Asia Carbon Industries, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.1 - Asia Carbon Industries, Inc.	ex32-1.htm
EX-31.1 - Asia Carbon Industries, Inc.	ex31-1.htm
EX-32.2 - Asia Carbon Industries, Inc.	ex32-2.htm
EX-31.2 - Asia Carbon Industries, Inc.	ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2011

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from to

COMMISSION FILE NUMBER 333-167090

ASIA CARBON INDUSTRIES, INC.

(Exact Name of small business issuer as specified in its charter)

Maryland		26-2895795
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

110 Wall Street, 11th Floor, New York, New York 10005

(Address of principal executive offices) (Zip Code)

Issuer’s telephone Number: (646) 623-6999

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of May 16, 2011 the issuer had 50,608,077 outstanding shares of Common Stock.

Table of Contents

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.	4
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	9
Item 4.	Controls and Procedures.	9

	PART II
Item 1.	Legal Proceedings.	10
Item 1A.	Risk Factors.	10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	10
Item 3.	Defaults Upon Senior Securities.	10
Item 4.	(Removed and Reserved).	10
Item 5.	Other Information.	10
Item 6.	Exhibits.	10

Table of Contents

PART I

Item 1. Financial Statements.

ASIA CARBON INDUSTRIES INC AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

	Page

Consolidated Balance Sheets As of March 31, 2011 (Unaudited) and December 31, 2010	F - 1

Consolidated Statements of Income and Comprehensive Income Three Months ended March 31, 2011 and 2010 (Unaudited)	F - 2

Consolidated Statements of Cash Flows Three Months Ended March 31, 2011 and 2010 (Unaudited)	F - 3

Notes to Consolidated Financial Statements (Unaudited)	F - 4

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ASIA CARBON INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2011		2010
	(Unaudited)
ASSETS
Current Assets:
Cash and equivalents	$	7,568,601	$	5,717,142
Accounts receivable, net		6,081,007		6,034,573
Inventories		1,690,873		1,476,061
Prepaid expenses		6,108		6,061
Total Current Assets		15,346,589		13,233,837

Property and Equipment, Net		10,846,982		11,031,788

Other Assets:
Idle assets, net		927,193		959,967
Land use rights, net		212,246		211,770
Total Other Assets		1,139,439		1,171,737

TOTAL ASSETS	$	27,333,010	$	25,437,362

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term debt	$	-	$	1,312,163
Accounts payable		4,721,189		3,913,207
Accrued liabilities		203,987		163,518
Taxes payable		990,040		896,351
Due to shareholder		20,011		19,855
Total Current Liabilities		5,935,227		6,305,094

Commitments and Contingencies

Stockholders' Equity:
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 authorized, none issued and outstanding		-		-
Blank Check Preferred Stock, $0.001 par value, 5,000,000 authorized, none issued and outstanding		-		-
Common stock, $0.001 par value, 100,000,000 authorized, 50,608,077 issued and outstanding at March 31, 2011 and December 31, 2010		50,608		50,608
Additional paid-in capital		5,533,737		5,533,737
Statutory reserves		1,224,559		1,224,559
Retained earnings		12,733,483		10,628,010
Accumulated other comprehensive income		1,855,396		1,695,354
Total Stockholders' Equity		21,397,783		19,132,268
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	27,333,010	$	25,437,362

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

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ASIA CARBON INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended March 31,
	2011			2010


Net Sales	$	13,441,516		$	5,294,873
Cost of Sales		10,260,084			4,504,212
Gross Profit		3,181,432			790,661

Operating Expenses:
Depreciation		56,919			16,186
Bad debts		3,282			(3,621	)
Selling		71,076			35,922
Professional fees		108,897			187,322
Other		50,630			34,213
Total		290,804			270,022
Income From Operations		2,890,628			520,639
Other Income and (Expense)
Interest expense		(27,178	)		(35,644	)
Income Before Provision for Income Tax		2,863,450			484,995
Provision for Income Tax		757,977			167,727
Net Income		2,105,473			317,268

Other Comprehensive Income (Loss)		160,042			(591	)
Comprehensive Income	$	2,265,515		$	316,677

Net Income Per Share - Basic and Diluted	$	0.04		$	0.01
Weighted Average Shares Outstanding - Basic and Diluted		50,608,077			43,678,272

