amount             Shares         Amount            Capital           Fund
                             -----------------------------------------------------------------------------------------------
<S>                        <C>            <C>               <C>              <C>               <C>              <C>
Balance,
  January 1, 2005               --         $      --              50,000      $    50,000      $ 4,350,313       $   918,501

Recapitalization                                                 (50,000)         (50,000)           50,000

Merger with Hanxin             1,000                 1        34,588,718            3,459           (3,460)
International

Reverse stock split                                          (28,823,932)          (2,882)           2,882

Net income

Appropriation of
Reserve funds                                                                                                        412,255

Foreign currency
  translation                   --                --                --               --                                 --
                             -----------------------------------------------------------------------------------------------

Balance,
 December 31, 2005             1,000       $         1         5,764,786      $       577      $ 4,399,735       $ 1,330,756

Conversion of Series A
Preferred Stock               (1,000)               (1)       29,649,064            2,964           (2,963)

Net income

Appropriation of
Reserve funds                                                                                                        102,236

Foreign currency
 translation                    --                --                --               --               --                --
                             -----------------------------------------------------------------------------------------------
Balance,
 December 31, 2006              --         $      --          35,413,850      $     3,541      $ 4,396,772       $ 1,432,992
                             ===============================================================================================


                                                    Other              Total
                             Retained           Comprehensive       Shareholders'
                             Earnings              Income              Equity
                            ----------------------------------------------------
Balance,
  January 1, 2005           $ 1,884,281         $      --           $ 7,203,095

Recapitalization                                                          --

Merger with Hanxin
International                                                             --

Reverse stock split                                                       --

Net income                    2,273,562                               2,273,562

Appropriation of
Reserve funds                  (412,255)                                  --

Foreign currency
  translation                      --               244,550             244,550
                            ----------------------------------------------------
Balance,
 December 31, 2005          $ 3,745,588         $   244,550         $ 9,721,207

Conversion of Series A
Preferred Stock                                                           --

Net income                      632,960                                 632,960

Appropriation of
Reserve funds                  (102,236)                                  --

Foreign currency
 translation                       --               390,808             390,808
                            ----------------------------------------------------
Balance,
 December 31, 2006          $ 4,276,312         $   635,358         $10,744,975
                            ====================================================


See notes to consolidated financial statements.
</TABLE>


                                      F-5
<PAGE>
<TABLE>
<CAPTION>


HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                         For Years Ended December 31,
                                                         ----------------------------
                                                            2006            2005

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                      <C>            <C>
NET INCOME                                               $   632,960    $ 2,273,562
Adjustments to Reconcile Net Income to Net Cash
  Provided by Operating Activities
    Depreciation and amortization                            238,184        232,042
    Bad debt adjutment                                        (7,459)           369
    Loss on disposal of fixed assets                          71,715         22,888
    Minority interest                                         63,486        214,948
    Changes in operating assets and liabilities:
      Accounts receivable                                    376,593         43,381
      Inventories                                            184,503       (158,906)
      Advance to suppliers                                  (476,344)     1,244,270
      Prepayments and other current assets                    25,598       (571,884)
      Accounts payable and accrued expenses                  188,666       (747,183)
      Customer deposits                                         --          (22,954)
      Taxes payable                                          109,995       (575,402)
      Other current liabilities                             (137,468)        81,207
                                                         -----------    -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                  1,270,429      2,036,338
                                                         -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Payment for the deposit for purchase of fixed assets      (991,301)          --
  Payment for purchase of equipment                           (8,339)       (48,742)
  Payment for machinery improvement                          (70,476)
  Payment for construction in progress                    (1,383,888)          --
  Long term investment at cost                                  --       (1,734,777)
  Investment in subsidiary                                      --         (746,795)
  Proceeds from repayment of loan to related party           978,910           --
  Advance to unrelated party                              (1,922,067)
                                                         -----------    -----------
NET CASH USED IN INVESTING ACTIVITIES                     (3,397,162)    (2,530,314)
                                                         -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from short-term loan                              896,964        362,424
  Payment of short-term loan                                (371,738)        (5,182)
  Payment on long-term debt                                     --          (14,920)
  Payments to stockholders/officers                          (33,664)    (1,615,984)
  Receipts from stockholders/officers                      1,535,640      1,316,139
                                                         -----------    -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                  2,027,202         42,477
                                                         -----------    -----------

