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, 2005
                                       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.)

                              (011) 86-13301996766
                              --------------------
                (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: $12,156,152.

The aggregate market value of the voting stock held by non-affiliates computed
by reference to the lack of average bid and asked prices of such stock on May
12, 2006 was $0.00 as the voting stock is not listed or quoted on any national
exchange or quotation service. The number of shares outstanding of the issuer's
common stock as of May 12, 2006 was 5,764,786. 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                                                       5
ITEM 1B.    UNRESOLVED COMMENTS                                               10
ITEM 2.     DESCRIPTION OF PROPERTIES                                         10
            LEGAL PROCEEDINGS                                                 10
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
            FINANCIAL STATEMENTS                                              22
ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURE                                          22
ITEM 8A.    CONTROLS AND PROCEDURES                                           23
ITEM 9:     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,     24

PART III

ITEM 10:    EXECUTIVE COMPENSATION                                            30
ITEM 11:    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT    32
ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.             35

PART IV

ITEM 13:    EXHIBITS LIST AND REPORTS ON FORM 8-K; SIGNATURES; INDEX TO
            FINANCIAL STATEMENTS                                              36
ITEM 14:    PRINCIPAL ACCOUNTANT FEES AND SERVICES                            37

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 OF THE COMPANY

      The Company was incorporated under the laws of the State of Delaware on
August 1, 1996. The Company was formed in connection with the merger acquisition
of Kushi Macrobiotics Corp. ("KMC") with American Phoenix Group, Inc. ("APGI")
in 1996. Prior to such acquisition, KMC had operated a business of marketing a
line of natural foods (the "Kushi Cuisine"). This business was not successful
and management determined that it would be in the shareholder's interest for KMC
to operate a different business. In the APGI reverse merger, the shareholders of
APGI became the owners of 85% of the shares of KMC, which changed its name to
American Phoenix Group, Inc. As a condition to the merger, KMC was required to
divest itself of all assets related to the Kushi Cuisine business. This
divestiture was affected by transferring all of the assets related to the Kushi
Cuisine business, principally inventory and receivables, and approximately
$115,000 to a newly formed entity, the Company, and spinning off the shares of
the Company to the KMC shareholders on a three for one basis simultaneously with
the consummation of the KMC merger with APGI. The Kushi Cuisine assets and a
portion of the cash were contributed to a joint venture which failed and the
Company lost its investment therein of approximately $42,000.

      As a result of the failed business, the Company had no operations and its
business plan became to seek, investigate, and, if warranted, acquire one or
more properties or businesses, and to pursue other related activities intended
to enhance shareholder value. The proposed business activities classified the
Company as a "blank check" or "shell company" whose sole purpose at this time
was to locate and consummate a merger or acquisition with a private entity. As
part of its business plan, the Company filed a registration statement on Form
10-SB on a voluntary basis in order to become a "public" company by virtue of
being subject to the reporting requirements of the Securities Exchange Act of
1934 (the "Exchange Act"). To the best of the Company's knowledge, the Company's
shares have never traded, nor have any such shares been transferred from their
original holders except by the laws of descent and distribution.

      On August 9, 2005, the Company, through Kushi Sub, Inc., a newly formed
Delaware corporation and wholly-owned subsidiary of the Company ("Acquisition
Sub") acquired a 100% ownership interest in Hanxin (Cork) International Holding
Co., Ltd., a British Virgin Islands limited liability corporation ("Hanxin
International") through a merger of Hanxin International into Acquisition Sub
(the "Merger"). The Company acquired Hanxin International in exchange for (i)
4,000,000 shares of the Company's common stock after taking into account a one
for six reverse stock split as described below (the "Reverse Split") and (ii)
1,000 shares of the Company's Series A Preferred Stock, which are converted into
29,530,940 shares of the Company's common stock, after taking into account the
Reverse Split. Hanxin International was the direct parent of Xi'An and the
indirect parent of Hanxin. Both Xi'An and Hanxin are privately held corporations
organized under the laws of The People's Republic of China. The aggregate amount
of shares of common stock issued to the shareholders of Hanxin International
pursuant to the Merger, taking into account conversion of all of shares of the
Series A Preferred Stock, represented 95% of the issued and outstanding shares
of the Company's common stock. Under the terms of the Agreement and Plan of
Merger (the "Agreement") executed on July 11, 2005, the former stockholders of
the Company continue to own an aggregate of 5% of the issued and outstanding
shares of the Company's common stock. As a result of the Merger, Acquisition Sub
now owns 100% of Xi'An, which, in turn, continues to own ninety two percent
(92%) of the issued and outstanding shares of capital stock of Hanxin. The
transactions contemplated by the Agreement were intended to be a "tax-free"
reorganization pursuant to the provisions of Section 368 of the Internal Revenue
Code of 1986, as amended. For accounting purposes, this transaction was
accounted for as a reverse merger, since the former stockholders of Hanxin
International now own a majority of the issued and outstanding shares of common
stock of the Company, and the directors and executive officers of Hanxin have
become the directors and executive officers of the Company.


                                       1
<PAGE>

      Fangshe Zhang, Chairman; Pengcheng Chen, Chief Executive Officer; Yi
Zhang, Chief Operations Officer; Yi Tong, Chief Financial Officer; and Pingjun
Zhang, Chief Technical Officer, replaced the officers of the Company upon the
closing of the Merger. Two of the former directors of the Company prior to the
Merger, Messrs. Mark Schindler and Eugene Strickler remained on the Board of
Directors until the Company distributed to the Company's stockholders an
Information Statement (the "Information Statement") in accordance with the
Securities Exchange Act and as described below. Mr. Daniel France, the third
member of the Board of Directors prior to the Merger, resigned on September 28,
2005 and was replaced by Fangshe Zhang, who was elected Chairman of the Board of
Directors. Following distribution of the Information Statement to stockholders
of the Company in November 2005, Messrs. Schindler and Strickler resigned from
the Board of Directors and Messrs. Pengcheng Chen, Genshe Bai, Yi Tong, Shengli
Liu became members of the Board of Directors. No other agreements exist among
present or former controlling stockholders of the Company or present or former
board members of Hanxin with respect to the election of the members of its Board
of Directors, and to the Company's knowledge, no other agreements exist which
might result in a change of control of the Company

      In October 2005, the Company, though Network One Financial Securities,
Inc. ("Network One"), a registered broker-dealer, filed a 15c-211 application
with the NASD for the purposes of establishing quotation of the Company on the
OTC Bulletin Board. The NASD completed its initial review of the application on
November 7, 2005 however, requested additional information about the Company.
The Company submitted the additional information to the NASD, however further
information was requested by the NASD. Such information was submitted on March
2, 2006. Although the Agreement initially gave the prior stockholders of
Hankersen International the right to rescind the Merger upon the failure of the
Company to receive the approval of the NASD of the Company's Form 15c2-11 by
November 30, 2005, as of September 30, 2005, the parties executed an amendment
to the Agreement which eliminated this right.