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

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ASIA CARBON INDUSTRIES INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED)

	2011			2010
Cash Flows from Operating Activities:
Net Income	$	2,105,473		$	317,268
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for (reduction in) allowances, returns and doubtful accounts		3,282			(3,621	)
Depreciation		310,309			124,436
Amortization of land use rights		1,181			406
Common stock issued for services		-			34,617
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable		(50,498	)		397,499
(Increase) decrease in inventories		(214,812	)		154,737
(Increase) decrease in prepaid expenses		(47	)		25,000
Increase in accounts payable		807,982			548,074
Increase in accrued expenses		40,469			69,063
Increase (decrease) in taxes payable		93,689			(193,959	)
Net Cash Provided by Operating Activities		3,097,028			1,473,520

Cash Flows from Financing Activities
Repayment of short term debt		(1,312,163	)		(25,500	)
Shareholder loans receivable		-			(2,615,993	)
Proceeds from private placement		-			1,430,036
Commission paid for private placement		-			(634,966	)
Net Cash (Used in) Financing Activities		(1,312,163	)		(1,846,423	)

Effect of Exchange Rate Changes on Cash		66,594			(591	)
Net Increase (Decrease) in Cash and Equivalents		1,851,459			(373,494	)
Cash and Equivalents - Beginning of Period		5,717,142			2,172,641

Cash and Equivalents - End of Period	$	7,568,601		$	1,799,147

Supplemental Cash Flow Information:
Interest Paid	$	31,436		$	36,136
Income taxes	$	665,515		$	309,225

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

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ASIA CARBON INDUSTRIES INC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 and 2010

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Organizations

Asia Carbon Industries, Inc. (“Asia Carbon” or “Company”) was incorporated June 23, 2008 under the laws of the State of Maryland. The Company is a holding Company to develop business opportunities in the People’s Republic of China (“PRC”).

On November 10, 2008, Asia Carbon formed a wholly-owned subsidiary, Jin zheng Li-Te-Wei-Si Carbon (Taiyuan) Inc. (“Liteweisi”) under PRC law in Taiyuan, China. Liteweisi is a management company to manage operations in China.

Taiyuan Hongxing Carbon Black Ltd. Company (“Hongxing”) was incorporated December 4, 2003 under the laws of the PRC. Hongxing is located at Qingxu County, Taiyuan, Shanxi province of China. Hongxing had two shareholders with registered capital of $384,300. Hongxing’s registered capital was $3,316,300 after one shareholder contributed $2,932,000 to Hongxing in 2008.

On December 29, 2009, Asia Carbon had, through its wholly owned subsidiary, Liteweisi, entered into Entrusted Management, Exclusive Option, Exclusive Purchase, Pledge of Equity and Shareholders’ Voting Proxy Agreements (collectively, the “Entrusted Agreements”) with Hongxing and shareholders of Hongxing, Guoyun Yao and Chunde Meng (“Hongxing Shareholders”). The effect of the Entrusted Agreements is to cede control of management and economic benefits of Hongxing to Liteweisi. Asia Carbon issued 36,239,394 restricted shares of its common stock, par value $0.001, to Karen Prudente, nominee and trustee for the Hongxing Shareholders for Hongxing and the Hongxing Shareholders for the Entrusted Agreements with Liteweisi.

The Entrusted Agreements empowered Asia Carbon, through Liteweisi, the ability to substantially influence Hongxing’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholders’ approval. As a result of these Entrusted Agreements, which obligate Asia Carbon to absorb a majority of the risk of loss from Hongxing’s activities and enable Asia Carbon to receive a majority of its expected residual returns, Asia Carbon, through its wholly-owned subsidiaries, accounts for Hongxing as its Variable Interest Entity (“VIE”) under ASC 810-10-15-14. Accordingly, Asia Carbon consolidates Hongxing’s operating results, assets and liabilities.