Net Decrease in Cash and Equivalents                         (99,531)      (451,499)
Effect of Exchange Rate Changes on Cash                       89,490         14,401
Cash and Equivalents at Beginning of Period                  574,774      1,011,872
                                                         -----------    -----------

Cash and Equivalents at End of Period                    $   564,733    $   574,774
                                                         ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Interest paid                                          $    22,821    $    19,407
                                                         ===========    ===========
  Income taxes paid                                      $   167,158    $      --
                                                         ===========    ===========

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
  Long-term debt released for building transfer out      $      --      $   (41,432)
                                                         ===========    ===========
  Fix assets transferred out for reward                  $     5,249    $      --
                                                         ===========    ===========

See notes to consolidated financial statements.
</TABLE>



                                      F-6
<PAGE>




HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

1.       ORGANIZATION AND PRINCIPAL ACTIVITIES

Hankersen International Corp. (f/k/a Kushi Natural Foods 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.

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

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

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.

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.

In fiscal 2005, the Company through Hanxin acquired 75% equity interest of Cork
Import and Export Co. Ltd. ("Cork I&E"), a PRC corporation engages in cork
trading businesses.



                                      F-7
<PAGE>


2.       BASIS 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 Hankersen
International Corp. 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.

3. 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
collectibility is reasonably assured. Persuasive evidence of an arrangement is
demonstrated via purchase order from distributor, our customers, product
delivery is evidenced by warehouse shipping log as well as signed bill of lading
from the trucking company and no product return is allowed except defective or
damaged products, the sales price to the customer is fixed upon acceptance of
purchase order, there is no separate sales rebate, discounts, and volume
incentives.


ADVERTISING COSTS

Advertising costs are booked as expenses as incurred. The Company incurred
$43,902 and $64,106 for the years ended December 31, 2006 and 2005,
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 $658and $2,316 for the
years ended December 31, 2006 and 2005, respectively.


                                      F-8
<PAGE>



CASH AND EQUIVALENTS

The Company considers all highly liquid temporary cash investments with an
original maturity of three months or less 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.

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.


                                      F-9
<PAGE>


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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheet for cash, accounts
receivable, inventories, advance to unrelated party, advance 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 loan
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, 2006.

INCOME TAXES

The Company and its U. S. subsidiary will file consolidated federal and state
income tax returns. 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.


                                      F-10
<PAGE>


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 September 2006, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 157, "Fair Value Measurements," which provides enhanced guidance for using
fair value to measure assets and liabilities. SFAS No. 157 provides a common
definition of fair value and establishes a framework to make the measurement of
fair value in generally accepted accounting principles more consistent and
comparable. SFAS No. 157 also requires expanded disclosures to provide
information about the extent to which fair value is used to measure assets and
liabilities, the methods and assumptions used to measure fair value, and the
effect of fair value measures on earnings. SFAS No. 157 is effective for
financial statements issued in fiscal years beginning after November 15, 2007
and to interim periods within those fiscal years. The Company is currently in
the process of evaluating the effect, if any, the adoption of SFAS No. 157 will
have on its consolidated results of operations, financial position, or cash
flows.

In September 2006, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial
Statements". SAB No. 108 was issued in order to eliminate the diversity in
practice surrounding how public companies quantify financial statement
misstatements. SAB No. 108 requires that registrants quantify errors using both
a balance sheet (iron curtain) approach and an income statement (rollover)
approach, then evaluate whether either approach results in a misstated amount
that, when all relevant quantitative and qualitative factors are considered, is
material. SAB No. 108 is effective for fiscal years ending after November 15,
2006. The Company has adopted the bulletin during 2006. The adoption did not
have a material effect on the consolidated results of operations, financial
position, or cash flows.

In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" ("FIN
48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in a company's financial statements in accordance with FAS 109, "Accounting for
Income Taxes". FIN 48 prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognizing, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The requirements of FIN 48 are
effective beginning January 1, 2007.



                                      F-11
<PAGE>



4.       INVENTORIES

Inventories at December 31, 2006 and 2005 consisted of the following:

                                          2006            2005
                                          ----            ----

    Raw material                          $ 377,890       $ 629,492
    Working in progress                     121,153          85,967
    Finished goods                          185,697         120,374
    Packaging and other                      13,434          23,823
                                         -----------    ------------
                      Total               $ 698,174       $ 859,656
                                         ===========    ============



5.       DUE FROM / TO STOCKHOLDERS/OFFICERS

Amounts due from a stockholder/officer are unsecured, non-interest bearing and
due on demand. As of December 31, 2005, the total net amount due from the
stockholder/officer was $1,380,292, which included $106,660 lent by officers to
the Company and a $1,486,952 prepayment to the officer for a potential
acquisition of a patent right owned by him. The purchase was subsequently
canceled and the full amount was returned to the Company on April 25, 2006.