      In November 2005, the Company filed and circulated to its shareholders the
Information Statement which permitted the Company to (i) change its name to
HanKersen International Corp.; (ii) amend its Articles of Incorporation to
increase its authorized shares of common stock to 200,000,000 shares; (iii)
approve the Reverse Split as to all outstanding shares of common stock of the
Corporation, effective as to holders of record of shares of common stock on
December 9, 2005, (iv) appoint the new directors of the Company; and (v) approve
a stock option, SAR and stock bonus plan for the directors, officers, employees
and consultants of the Company. A certificate of amendment (the "Amendment")
officially changing the name, increasing the authorized shares of common stock
and approving the reverse stock split was filed with the State of Delaware on
December 13, 2005.


                                       2
<PAGE>

BUSINESS OVERVIEW

      Hanxin is a manufacturing company based in China, which produces
cork-building material sold under the Hanxin brand name. Presently,
approximately 75% of Hanxin's sales are to customers in China, and the balance
of its sales are 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 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.

MARKET OPPORTUNITIES AND COMPETITION

      Cork building material has been used for wallboard and flooring in Europe
for more than a century, and was first manufactured in the United States in the
early 1900's. Cork tile has become popular in many countries as a natural
building material. Based on a report in July 2004 by Xi'An Evening news it is
estimated that the demand for cork building material in China is ten (10) to
fifteen (15) million square meters.

      In China, where Hanxin conducts the majority of its business, cork
building material has become widely used for wood flooring. Hanxin has three
major customers, Shanghai Ytuan Rui Development Ltd., Guangzhou Ming Bang
Trading Firm and Nanchang Jun Long Trading Firm. These customers engage in the
sale of cork products both domestically and internationally and each represents
approximately 5% of Hanxin's total sales.

      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. The price of raw materials is only 10% compared with that of
overseas markets, and the domestic production costs in China are one third (1/3)
of the costs outside of China. In addition, with the support of local
government, Hanxin enjoys the advantages of favorable tax and other beneficial
policies. Hanxin was exempt from income tax in 2003 and 2004 based on a program
administered by the Ministry of Finance and the State Administration whereby
high-tech companies located in the Hi-Tech Development zone are exempt from
income tax for the first two years in which sales are made. Furthermore, the
program will also permit Hanxin to have 50% of its income exempt from 2005 to
2007.


                                       3
<PAGE>

PRODUCT LINES

      Hanxin produces 16 types of cork wallboard and three types of cork art
crafts with different patterns and which such art crafts are used as ornaments
and decorations.

      Hanxin has developed staining technology, which has the ability to create
cork flooring or walls in many different colors. Hanxin's cork wallboard can
also be used as decorative material. The special features of cork material have
enabled it to be an ideal flooring material. With its elasticity, cork is a
natural floor cushion, 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 similar types of raw materials. Hanxin produces seven
series of cork flooring planks with over 50 different patterns, colors and
granules. Hanxin intends to develop additional series of product lines modeled
after its existing products.

PRODUCTION PROCESS

      Hanxin has designed a production process in order to ensure the quality of
its products. Hanxin places great emphasis on the quality of its products and
quality control system. 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

MARKETING STRATEGIES

      Hanxin has divided the market within China into five regions and it
intends to set up branch offices within each region in order to increase its
marketing efforts and facilitate its day-to-day operations. Hanxin has
established branch offices in Beijing, Shanghai and Guangzhou. In the future, it
intends to set up two other branches within the central and northeast regions of
China.

      Hanxin's products, though distributors, have been exported to India, the
United States, Japan, and Germany. In the future, Hanxin intends to expand
further into the Asian market as well as the North American market.

EMPLOYEES

      Hanxin has approximately 450 employees. Hanxin believes its relationship
with its employees is good.


                                       4
<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.

      There are also risks that 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.

      BY EXPANDING ITS OPERATIONS OVERSEAS, HANXIN MAY BE SUBJECT TO ADDITIONAL
ECONOMIC AND TECHNICAL RISKS

      Hanxin's daily operations are primarily in China. Hanxin plans on
expanding its business internationally. As a result, Hanxin will be subject to
the rules and regulations of those countries where it will be conducting
business. If Hanxin is unable to expand its business overseas or comply with
these regulations, it may have a material adverse affect on its business. In
addition, fluctuations in exchange rates may unpredictably and adversely affect
Hanxin's operating results, and could result in exchange losses. Hanxin does not
hedge against the risks associated with fluctuations in exchange rates. Although
it may use hedging techniques in the future, Hanxin may not be able to eliminate
or reduce the effects of currency fluctuations. Thus, exchange rate fluctuations
could have a material adverse impact on Hanxin's operating results, which in
turn may affect the Company's stock price.

      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.


                                       5
<PAGE>

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

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

      HANXIN IS DEPENDENT ON KEY PERSONNEL, AND THE LOSS OF ANY KEY EMPLOYEES,
OFFICERS AND/OR DIRECTORS MAY HAVE A MATERIALLY ADVERSE EFFECT ON HANXIN'S
OPERATIONS.

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

      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 Hanxin's exporting countries, 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.


                                       6
<PAGE>

      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.

      The Company is not listed on any national or other stock exchange.
Although the Company has submitted an application for quotation of its
securities on the Over the Counter Bulletin Board, there can be no assurance
that the application will be approved. Furthermore, even if its application is
approved and its securities are listed 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;

      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; and

      o     general economic and other national conditions.

      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.


                                       7
<PAGE>

      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.

      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.


                                       8
<PAGE>

      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.

      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.


                                       9
<PAGE>

      BLUE SKY CONSIDERATIONS.

      Because the securities registered hereunder have not been registered for
resale under the blue sky laws of any state, the holders of such shares and
persons who desire to purchase them in any trading market that might develop in
the future, should be aware that there may be significant state blue-sky law
restrictions upon the ability of investors to sell the securities and of
purchasers to purchase the securities. Some jurisdictions may not under any
circumstances allow the trading or resale of blind-pool or "blank-check"
securities. Accordingly, investors should consider the secondary market for the
Company's securities to be a limited one.

ITEM 1B. UNRESOLVED COMMENTS

      Although the Securities and Exchange Commission (the "SEC") did issue
comment letters regarding the Company's Report on Form 8-K filed on August 9,
2005 as well as the Company's Report on 10-QSB for the quarter ended September
30, 2005, such comments were addressed in the form of amendments to these
filings and on March 17, 2006, the SEC issued a clearance letter regarding these
filings.

ITEM 2. DESCRIPTION OF PROPERTIES

      Hanxin owns two properties in Xi'an, one of which is for approximately 500
square feet, which is used for office space and the other, which is
approximately 20,000 square feet, and is used as a cork processing plant. Hanxin
also leases an office in an office building in Xi'an for approximately $1,580
per month. The lease for this office space expires on November 30, 2006. Hanxin
also leases a parcel of land which is approximately 13 acres and is used as a
processing plant.

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

      As described above, on September 30, 2005, stockholders owning 55.37% of
the Company's issued and outstanding common stock, pursuant to a written
consent, voted to (i) elect new members to the Board of Directors; (ii) change
the name of the Company to HanKersen International Corp.; (iii) increase the
authorized shares of Common Stock of the Company to 200,000,0000; (iv) declare a
one (1) for six (6) reverse stock split for all of its issued and outstanding
shares of Common Stock as to holders of record on December 9, 2005; and (v)
adopt the Company 2005 Long Term Equity Compensation Plan. The actions adopted
in the consent are set forth in the Information Statement which was circulated
to its shareholders in November 2005 and took effect on December 13, 2005.