For accounting purposes, the transaction was accounted for in a manner similar to a reverse merger or recapitalization, since the stockholders of Hongxing owned a majority of Asia Carbon’s common stock immediately following the transaction. Consequently, the assets and liabilities and historical operations reflected in the consolidated financial statements prior to the transaction are those of Hongxing and are recorded at the historical cost of Hongxing, and the consolidated financial statements after completion of the transaction include the assets and liabilities of Asia Carbon, Liteweisi, and Hongxing (collectively, the “Company”), historical operations of Hongxing, and operations of Asia Carbon and Liteweisi from the date of the transaction. The 36,239,394 restricted shares of common stock issued to Karen Prudente were presented as outstanding for all periods.

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Asia Carbon, through its operating company in China, manufactures three carbon black products, N220, N330 and N660, under the brand name “Great Double Star”. Most of the Company’s products are used by the domestic tire industry.

Basis of Presentation

The accompanying consolidated financial statements were prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

Basis of Consolidation

The consolidated financial statements include the accounts of the Asia Carbon and its subsidiaries. All significant inter-company transactions were eliminated in consolidation.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with US GAAP 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and equivalents, accounts receivable, prepaid expenses, short term debt, accounts payable and accrued liabilities, various taxes payable and customer advances. The fair value of these financial instruments approximates their carrying amounts in the balance sheets due to their short term maturity or by comparison to other instruments with similar terms.

Foreign Currency Translation

The functional currency of Hongxing and Litweisi is the Chinese Renminbi (“RMB”). The reporting currency of the Company is the United States dollar (“US dollar”).

The assets and liabilities of Hongxing and Litweisi are translated into US dollars at period-end exchange rates. The revenues and expenses are translated into US dollars at average exchange rates of the periods. Resulting translation adjustments are recorded as a component of accumulated other comprehensive income within stockholders’ equity.

The exchange rates used were as follows:

	Three Months Ended March 31,				Year Ended December 31,
	2011		2010		2010
RMB/US$ exchange rate at period end		0.15271		0.14650		0.15152
Average RMB/US$ exchange rate for the period		0.15200		0.14650		0.14774

Transaction gains or losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency were included in the consolidated results of operations. There was no material foreign currency transaction gain or loss for 2011 or 2010.

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Cash and Equivalents

Cash and equivalents consist of cash on hand, cash on deposit with banks, and highly liquid debt investments with a maturity of three months or less when purchased.

Inventories

Inventories are stated at the lower of cost, as determined on a weighted average basis, or market. Costs of inventories include raw materials and related costs incurred in bringing the products to the Company’s location and in proper condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. The Company writes down inventories to market value if below cost. The Company also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required.

Property, Plant and Equipment, Net

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the respective assets.

Long Lived Assets

The Company evaluates potential impairment of long-lived assets, in accordance with Accounting Standards Codification (ASC) 360-10-15 “Impairment or Disposal of Long-Lived Assets” which requires the Company to evaluate a long-lived asset for recoverability when there is event or circumstances that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value.

Revenue Recognition

We recognize revenue from sales of products. Sales are recognized when these four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectivity is reasonably assured. Sales revenue is presented net of value added tax (VAT), sales rebates and returns. No return allowance is made as product returns are insignificant based on historical experience. The Company performs ongoing credit evaluations of its customers’ financial condition, but generally does not require collateral to support customer receivables. Credit risk is controlled through credit approvals, limits and monitoring procedures. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors. Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been exhausted. The Company does not routinely permit customers to return products and historically, customer returns have been immaterial. The Company will replace a product if the customer is not satisfied with its quality. Freight in costs are included in cost of goods sold.

Advertising Costs

Advertising costs are expensed as incurred. There were no material adverting costs for 2011 or 2010.

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Research and Development

In accordance with the Accounting Standards Codification subtopic 730-10, Research and Development, the Company expenses all research and development costs as incurred. There were no material research and development costs for 2011 or 2010.

Segment Information

ASC 280-10 requires disclosures about segments and related information of a public entity. The Company manufactures and sells carbon black made from tar oil. The Company, its major suppliers and customers are all located in the PRC. The Company operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Statement of Cash Flows

In accordance ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon local currencies using average translation rates. As a result, amounts reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding asset and liabilities balances on the consolidated balance sheets.

Income Taxes

The Company accounts for income taxes using the asset and liability method described in ASC 740-10, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized.

Reclassifications

Certain prior year amounts were reclassified to conform to the manner of presentation in the current period.