As of December 31, 2006, amounts due to stockholder/officer are unsecured,
non-interest bearing and due on demand. The total net amount due to the
stockholder/officer was $121,684 which represented the net amount lent by
officers to the Company.


6.       INVESTMENT AND LOAN TO RELATED PARTY (INVESTEE)

On June 28, 2005, the Company purchased 12% equity interest of Shaanxi DeRong
Technology Information Development Co. Ltd. ("DeRong"), a PRC corporation, for
$1,793,929 (equivalent to RMB 14,000,000). DeRong owns a cork tree forest
plantation in China. The investment is for long term and is stated at cost.

During fiscal 2005, the Company also advanced to DeRong $978,910 (equivalent to
RMB 7,900,000). The amount is unsecured and interest at minimum rate of bank
loan. The principal was fully paid off by DeRong on September 7, 2006.


                                      F-12
<PAGE>


7.       ADVANCE TO UNRELATED PARTY

On November 27, 2006, the Company advanced a three months loan $1,922,067
(equivalent to RMB15,000,000) to an unrelated party. The interest rate for this
advance is 1% per month, and the principal $1,025,102 (equivalent to
RMB8,000,000) was paid to the Company on February 28, 2007, and the rest
principal $896,965 (equivalent to RMB7,000,000) was paid to the Company on March
12, 2007.

8.       PROPERTY AND EQUIPMENT

On December 31, 2006 and 2005, property and equipment consisted of the
following:

                                     ESTIMATED LIFE        2006          2005
                                     --------------        ----          ----

    Buildings and improvement            27 - 35       $1,807,843     $1,748,233
    Manufacturing equipment                1-8          1,115,102      1,119,687
    Office furniture and equipment          5              25,765         77,470
    Vehicle                                2-8             10,951         18,590
    Machinery improvement                   3              70,476              -
                                                      ------------   -----------
                    Subtotal                            3,030,137      2,963,980
    Less: Accumulated depreciation                        823,033        598,966
                                                      ------------   -----------
                     Total                             $2,207,104     $2,365,014
                                                      ============   ===========

For the years ended December 31, 2006 and 2005, depreciation expenses amounted
to $233,817 and $227,793, respectively. Loss on disposal of fixed assets for the
years ended December 31, 2006 and 2005 was$71,715 and $22,888, respectively.

9.       DEPOSIT FOR PURCHASE OF FIXED ASSETS

The Company intends to purchase certain factory facilities from an unrelated
company without disclosing its own identity. The purchase was arranged through
an agent. $743,476 (equivalent to RMB 6,000,000) deposit was paid to the agent
as of December 31, 2005 and $1,793,929 (equivalent to RMB 14,000,000) was paid
to the agent as of the year ended December 31, 2006. The agency agreement has no
firm commitment on the purchase but it states a maximum price the Company is
willing to pay for the fixed assets. The deposit is fully refundable if the
purchase did not go through.



                                      F-13
<PAGE>





10.      LAND USE RIGHT

The Company purchased the right to use a parcel of land for 40 years on
September 27, 2001. The purchase price is being amortized over the term of the
right. At December 31, 2006 and 2005, land use right at cost, less accumulated
amortization consisted of the following:


                                                2006              2005
                                                ----              ----

    Land use right                               $ 178,437         $ 172,554
    Less: Accumulated amortization                  23,419            18,333
                                             --------------    --------------
                     Total                       $ 155,018         $ 154,221
                                             ==============    ==============


For the years ended December 31, 2006 and 2005, amortization expense amounted to
$4,367and $4,249, respectively.