                                       10
<PAGE>

                                     PART II

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

      Although Network One has filed a 15c-211 application with the NASD for the
purposes of establishing quotation of the Company on the OTC Bulletin Board,
such application has not yet been approved and no public trading market exists
for the Company's securities and all of its outstanding securities are
restricted securities as defined in Rule 144. There were approximately 230
holders of record of the Company's common stock on December 31, 2004. No
dividends have been paid to date and the Company's Board of Directors does not
anticipate paying dividends in the foreseeable future.

      The Company does not plan to take affirmative steps to request or
encourage any broker-dealer to act as a market maker for the Company's
securities. There are to date no understandings, agreements or discussions in
place with any such broker-dealer. Although management has set forth disclosure
throughout this registration statement indicating it would consider the public
"trading" of its securities if such activity was in the best interests of its
shareholders, it presently has no plans to do so.

      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.


                                       11
<PAGE>

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, 2005 and 2004, should be read in
conjunction with the consolidated financial statements, including footnotes, and
other information presented in Item 7 and in our current report of Form 8-K/A as
filed with the Securities and Exchange Commission on March 8, 2006.

      OVERVIEW

On August 9, 2005, under an Agreement and Plan of Merger, the Company, through
Kushi Sub, Inc., a newly formed Delaware corporation and wholly-owned subsidiary
of the Registrant ("Acquisition Sub") acquired a 100% ownership interest in
Hanxin (Cork) International Holding Co., Ltd., a British Virgin Islands limited
liability corporation ("Hanxin International"). The Registrant acquired Hanxin
International in exchange for (i) 24,000,000 shares of the Registrant's common
stock and (ii) 1,000 shares of the Registrant's Series A Preferred Stock, which
are convertible into 177,185,642 shares of the Registrant's common stock (the
"Merger"). Hanxin International is the direct parent of Xi'An Cork Investments
Consultative Management Co., a People's Republic of China corporation ("Xi'An")
and as the indirect parent of Xian Hanxin Science and Technology Co., Ltd., a
People's Republic of China corporation ("Hanxin") both privately-held
corporations. The aggregate amount of shares of common stock issuable to the
shareholders of Hanxin International pursuant to the Merger, taking into account
conversion of all of shares of the Series A Preferred Stock, represents 95% of
the issued and outstanding shares of the Registrant's common stock. Under the
terms of the Agreement and Plan of Merger (the "Agreement") executed on July 11,
2005, the former stockholders of the Registrant continue to own an aggregate of
5% of the issued and outstanding shares of the Registrant's common stock. For
financial reporting purposes, the exchange of stock was treated as a reverse
acquisition of Hanxin with the former shareholders of the Company retaining
10,588,718 shares of common stock, or approximately 5% of the outstanding stock,
after giving effect to the conversion of 1,000 Series A Preferred shares which,
on an as if converted basis of 177,185,642 common shares, gives Hanxin
shareholders a controlling interest in the Company. Hanxin International was
deemed the accounting acquirer and the Registrant was deemed the accounting
acquiree.

Subsequent to the Merger, Acquisition Sub now owns 100% of Xi'An, which, in
turn, will continue to own ninety two percent (92%) of the issued and
outstanding shares of capital stock of Hanxin.

Hanxin (Cork) International Holding Co., Ltd. incorporated in September 2004, in
the British Virgin Islands, acquired a 92% interest in Xi'an Hanxin Technology
Co., Ltd. ("Hanxin") through its wholly-owned subsidiary, Xi'an Cork Investments
Consultative Management Co., Ltd., in April 2005. Xi'an Hanxin Technology Co.
Ltd. incorporated in July 2002 in Shaanxi Province, China, 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. Presently, approximately 75% of
Hanxin's sales are to customers in China, and the balance of its sales are made
to customers in India, the United States, Germany and Japan. Hanxin currently
owns 4 cork processing technology related patents in China.


                                       12
<PAGE>

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.

      FOREIGN EXCHANGE CONSIDERATIONS

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

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

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


                                       13
<PAGE>

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

      CRITICAL ACCOUNTING POLICIES

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

A summary of significant accounting policies is included in Note 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 five 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.


                                       14
<PAGE>

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2005 AS COMPARED TO YEAR ENDED DECEMBER 31, 2004

      REVENUES

For the year ended December 31, 2005, our revenues were $12,156,152 as compared
to $10,473,229 for the year ended December 31, 2004, an increase of $1,682,923
or approximately 16.1%. We attribute this increase in net revenues to a better
marketing effort, gradual acceptance of our cork wood floor, wall and decorating
materials in the residential as well as commercial real estate market, and our
well known brand recognition.

      COST OF SALES AND GROSS PROFIT

For the year ended December 31, 2005, cost of sales amounted to $7,044,695 or
58.0% of net revenues as compared to cost of sales of $5,522,921 or 52.7% of net
revenues for the year ended December 31, 2004, a percentage increase of 5.3% due
mainly to price increase in raw materials. Gross profit for the year ended
December 31, 2005 was $5,111,457 or 42.0% of revenues, as compared to $4,950,308
or 47.3% of revenues for the year ended December 31, 2004.

      OPERATING EXPENSES

Our operating expenses increased moderately for the year ended December 31, 2005
from the year ended December 31, 2004. For the year ended December 31, 2005,
total operating expenses were $2,107,278 as compared to $1,817,867 for the year
ended December 31, 2004, a increase of $289,411 or 15.9%.

Included in this increase were:

* For the year ended December 31, 2005, selling expenses amounted to $1,311,619
as compared to $1,144,549 for the year ended December 31, 2004, an increase of
$167,070 or 14.6%. For the year ended December 31, 2005, we experienced an
increase in commission expenses of approximately $138,160 associated with our
increased revenues. Another reason for the increase in selling expenses was the
increase in shipping and freight charges of $136,381. The increase was offset by
a decrease $96,710 and $17,465 in advertising costs and travel expenses.

* For the year ended December 31, 2005, general and administrative expenses were
$795,659 as compared to $673,318 for the year ended December 31, 2004, an
increase of $122,341 or 18.2%.The increase in general and administrative
expenses were mainly attributed to a $250,000 increase in business development
expense and other office expenses, meetings and seminars, and telephone expense
associated with increased operations. The increase was offset by a decrease of
approximately $100,000 in business and technical consulting fees, a decrease of
$54,000 in charitable contributions made during 2004 which included building a
cultural center and new road for the township where the Company's manufacturing
facility located.


                                       15
<PAGE>

The Company saw an increase in legal and accounting fees during 2005 and expects
the same for 2006 in connection with our SEC filings as well as continued
compliance with provisions of the Sarbanes-Oxley Act of 2002, including new
provisions which will be effective in 2007. These increases could serve to
reduce our net income absent a significant increase in our revenues at the
current gross profit margins.

For the year ended December 31, 2005, other expenses amounted to $27,890 as
compared to other income of $104,608 for the year ended December 31, 2004. Other
expense (income) for the year ended December 31, 2005 and 2004 was associated
with reverse-merger acquisition cost of $198,059 in 2005 and rental income from
its entertainment facility.