Recent Pronouncements

In April 2010, FASB issued Accounting Standards Update (ASU) No. 2010-13, Compensation – Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades. This update provides amendments to Accounting Standards Codification (ASC) Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The amendments in this update should be applied by recording a cumulative-effect adjustment to the opening balance of retained earnings. The cumulative-effect adjustment should be calculated for all awards outstanding as of the beginning of the fiscal year in which the amendments are initially applied, as if the amendments had been applied consistently since the inception of the award. The cumulative-effect adjustment should be presented separately. Earlier application is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

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In December 2010, FASB issued ASU No. 2010-28, Intangibles – Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. The amendments in this update affect all entities that have recognized goodwill and have one or more reporting units whose carrying amount for purposes of performing Step 1 of the goodwill impairment test is zero or negative. The amendments in this update modify Step 1 so that for those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that an impairment may exist. The qualitative factors are consistent with existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. Upon adoption of the amendments, any resulting goodwill impairment should be recorded as a cumulative-effect adjustment to beginning retained earnings in the period of an adoption. Any goodwill impairments occurring after the initial adoption of the amendments should be included in earnings. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In December 2010, FASB issued ASU No. 2010-29, Business Combinations (Topic 805): Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this update are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company intends to adopt the disclosure requirements for any business combinations in 2011and thereafter.

On March 5, 2010, FASB issued ASU No. 2010-11, Derivatives and Hedging Topic 815: Scope Exception Related to Embedded Credit Derivatives. This ASU clarifies the guidance within the derivative literature that exempts certain credit related features from analysis as potential embedded derivatives requiring separate accounting. The ASU specifies that an embedded credit derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another is not subject to bifurcation from a host contract under ASC 815-15-25, Derivatives and Hedging – Embedded Derivatives – Recognition. All other embedded credit derivative features should be analyzed to determine whether their economic characteristics and risks are “clearly and closely related” to the economic characteristics and risks of the host contract and whether bifurcation is required. The ASU was effective for the Company on July 1, 2010. Early adoption is permitted. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In January 2010, FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This update provides amendments to ASC Topic 820 that will provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements and (4) the transfers between Levels 1, 2, and 3. This standard is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In January 2010, FASB issued ASU N0. 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash. The update clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected prospectively in earnings per share and is not considered a stock dividend for purposes of ASC Topic 505 and Topic 260, Earnings Per Share. This standard is effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The adoption of this standard did not have a material impact to the Company’s financial position or results of operations.

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NOTE 3 – INTERIM FINANCIAL STATEMENTS

The unaudited consolidated financial statements as of March 31, 2011 and for the three months ended March 31, 2011 and 2010 were prepared in accordance with US GAAP for interim financial information and with Securities and Exchange Commission (“SEC”) instructions to Form 10-Q. In the opinion of management, the unaudited consolidated financial statements were prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of March 31, 2011and the results of operations and cash flows for the three months ended March 31, 2011 and 2010. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three-month period ended March 31, 2011 are not necessarily indicative of the results to be expected for any subsequent quarter of the year ending December 31, 2011. The balance sheet at December 31, 2010 was derived from the audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP was condensed or omitted pursuant to the SEC’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2010 included in our Form 10-K filed on March 31, 2011.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable at March 31, 2011 and December 31, 2010 consisted of the following:

	2011			2010
		(Unaudited)
Accounts receivable	$	6,182,711		$	6 ,132,213
Allowance for doubtful accounts		(101,704	)		(97,640	)
Accounts receivable, net	$	6,081,007		$	6,034,573

NOTE 5 - INVENTORIES

Inventories at March 31, 2011 and December 31, 2010 consisted of the following:

	2011		2010
	(Unaudited)
Raw materials	$	1,291,850	$	1,138,027
Packing and other materials		40,471		49,051
Finished Products		358,552		288,983
	$	1,690,873	$	1,476,061

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NOTE 6 - PROPERTY AND EQUIPMENT

Property and equipment was summarized as follows at March 31, 2011 and December 31, 2010:

	Estimated Useful Lives	2011		2010
		(Unaudited)
Plant	20	$	3,734,969	$	3,705,864
Machinary and equipment	10		9,861,306		9,784,462
Other machinery and equipment	5		112,028		111,155
	5		55,721		55,287
			13,764,024		13,656,768
Less: Accumulated Depreciation			2,917,042		2,624,980
		$	10,846,982	$	11,031,788

Depreciation of property and equipment was $270,184 and $124,436 for three months ended March 31, 2011 and 2010, respectively. Depreciation included in cost of goods sold was $253,391and $108,249 for 2011 and 2010, respectively.