The amortization expense for the next five years is as follows:

    2007                                            $4,367
    2008                                             4,367
    2009                                             4,367
    2010                                             4,367
    2011                                             4,367


11.      LOAN PAYABLE

Loan payable as of December 31, 2006 and 2005 consisted of the following:
<TABLE>
<CAPTION>

                                                                                         2006             2005
                                                                                     -------------    -------------
<S>                                                                               <C>                <C>
On May 13, 2005, the Company obtained a short-term loan $371,738 (equivalent to
RMB3,000,000) from Xian Commercial bank by pledging certain building and land
use right with the bank. The loan interest is 9.486% per annum, and the
principal was fully paid off to the bank on May 22, 2006.
                                                                                     $        --      $    371,738

On October 26, 2006, the Company obtained a short-term loan $627,875 (equivalent
to RMB4,900,000) from Xian Lan Hu Valley Trust Bank by pledging the Company's
building in YuLerYuan with bank. The loan interest is 0.714%per month. On
November 15, 2006, the Company had paid principal $115,324 (equivalent to
RMB900,000) back to bank, and the balance of loan $512,551 (equivalent to
RMB4,000,000) is due October 26, 2007.

                                                                                           512,551            --

On December 15, 2006, the Company obtained a short-term loan $384,413
(equivalent to RMB3,000,000) from Hua Xia Bank Xian Branch by pledging the
Company's land use right in YuLerYuan with bank. The loan interest is 7.956% per
year and the principal is due December 15, 2007.
                                                                                           384,413            --
                                                                                     -------------    -------------

                               Total Loan Payable                                    $     896,964    $    371,738
                                                                                     =============    =============
</TABLE>

                                      F-14
<PAGE>



12.      INCOME AND OTHER TAXES

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

Per PRC Income Tax Law, any new foreign fully owned corporation is exempt from
income tax for the first two years, and 50% exemption of income tax for the next
three years for non high-tech corporation or 15% tax rate for corporation
qualified by State Science and Technology Commission as "High Tech corporation"
located in State "High Tech Zone" approved by China State Council. Hanxin is
qualified as a High Tech corporation. Based on this regulation, Hanxin was
exempt from income tax in year 2003 and 2004 and its income is subject to 15%
tax starting from January 1, 2005. Cork I&E is subject to 33% tax, since it does
not locate in "High Tech Zone".

At December 31, 2006 and 2005, taxes payable consisted the following:

                                                 2006               2005
                                                 ----               ----

    Value-added tax                               $238,207           $94,852
    Corporate income tax provision                  29,246            61,432
    Individual withholding payroll tax                   -             1,349
    Local taxes and surcharges                      16,768             7,221
                                               ------------   ---------------
                                                  $284,221         $ 164,854
                                               ============   ===============


13.      STOCKHOLDERS EQUITY

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


                                      F-15
<PAGE>


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. As a result, the total issued and outstanding shares of the
Company's common stock were 35,413,850 as of December 31, 2006.

All net income per share amounts has been restated to reflect the reverse stock
split.

14.      LEASE COMMITMENTS

The Company leases its office space and land under operating lease agreements
that are originally expired in November 2006 and February 2007 had been extended
to December 31, 2007 and February 28, 2008. The future minimum rental and
property maintenance payments as of December 31, 2006 are as follows:


    2007                                           $36,250
    2008                                             2,508
                                            ---------------
                                                   $38,758
                                            ===============

Rent and properties maintenance expenses amounted to $36,370 and $56,320 for the
years ended December 31, 2006 and 2005, respectively.

The Company also leases three patent rights from its Chairman, Mr. Fang She
Zhang, under operating lease agreements that expire on April 16, 2011. The
following is a schedule of future minimum rental payments required under these
operating leases that have remaining lease terms in excesses of one year as of
December 31, 2006.

          Year Ending December 31,
                    2007                      $   301,042
                    2008                          301,042
                    2009                          301,042
                    2010                           88,640
                                              ------------
       Total minimum payments required        $   991,766
                                              ============


                                      F-16
<PAGE>


Patent lease expenses amounted to $212,402 and $0 for the years ended December
31, 2006 and 2005, respectively.


15.      FOREIGN SUBSIDIARIES

OPERATIONS

Substantially all of the Companies' operations are carried out through its
subsidiary located in the PRC. Accordingly, the Companies' business, financial
condition and results of operations may be influenced by the political, economic
and legal environments in the PRC. The Companies' business may be influenced by
changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency fluctuation and remittances and methods of
taxation, among other things.

DIVIDENDS AND RESERVES

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 tax, 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, 2006, the Company's PRC subsidiaries established and
segregated in retained earnings an aggregate amount of $1,432,992 for the
Statutory Surplus Reserve and the Statutory Common Welfare Fund.




                                      F-17