For the year ended December 31, 2005, interest income was $46,664 as compared to
$32,344 for the year ended December 31, 2004, an increase of $14,320 or 44.3%.
Interest expense for the year ended December 31, 2005 and 2004 was associated
with our borrowings.

Our income before income taxes and minority interest decreased by $260,760 or
8.1% to $2,976,289 for the year ended December 31, 2005 as compared to
$3,237,049 for the year ended December 31, 2004 primarily as a result of an
increase in total operating expense described above as well as reverse-merger
expenses related to acquisition cost.

Our income taxes increased by $482,151 for the year ended December 31, 2005 as
compared to $0 for the year ended December 31, 2004 due to the fact that the
Company's tax-exempt status is terminated as of December 31, 2004 and is subject
to 15% corporate income tax provision afterwards.

Our income before minority interest decreased by $742,911 or 23.0% to $2,494,138
for the year ended December 31, 2005 as compared to $3,237,049 for the year
ended December 31, 2004 primarily as a result of an increase in income taxes of
$482,151 described above.

For the year ended December 31, 2005, we reported a minority interest in income
of subsidiary of $220,576 as compared to $258,964 for the year ended December
31, 2004. The minority interest in income of subsidiary is attributable to
Hanxin, which we allocated to the minority stockholders, and reduced our net
income.

As a result of these factors, we reported net income of $2,273,562 or $0.32 per
diluted share for the year ended December 31, 2005 as compared to net income of
$2,978,085 or $0.52 per diluted share for the year ended December 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2005, we had working capital of $6,767,792 and cash and cash
equivalents of $574,774. At December 31, 2005, the majority of our cash resided
in China with our subsidiaries. During 2005, we increased our revenues by
$1,682,923 or 16.1% while we reduced our accounts receivable balance by $43,750
or 2.0% since December 31, 2004.


                                       16
<PAGE>

In order to make sure we have a sufficient supply of raw materials for
production in 2006, we have advanced an additional $570,000 to our vendors for
tree skins in 2005 which increased our prepaid expenses since December 31, 2004
on our consolidated balance sheet.

During 2005, we reduced our accounts payable and accrued expenses by $747,183 or
66.5% since December 31, 2004.

During 2005, we purchased a 12% interest in Shaanxi DeRong Technology
Information Development Co. Ltd., a People's Republic of China corporation that
incorporated on February 2, 2000 in Xi'An, Shaanxi, China, and engages in cork
tree plantation, for $1,734,777.

During 2005, we purchased a 75% interest in Cork Import and Export Co. Ltd., a
PRC corporation, engaged in cork trading business and net cash invested as of
December 31, 2005 was $746,795.

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 an 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. The advance by officers to the
Company was also subsequently settled after year end.

During 2005, we obtained a short term bank loan which amounted to $371,738
maturing on May 13, 2006. The bank loan increased our operating cash flow.

Net cash provided by operating activities increased from $1,973,442 for the year
ended December 31, 2004 to $2,036,338 for the year ended December 31, 2005. This
increase is primarily attributable to:

* a decrease of $704,523 in our net income,

* an increase of $52,774 in depreciation and amortization as a result of the
fact that certain property, plant and equipment was added in 2005.

* a decrease of $44,016 in minority interest which represents that portion of
our net income which is attributable to the 8% of Hanxin and 25% of Cork Import
and Export Co, Ltd. we do not own,

* a decease of $43,750 in accounts receivable mainly attributable to the fact
that we have been collecting our receivables in a more timely manner,

* an increase of $158,906 in inventory as a result of increase in our cork wood
floor, wall and decorating materials production,


                                       17
<PAGE>

* a increase of $571,884 in prepaid and other current assets, as a result of
additional advances made to suppliers for raw materials.

* a decrease of $770,137 in accounts payable and accrued expenses and other
current liabilities as a result of the repayment of balances due from our cash
provided by operations,

* a decrease of $575,402 in taxes payable as a result of the payment of income
tax before year end.

Net cash used in investing activities increased to $2,530,314 for the year ended
December 31, 2005 as compared to $566,249 for the year ended December 31, 2004.
This change is primarily the result of an increase of $1,734,777 in a strategic
investment during the year ended December 31, 2005 and $746,795 net investment
in a newly acquired subsidiary.

Net cash provided by financing activities was $42,477 for the year ended
December 31, 2005 as compared to $1,003,857 net cash used for the year ended
December 31, 2004. This change is primarily attributable to an addition of short
term bank loan and collection of due from shareholders and officers during the
year ended December 31, 2005.

We currently have no material commitments for capital expenditures.

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.


                                       18
<PAGE>

(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.

(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


                                       19
<PAGE>

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.

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.


                                       20
<PAGE>

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.

      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.


                                       21
<PAGE>

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

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

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

1. On August 23, 2005, the Company engaged Sherb & Co., LLP ("Sherb & Co."). On
August 23, 2005, the Company's former independent accountants, Wolinetz, Lafazan
& Company, P.C. ("WLC") were dismissed as independent accountants of the
Company. The change of independent accountants was approved by the Board of
Directors of the Company.

      WLC's reports on the Company's financial statements for the last two
fiscal years did not contain any adverse opinions or disclaimer opinions, nor
were the reports qualified or modified as to uncertainty, audit scope or
accounting principles. Furthermore, the accountant's reports did not include any
disclosure of uncertainty regarding the Company's ability to continue as a going
concern. During the Company's last two fiscal years and through the date of
dismissal, there were no disagreements between the Company and WLC on any
matters relating to accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of the former independent accountants, would have caused them to
make reference to the subject matter of the disagreement in their report.

2. On November 2, 2005, the Company engaged Most & Company, LLP ("Mostco"). On
the same date, Sherb & Co. ("Sherb") were dismissed as independent accountants
of the Company. The change of independent accountants was approved by the Board
of Directors of the Company.


                                       22
<PAGE>

      Sherb and Co's reports on the Company's financial statements for the last
two fiscal years did not contain any adverse opinions or disclaimer opinions,
nor were the reports qualified or modified as to uncertainty, audit scope or
accounting principles. Furthermore, the accountant's reports did not include any
disclosure of uncertainty regarding the Company's ability to continue as a going
concern. During the Company's last two fiscal years and through the date of
dismissal, there were no disagreements between the Company and Sherb on any
matters relating to accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of the former independent accountants, would have caused them to
make reference to the subject matter of the disagreement in their report.

3. On March 30, 2006, the Company engaged MS Group CPA LLC ("MSG") as its
independent accountants, to audit its financial statements for the year ended
December 31, 2005. On the same date, Mostco was dismissed as independent
accountants of the Company. The change of independent accounts was approved by
the Board of Directors of the Company.

      In connection with its review of the interim periods until the date of
dismissal, there were no disagreements between the Company and Mostco on any
matters relating to accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which, if not resolved to the
satisfaction of Mostco, would have caused them to make reference to the subject
matter of the disagreement in their report on the financial statements.

      The Company has not consulted MSG during the two most recent fiscal years
regarding the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that was rendered on
the Company's financial statements, and written reports and no oral advice was
provided to the Company by concluding that there was an important factor to be
considered by the Company in reaching a decision as to an accounting, auditing
or financial issue. In the past two years the Company has not consulted MSG on
any matter that was either the subject of a disagreement or a reportable event.