NOTE 7 – IDLE ASSETS

To build a new wet method production line, the Company retired its fourth dry method production line in July 2008, which was built in 2007. Most of the equipment and parts were in good condition and able to be used in the new wet method production line. The remaining net book value of the fourth dry method production line was RMB 14,735,993 ($2,160,297, translated at the 2008 exchange rate). In July 2008, the Company decided to stop depreciating these assets until completion of new production line.

On October 26, 2010, the Company completed construction of the new wet production line. Approximately 50% of the equipment and parts of the fourth dry production line were used in the Company’s new wet method production line. The remaining equipment and parts with net book value of RMB 7,391,507 ($1,119,961, translated at the 2010 exchange rate) became idle assets. The Company plans to use remainder of the equipment and parts as replacement parts for the Company’s other three dry production lines, or to sell them in the used market place. The estimated remaining useful lives for the idle assets are seven years. The Company’s policy is to depreciate the idle assets during their estimated remaining useful lives until they are reused or sold.

Depreciation of idle assets was $40,125 for three months ended March 31, 2011.

NOTE 8 – SHAREHOLDERS LOANS RECEIVABLE

During the first quarter of 2010, the Company loaned RMB 16,226,224 ($2,377,142) and RMB 1,630,386 ($238,851) to two of the Company’s significant shareholders. These were interest free and due on demand. On June 23, 2010, the Company received RMB 16,226,224 ($2,377,142) and 1,630,386 ($238,851) from the aforementioned shareholders, respectively.

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NOTE 9 – XIGU LOAN RECEIVABLE AND LAND USE RIGHTS

On December 29, 2005, the Company lent RMB 554,130 ($84,621) to Xigu Village (“Village”), which was interest free and due December 29, 2008. The Village failed to pay the loan as of December 29, 2008. Pursuant to the loan agreement, once the Village was in default, the Company had the right to use the outstanding amount as a prepayment of its future rent obligation for this 49 mu (8.07 acre) parcel of land. The lease requires a yearly payment of RMB 10,000 ($1,527) through July, 2053. The balance due was capitalized at December 31, 2008 as land use rights and amortized over the remaining life of the lease.

On October 31, 2007, the Company lent an additional RMB 1,000,000 ($152,710) to the Village. The loan was interest free and due October 31, 2010. Xigu Village failed to repay the loan as of October 31, 2010. Pursuant to the loan agreement, if the Village was unable to repay the loan when due, the Company had the right to offset the defaulted loan balance against future rent obligations of the Company’s newly leased second 49 mu (8.07 acre) parcel of land. The lease requires a yearly payment of RMB 10,000 ($1,527) through June 2056, the loan balance due was capitalized as land use rights and amortized over the remaining life of land use rights lease started on November 1, 2010.

As of March 31, 2011 and December 31, 2010, land use rights were as follows:

	2011			2010
	(Unaudited)
Land use rights	$	237,331		$	235,482
Less: accumulated amortization		(25,085	)		(23,712	)
Land use rights, net	$	212,246		$	211,770

Amortization of land use rights was recorded as rent. Rent expense was $1,181 and $406 for three months ended March 31, 2011 and 2010, respectively.

The estimated annual amortization of land use rights for the next five years and thereafter is as follows as of March 31, 2011, by years:

2012	$	4,747
2013		4,747
2014		4,747
2015		4,747
2016		4,747
Thereafter		188,511
Total	$	212,246

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The minimum rent payment for land lease at March 31, 2011 was as follows by years:

2012	$	3,054
2013		3,054
2014		3,054
2015		3,054
2016		3,054
Thereafter		188,351
Total	$	133,621

NOTE 10 – SHORT TERM DEBT

Short-term debt at December 31, 2010 consisted of the following:

To Xigu Credit Union
Interest at 11.68%, payable March 20, 2011 to C	$	487,894
To Chengguan Credit Union
Interest at 11.68%, payable March 20, 2011		824,269
Total	$	1,312,163

The short-term debts are renewable based on the past credit of the Company. Interest expense is paid quarterly. There were no other terms or loan covenants relating to these short term loans. On March 21, 2011, the Company repaid the $487,894 loan to Xigu Credit Union and the $824,269 loan to Chengguan Credit Union.