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.


                                       23
<PAGE>

      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.

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           48          Chairman
Pengcheng Chen          30          CEO/Director
Yi Tong                 34          Chief Financial Officer/Director
Yi Zhang                34          Chief Operating Officer
Pingjun Zhang           57          Chief Technical Officer
Genshe Bai              46          Director
Shengli Liu             38          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.


                                       24
<PAGE>

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.

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.


                                       25
<PAGE>

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.

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.


                                       26
<PAGE>

            (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 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.


                                       27
<PAGE>

            (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.

            (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.


                                       28
<PAGE>

            (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 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.


                                       29
<PAGE>

                                    PART III

ITEM 10: EXECUTIVE COMPENSATION.

The following table discloses executive compensation received for the fiscal
year ended December 31, 2005 as well as the preceding two years.

<TABLE>
<CAPTION>
                                                                                      LONG-TERM
                                                ANNUAL COMPENSATION              COMPENSATION AWARDS
                                                -------------------              -------------------
                                                                             RESTRICTED      SECURITIES
                                                                               STOCK         UNDERLYING       ALL OTHER
NAME AND PRINCIPAL POSITION      YEAR          SALARY           BONUS           AWARD         OPTIONS       COMPENSATION
------------------------------------------------------------------------------------------------------------------------
<S>                              <C>           <C>             <C>             <C>             <C>             <C>
Fangshe Zhang,
Chairman                         2005          $2,833          $2,478          $  -0-          $  -0-          $5,311
                                 2004,         $2,842          $  -0-          $  -0-          $  -0-          $2,842
                                 2003          $4,644          $  -0-          $  -0-          $  -0-          $4,644
Pengcheng Chen,
Chief Executive Officer          2005          $2,777          $2,478          $  -0-          $  -0-          $5,255
                                 2004          $2,148          $  -0-          $  -0-          $  -0-          $2,148
                                 2003          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
Yin Tong,
Chief Financial Officer          2005          $2,409          $1,983          $  -0-          $  -0-          $4,392
                                 2004          $2,148          $  -0-          $  -0-          $  -0-          $2,148
                                 2003          $4,168          $  -0-          $  -0-          $  -0-          $4,168
Yi Zhang,
Chief Operating Officer          2005          $2,465          $1,983          $  -0-          $  -0-          $4,448
                                 2004          $  921          $  -0-          $  -0-          $  -0-          $  921
                                 2003          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
Pingjun Zhang,
Chief Technical Officer          2005          $2,229          $1,859          $  -0-          $  -0-          $4,088
                                 2004          $4,168          $  -0-          $  -0-          $  -0-          $4,168
                                 2003          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
Eugene Stricker,                 2005          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
Former President                 2004          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
                                 2003          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
Mark Schindler,                  2005          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
Former Secretary                 2004          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
                                 2003          $  -0-          $  -0-          $  -0-          $  -0-          $  -0-
------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       30
<PAGE>

      ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth as of May 12, 2006, 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 35,295,726 shares
outstanding, and takes into account (i) the conversion of the 1,000 shares of
Series A Preferred Stock into 29,530,940 shares of Common Stock and (ii) the
Reverse Split.

<TABLE>
<CAPTION>
Title       Name and Address                                  Number of             Percent
of          of Beneficial                                     shares held by        of
Class       Owner of Shares         Position                  Owner                 Class
-------------------------------------------------------------------------------------------
<S>         <C>                     <C>                       <C>                   <C>
Common      Pengcheng Chen (1)      CEO/Director              11,361,458 (1)        32.19%

Common      Fangshe Zhang (2)       Chairman                   9,892,097 (2)        28.03%

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            60.22%
            Directors as a Group
-------------------------------------------------------------------------------------------
</TABLE>

      (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 issuable upon 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 issuable upon 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.


                                       31
<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.


                                       32
<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.


                                       33
<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.

      Certain officers of Hanxin loaned Hanxin an aggregate net amount of
$106,660 for various expenses and costs of operations. These loans did not
accrue interest and were payable on demand.

      On December 26, 2005, Hanxin prepaid $1,486,952 to Mr. Zhang 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.


                                       34
<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 **

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


                                       35
<PAGE>

** 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:

      The Company filed reports on Form 8-K and 8-K/A on the following dates:
(i) August 10, 2005, as amended (ii) August 24, 2005, as amended, and (iii)
November 7, 2005.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

We paid or accrued an aggregate of approximately $167,590 in fees for
professional services rendered by (i) Sherb & Co. in connection with required
audits associated with Merger and the review of our financial statements
included in the Quarterly Report on Form 10-for the quarter ending September 30,
2005; (ii) Mostco in connection with the review of our financial statements
included in the Quarterly Report on Form 10-QSB for the quarter ending September
30, 2004 as well as review of the financial statements of Hanxin International,
Hanxin and Xi'An; and MS Group CPA LLC in connection with the audit of our
financial statements for the fiscal year ending December 31, 2005.


                                       36
<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: May 13, 2006

      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                      May 13, 2006
-------------------------------
Fangshe Zhang


/s/ Pengcheng Chen                  Chief Executive Officer/      May 13, 2006
-------------------------------     Director
Pengcheng Chen


/s/ Yi Tong                         Chief Financial Officer/      May 13, 2006
-------------------------------     Director
Yi Tong


/s/ Yi Zhang                        Chief Operating Officer       May 13, 2006
-------------------------------
Yi Zhang


/s/ Pingjun Zhang                   Chief Technical Officer       May 13, 2006
-------------------------------
Pingjun Zhang


/s/ Genshe Bai                      Director                      May 13, 2006
-------------------------------
Genshe Bai


/s/ Shengli Liu                     Director                      May 13, 2006
-------------------------------
Shengli Liu
<PAGE>

CONTENTS                                                                    PAGE

Report of Independent Registered Public Accounting Firm                      F-2
Report of Independent Registered Public Accounting Firm                      F-3
Consolidated Financial Statements
   Consolidated Balance Sheet                                                F-4
   Consolidated Statements of Operations                                     F-5
   Consolidated Statements of Changes in Stockholders' Equity                F-6
   Consolidated Statements of Cash Flows                                     F-7
   Notes to Consolidated Financial Statements                        F-8 to F-14


                                       F-1
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheet of Hankersen
International Corp. (f/k/a Kushi Natural Foods Corp.) as of December 31, 2005
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the year 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, 2005 and
the results of its consolidated operations, changes in stockholders' equity, and
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.


/s/ MS Group CPA LLC

MS Group CPA LLC
New York, NY
April 25, 2006


                                       F-2
<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders
Hanxin (Cork) International Holding Co., Ltd

We have audited the statement of operations, excluding earnings per share,
stockholders' equity and cash flows of Hanxin (Cork) International Holdings Co.,
Ltd for the year ended December 31, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all respects the results of operations and cash flows of Hanxin (cork
International Holding Co., Ltd. For the year ended December 31, 2004 in
conformity with accounting principles generally accepted in the United States of
America.

The financial statements for the year ended December 31, 2004 have been
restated.


                                                    /s/ Most & Company, LLP

                                                    Most & Company, LLP

New York, NY

December 28, 2005


                                       F-3
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                       DECEMBER 31, 2005
                                                                                       -----------------
<S>                                                                                    <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                                           $         574,774
   Accounts receivable, net of allowance for doubtful accounts of $16,995                      2,284,854
   Inventories                                                                                   859,656
   Due from stockholders/officers                                                              1,380,292
   Loan to related party                                                                         978,910
   Prepayments and other current assets                                                        1,771,365
                                                                                       -----------------
      Total Current Assets                                                                     7,849,851

Property and Equipment - Net                                                                   2,365,014
Investment - At cost                                                                           1,734,777
Land Use Right - Net                                                                             154,221
                                                                                       -----------------
      Total Assets                                                                     $      12,103,863
                                                                                       =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                              179,144
   Accrued expenses                                                                              218,930
   Loan payable                                                                                  371,738
   Taxes payable                                                                                 164,854
   Other current liabilities                                                                     147,393
                                                                                       -----------------
      Total Current Liabilities                                                                1,082,059

Minority Interest                                                                              1,300,597

Stockholders' Equity
   Series A Preferred stock, $0.0001 par value, 5,,000,000 shares authorized,
      1,000 shares issued and outstanding                                                              1
   Common stock, $0.0001 par value, 200,000,000 shares authorized,
      5,764,786 shares issued and outstanding                                                        577
   Additional paid-in capital                                                                  4,399,735
   Reserve funds                                                                               1,330,756
   Retained earnings                                                                           3,745,588
   Accumulated other comprehensives income                                                       244,550
                                                                                       -----------------
      Total Stockholders' Equity                                                               9,721,207
                                                                                       -----------------
      Total Liabilities and Stockholders' Equity                                       $      12,103,863
                                                                                       =================
</TABLE>

See notes to consolidated financial statements


                                       F-4
<PAGE>

HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   For Years Ended December 31,
                                                  -----------------------------
                                                      2005             2004
                                                  ------------     ------------
                                                                    As Restated

Revenues                                          $ 12,156,152     $ 10,473,229

Cost of Goods Sold                                   7,044,695        5,522,921
                                                  ------------     ------------
Gross Profit                                         5,111,457        4,950,308

Operating expenses
   Selling expenses                                  1,311,619        1,144,549
   General and administrative expense                  795,659          673,318
                                                  ------------     ------------
Total operating expenses                             2,107,278        1,817,867
                                                  ------------     ------------
Income from operations                               3,004,179        3,132,441
                                                  ------------     ------------
Other income (expense)
   Interest income, net                                 46,664           32,344
   Other income (expense), net                         (74,554)          72,264
                                                  ------------     ------------
Total other (expense) income                           (27,890)         104,608

Income before taxes and minority interest            2,976,289        3,237,049

Income tax provision                                   482,151               --
                                                  ------------     ------------
Income before minority interest                      2,494,138        3,237,049

Minority interest                                      220,576          258,964
                                                  ------------     ------------
Net income                                           2,273,562        2,978,085

Other comprehensive income:
Foreign currency translation gain                      244,550               --
                                                  ------------     ------------
Comprehensive income                              $  2,518,112     $  2,978,085
                                                  ============     ============
Net income per common share
   - Basic                                        $       0.39     $       0.52
                                                  ============     ============
   - Diluted:                                     $       0.32     $       0.52
                                                  ============     ============
Weighted Common Shares Outstanding*
   - Basic                                           5,764,786        5,764,786
                                                  ============     ============
   - Diluted:                                        7,140,200        5,764,786
                                                  ============     ============

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

See notes to consolidated financial statements


                                       F-5
<PAGE>

HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                   Series A
                                   Preferred
                                     Stock           Common Stock,
                                 --------------   -------------------
                                                                                                               Other       Total
                                                                        Additional                            Compre-      Stock-
                                 No. of             No. of                Paid in    Reserve     Retained     hensive      holders'
                                 Shares  Amount     Shares     Amount     Capital      Fund      Earnings      Income      Equity
                                 ------  ------   ----------  -------   ----------  ----------  -----------   --------   ----------
<S>                              <C>     <C>      <C>         <C>       <C>         <C>         <C>           <C>        <C>
Balance, December 31, 2003           --  $   --       50,000  $50,000   $4,350,313  $  375,768  $   657,009              $5,433,090

Net income                                                                                        2,978,085               2,978,085

Appropriation of Reserve funds                                                         542,733     (542,733)

Less: Capital distribution           --      --           --       --           --          --   (1,208,080)        --   (1,208,080)
                                 ------  ------   ----------  -------   ----------  ----------  -----------   --------   ----------
Balance, December 31, 2004           --      --       50,000   50,000    4,350,313     918,501    1,884,281         --    7,203,095

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

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

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

Appropriation of Reserve funds                                                         412,255     (412,255)

Foreign currency translation         --      --           --       --           --          --           --    244,550      244,550
                                 ------  ------   ----------  -------   ----------  ----------  -----------   --------   ----------
Balance, December 31, 2005
  (pre reverse stock split)       1,000  $    1   34,588,718  $ 3,459   $4,396,853  $1,330,756  $ 3,745,588   $244,550   $9,721,207
                                 ======  ======   ==========  =======   ==========  ==========  ===========   ========   ==========
Balance, December 31, 2005
  (post reverse stock split)      1,000  $    1    5,764,786  $   577   $4,399,735  $1,330,756  $ 3,745,588   $244,550   $9,721,207
                                 ======  ======   ==========  =======   ==========  ==========  ===========   ========   ==========
</TABLE>

See notes to consolidated financial statements


                                       F-6
<PAGE>

HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                              For Years Ended December 31,
                                                            -------------------------------
                                                                2005               2004
                                                            ------------       ------------
<S>                                                         <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                  $  2,273,562       $  2,978,085
Adjustments to reconcile net income to net cash
   provided by operating activities
   Depreciation and amortization                                 232,042            179,268
   Loss on disposal of fixed assets                               22,888                 --
   Minority interest                                             214,948            258,964
   Changes in operating assets and liabilities:
      Accounts receivable                                         43,750         (1,301,316)
      Inventories                                               (158,906)           568,750
      Deposits                                                 1,244,270           (667,247)
      Prepayments and other current assets                      (571,884)          (962,106)
      Accounts payable and accrued expenses                     (747,183)           634,754
      Customer deposits                                          (22,954)            22,954
      Taxes payable                                             (575,402)           426,306
      Other current liabilities                                   81,207           (164,970)
                                                            ------------       ------------
Net cash provided by operating activities                      2,036,338          1,973,442

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of equipment                                         (48,742)          (566,249)
   Long term investment at cost                               (1,734,777)                --
   Investment in subsidary                                      (746,795)                --
                                                            ------------       ------------
Net cash used in investing activities                         (2,530,314)          (566,249)

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from short-term loan                                 362,424                 --
   Payment of short-term loan                                     (5,182)          (193,293)
   Proceeds from long-term debt                                       --             64,028
   Payment on long-term debt                                     (14,920)            (2,495)
   Payments to stockholders/officers                          (1,615,984)        (1,326,834)
   Receipts from stockholders/officers                         1,316,139          2,436,148
   Dividend paid                                                      --           (773,331)
   Distributions                                                      --         (1,208,080)
                                                            ------------       ------------
Net cash provided by (used in) financing activities               42,477         (1,003,857)

Net (decrease) increase in cash and cash equivalents            (451,499)           403,336
Effect of exchange rate changes on cash                           14,401                 --
Cash and cash equivalents at beginning of year                 1,011,872            608,536
                                                            ------------       ------------
Cash and cash equivalents at end of year                    $    574,774       $  1,011,872
                                                            ============       ============
SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION
   Interest paid                                            $     19,407       $     11,556
                                                            ============       ============
   Taxes paid                                               $         --       $         --
                                                            ============       ============
SUPPLEMENT SCHEDULE OF NON-CASH FINANCING ACTIVITIES

   Long-term debt released for building transfered out      $    (41,432)      $         --
                                                            ============       ============
</TABLE>

See notes to consolidated financial statements


                                       F-7
<PAGE>

HANKERSEN INTERNATIONAL CORP. AND SUBSIDIARIES
(FORMERLY KUSHI NATURAL FOODS CORP. AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

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 11 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.
Hanxin currently owns 4 cork processing technology related patents in China.

The Company through Hanxin acquired 75% equity interest of Cork Import and
Export Co. Ltd., a PRC corporation engages in cork trading businesses during
fiscal year 2005.

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.

RESTATEMENTS AND RECLASSIFICATIONS

As previously disclosed in our Quarterly Report on Form 10-QSB/A for the nine
months ended September 30, 2005 (the Third Quarter 2005 Form 10-QSB), we had to
restate certain financial information for our Fiscal 2004 and Fiscal 2005
quarterly periods. These restatements and related reconciliations from
previously filed financial statements are described in further detail in Note 14
to the accompanying consolidated financial statements. In addition, certain
reclassifications have been made to the prior period's financial information in
order to conform to the current period's presentation.


                                       F-8
<PAGE>

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 customer, 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
$64,106 and $160,816 for the years ended December 31, 2005 and 2004,
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 $2,316 and $111,305 for the
years ended December 31, 2005 and 2004, respectively.

CASH AND CASH 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
and raw materials, 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.

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.


                                       F-9
<PAGE>

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, prepayments and other current assets, accounts payable,
accrued expenses, and other current liabilities approximate fair value based on
the short-term maturity of these instruments. The Company's mortgage 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 at December 31, 2005.

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.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reporting amounts of revenues and expenses during the reported period.
Estimates, by their nature, are based on judgment and available information.
Accordingly, actual results could differ from those estimates.

SEGMENT REPORTING

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

NEW ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued Statement No. 154, Accounting Changes and Error
Corrections ("SFAS 154"). SFAS 154 generally require that accounting changes and
errors be applied retrospectively. SFAS 154 is effective for accounting changes
and corrections of errors made in fiscal years beginning after December 15,
2005. The Company does not expect SFAS 154 to have a material impact on its
financial statements.

In March 2005, the FASB issued Statement of Financial Accounting Standards
Interpretation Number 47, Accounting for Conditional Asset Retirement
Obligations (FIN 47). FIN 47 provides clarification regarding the meaning of the
term conditional asset retirement obligation as used in FASB Statement No. 143,
Accounting for Asset Retirement Obligations. FIN 47 is effective for fiscal
years beginning after December 15, 2005. The Company is currently evaluating the
impact of FIN 47 on its financial statements.

In December 2004, the FASB issued SFAS 123R. Under this standard, all forms of
share-based payment to employees, including stock options, would be treated as
compensation and recognized in the statement of operations. This standard will
be effective for awards granted, modified or settled in fiscal years beginning
after June 15, 2005. The Company is currently researching the appropriate
valuation model to use for stock options. In connection with the issuance of FAS
123R, the SEC issued Staff Accounting Bulletin No. 107 (SAB 107) in March of
2005. SAB 107 provides implementation guidance for companies to use in their
adoption of FAS 123R. The Company is currently evaluating the effect of FAS 123R
and SAB 107 on its financial statements.


                                      F-10
<PAGE>

4. INVENTORIES

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

      Raw material                             $653,315
      Working in progress                        85,967
      Finished goods                            120,374
                                               --------
      Total                                    $859,656
                                               ========

5. DUE FROM 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 an aggregate net amount of
$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. .

6. INVESTMENT AND LOAN TO INVESTEE

On June 28, 2005, the Company purchased 12% equity interest of Shaanxi DeRong
Technology Information Development Co. Ltd. ("DeRong"), a PRC corporation, for
$1,734,777 (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 the year, 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 is due August 14, 2006 . The amount is presented on the balance
sheet as Loan to Related Party.

7. PROPERTY AND EQUIPMENT

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

                                          Estimated Life
                                          --------------
      Buildings and improvement               27 - 35           $1,748,233
      Manufacturing equipment                   1-8              1,119,687
      Office Furniture and Equipment             5                  77,470
      Vehicle                                   2-8                 18,590
                                                                ----------
         Subtotal                                                2,963,980
      Less: Accumulated depreciation                               598,966
                                                                ----------
         Total                                                  $2,365,014
                                                                ==========

For the years ended December 31, 2005 and 2004, depreciation expenses amounted
to $227,793 and $175,062, respectively. Loss on disposal of fixed assets for the
year ended December 31, 2005 was $22,888 and there was no such loss for the year
2004.

8. 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, 2005, land use right at cost, less accumulated
amortization consisted of the following:

      Land use right                          $172,554
      Less: Accumulated amortization            18,333
                                              --------
                                              $154,221
                                              ========

For the years ended December 31, 2005 and 2004, amortization expense amounted to
$4,249 and $4,206, respectively.


                                      F-11
<PAGE>

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

      2006                                      $4,249
      2007                                       4,249
      2008                                       4,249
      2009                                       4,249
      2010                                       4,249

9. LOAN PAYABLE

At May 13, 2005, the Company obtained a short term bank loan by pledging certain
building and land use right with a bank. The loan interest is 9.486% per annum
and the principal is due May 13, 2006.

10. 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 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. As a result, the Company had tax exempt benefit in the amount of $446,713
or $8.93 per share for the years ended December 31, 2004.

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

      Value-added tax                         $ 94,852
      Corporate income tax provision            61,432
      Individual withholding payroll tax         1,349
      Local taxes and surcharges                 7,221
                                              --------
                                              $164,854
                                              ========

11. 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.

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.

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

12. LEASE COMMITMENTS

The Company leases its office space and land under operating lease agreements
that are expiring at November 2006 and February 2007. The future minimum rental
and properties payments as of December 31, 2005 are as follows:

      2006                                     $33,669
      2007                                       2,441
                                               -------
                                               $33,110
                                               =======

Rent expense amounted to $56,320 and $60,721 for the years ended December 31,
2005 and 2004, respectively.


                                      F-12
<PAGE>

13. 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, 2005, the Company's PRC subsidiaries established and
segregated in retained earnings an aggregate amount of $1,330,756 for the
Statutory Surplus Reserve and the Statutory Common Welfare Fund.

14. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

In connection with comments from the Securities and Exchange Commission and upon
a review and assessment by the Company, it was concluded on December 7, 2005
that certain of the Company's previously issued financial statements included
with Form 8-K filed on August 10, 2005, as amended on January 18, 2006 and
10-QSB for the quarter ended September 30, 2005 filed on November 21, 2005, as
amended on January 18, 2006 should no longer be relied upon because of errors in
such financial statements. A further amended Current Report on Form 8-K/A with
inclusion of the Company's re-audited financial statements for the years ended
December 31, 2004 and 2003, and interim financial statements for three months
ended March 31, 2005 and six months ended June 30, 2005, and a further amended
Quarterly Report on Form 10-QSBA for the nine months ended September 30, 2005 to
reflect certain revisions in such financial statements were filed on March 8,
2006. The errors in such financial statements include:

      a.    Recorded $731,146 prepayments advanced to stockholders/officers for
            expenses associated with completing a reverse acquisition in
            "Prepayments and Other Current Assets" instead of "Due from
            stockholders/officers",

      b.    Recorded $4,833 expenses incurred by a stockholder during fiscal
            year 2003 as "Due from stockholders/officers" instead of an increase
            in expenses,

      c.    Presented $50,000 stock subscription receivable as a reduction of
            stockholders' equity instead of "Prepayments and Other Current
            Assets" even though the amount was received in January 2005,

      d.    Recorded $1,208,080 patent rights as intangible asset contributed by
            a more than 10% stockholder and recorded an additional $1,208,080
            patent rights as intangible asset purchased from the same
            stockholder. The Company also recorded associated amortization
            expenses of $221,480 and $171,145 in fiscal year 2004 and 2003
            respectively. Upon subsequent review, the Company has concluded that
            its determination was incorrect and that the contributed patent
            rights should be revalued at historical cost basis of $0 and the
            amount paid to purchase the patent rights should be treated as a
            capital distribution.

The Company made the following corrections with respect to the above errors for
its financial statements as of December 31, 2004:

      a.    Reclassified $731,146 from "Prepayments and other Current Assets" to
            "Due from stockholders/officers",

      b.    reduced both "Due from stockholders/officers" and "Retained Earning"
            by $4,833,

      c.    reclassified $50,000 from "Stockholders' Equity" to "Prepayments and
            other Current Assets",

      d.    wrote off $1,208,080 "Patent Right" against "Additional Paid in
            Capital" for the contributed patent rights and wrote off an
            additional $1,208,080 "Patent Right" against "Retained Earning" for
            the purchased patent rights. The Company also reversed the
            associated amortization expenses by crediting $171,145 to "Retained
            Earning" and $221,480 to "General and Administration Expenses".
            Minority interest was also adjusted by an increase of $31,023 to
            reflect the write off of amortization expense associated with the
            "Patents Rights".


                                      F-13
<PAGE>

A summary which shows the impact of the restatement on the consolidated balance
sheet as of December 31, 2004, and the related statements of operations and
statement of cash flows for the year ended December 31, 2004 is as follow:

<TABLE>
<CAPTION>
                                                     As                                    Subscription     Patent
                                                 Previously      Prepayment    Expenses      Receivable      Right
CONSOLIDATED BALANCE SHEET                        Reported      Adjustments   Adjustments   Adjustments   Adjustments   As Restated
--------------------------                      ------------   ------------  ------------  ------------  ------------  ------------
<S>                                             <C>            <C>           <C>           <C>           <C>           <C>
Cash and cash equivalents                       $  1,011,872                                                           $  1,011,872
Accounts receivable                                2,272,868                                                              2,272,868
Inventories                                          679,211                                                                679,211
Due from stockholders/officers                       271,356   $    731,146  $     (4,833)                                  997,669
Deposits                                           1,208,080                                                              1,208,080
Prepayments and other current assets               1,802,704       (731,146)               $     50,000                   1,121,558
Property and equipment - Net                       2,595,658                                                              2,595,658
Patents right - Net                                2,023,535                                             $ (2,023,535)           --
Land use right - Net                                 154,562                                                                154,562
                                                ------------   ------------  ------------  ------------  ------------  ------------
Total Assets                                    $ 12,019,846   $         --  $     (4,833) $     50,000  $ (2,023,535) $ 10,041,478
                                                ============   ============  ============  ============  ============  ============
Total Current Liabilities                          1,949,922                                                              1,949,922
Mortgage Payable - Non-current Portion                56,352                                                                 56,352
Minority interest                                    801,086                                                   31,023       832,109
Common stock                                          50,000                                                                 50,000
Stock subscription receivables                       (50,000)                                    50,000                          --
Additional paid-in capital                         5,558,393                                               (1,208,080)    4,350,313
Retained earnings                                  3,654,093                       (4,833)                   (846,478)    2,802,782
                                                ------------   ------------  ------------  ------------  ------------  ------------
                                                $ 12,019,846   $         --  $     (4,833) $     50,000  $ (2,023,535) $ 10,041,478
                                                ============   ============  ============  ============  ============  ============

<CAPTION>
                                                     As                                    Subscription     Patent
                                                 Previously      Prepayment    Expenses      Receivable      Right
CONSOLIDATED STATEMENT OF OPERATIONS              Reported      Adjustments   Adjustments   Adjustments   Adjustments   As Restated
------------------------------------            ------------   ------------  ------------  ------------  ------------  ------------
<S>                                             <C>            <C>           <C>           <C>           <C>           <C>
Revenue                                         $ 10,473,229                                                           $ 10,473,229
Cost of Goods Sold                                 5,522,921                                                              5,522,921
Selling expenses                                   1,144,549                                                              1,144,549
General and administrative expenses                  894,798                                             $   (221,480)      673,318
Other income/expenses                                104,608                                                                104,608
Income from operations                             3,015,569                                                  221,480     3,237,049
Minority interest                                    241,246                                                   17,718       258,964
Provision for income taxes                                --                                                                     --
                                                ------------   ------------  ------------  ------------  ------------  ------------
Net income                                      $  2,774,323   $         --  $         --  $         --  $    203,762  $  2,978,085
                                                ------------   ------------  ------------  ------------  ------------  ------------
Net income per share - Basic and Diluted        $      55.49                                             $       4.08  $      59.57
                                                ============                                             ============  ============

<CAPTION>
                                                     As                                    Subscription     Patent
                                                 Previously      Prepayment    Expenses      Receivable      Right
CONSOLIDATED STATEMENT OF CASH FLOW               Reported      Adjustments   Adjustments   Adjustments   Adjustments   As Restated
-----------------------------------             ------------   ------------  ------------  ------------  ------------  ------------
<S>                                             <C>            <C>           <C>           <C>           <C>           <C>
Net cash provided by operating activities       $  1,242,296   $    731,146                                            $  1,973,442
Net cash used in investing activities             (1,774,329)                                            $  1,208,080      (566,249)
Net cash used in financing activities                935,369       (731,146)                               (1,208,080)   (1,003,857)
Net increase in cash and cash equivalents            403,336             --            --            --            --       403,336
Cash and cash equivalents at beginning of year       608,536                                                                608,536
                                                ------------   ------------  ------------  ------------  ------------  ------------
Cash and cash equivalents at end of year        $  1,011,872   $         --  $         --  $         --  $         --  $  1,011,872
                                                ============   ============  ============  ============  ============  ============
</TABLE>


                                      F-14