NOTE 11 – TAXES PAYABLE

Taxes payable at March 31, 2011 and December 31, 2010 consisted of:

	2011		2010
	(Unaudited)
PRC corporation income tax	$	761,517	$	669,055
Value added tax		214,575		213,424
Other taxes and surcharges		13,948		13,872
Total	$	990,040	$	896,351

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NOTE 12 - COMMITMENTS AND CONTINGENCIES

Country Risk

As the Company's principal operations are conducted in the PRC, the Company is subject to considerations and risks not typically associated with companies in North America and Western Europe. These risks include, among others, risks associated with the political, economic and legal environments and foreign currency exchange limitations encountered in the PRC. The Company's results of operations may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, among other things.

In addition, all of the Company's transactions in the PRC are denominated in RMB, which must be converted into other currencies before remittance from the PRC. Both conversion of RMB into foreign currencies and remittance of foreign currencies abroad require approval of the PRC government.

Lack of Insurance

The Company currently has no insurance for its office facilities and operations and cannot be certain it can cover the risks associated with such lack of insurance or that it will be able to obtain and/or maintain insurance to cover these risks at economically feasible premiums.

Corporate Finance Advisory Services Agreements

On September 8, 2008, Asia Carbon entered a Corporate Finance Advisory Services Agreement (the “Asia Carbon Advisory Agreement”) with Friedland Corporate Investor Services LLC (“Friedland LLC”). The agreement provided Friedland LLC would provide corporate finance advisory services to Asia Carbon designed to form a Wholly Owned Foreign Enterprise (“WOFE”) in China and to result in Asia Carbon’s shares becoming publicly-traded in the US. As consideration for these services, Asia Carbon agreed to pay Friedland no less than 10% of the Company shares outstanding on a fully diluted basis at the time of commencement of trading of the Company’s shares. These services were provided during 2008 and were valued at $50,000 and recorded as consulting expense.

Pursuant to the Asia Carbon Advisory Agreement, the Company issued 4,700,000 and 360,809 shares to Friedland LLC on January 25, 2010 and May 11, 2010, respectively. In addition, the Company paid $498,034 to Friedland LLC in connection with a private placement (“PP”). This amount was netted against the proceeds from the PP and reduced additional paid in capital.

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NOTE 13 – STOCKHOLDERS’ EQUITY

On January 25, 2010, the Board of Directors (“BOD”) approved the resolution to execute the Asia Carbon Advisory Agreement with Friedland LLC. Pursuant to the agreement, the Board agreed to issue 4,700,000 shares to the designees of Friedland. The 4,700,000 shares issued to Friedland LLC were valued at $50,000 and recorded in 2008.

On January 25, 2010, the BOD approved a resolution to issue 74,900 shares of common stock to its sole director, Mr. Michael Segal at the time for his services as a director of the Company. Since there was no established market for the Company’s equity, the price of private placement was used as a market price to value the service. A fee of $24,717 was recorded during the three months ended March 31, 2010.

On February 17, 2010, the BOD approved a resolution to issue 30,000 shares of common stock to Ms. Karen Prudente for her services to manage the trust of Hongxing shareholders. Since there was no established market for Company’s equity, the price of private placement was used as a market price to value the service. A fee of $9,900 was recorded during the three months ended March 31, 2010.

On February 10, 2010, Asia Carbon issued 4,146,710 shares of common stock to twenty one individual subscribers at $0.33 per share for $1,368,417. On March 29, 2010 the Company issued 186,726 to two individual subscribers at $0.33 per share for $61,620. As of March 31, 2010, total commission paid to brokers was $634,966.

On April 30, 2010, Asia Carbon issued 4,867,772 shares of common stock to seven individual subscribers at $0.33 per share for $1,606,366. Total commissions and finder’s fees were $169,534.

On May 3, 2010, Asia Carbon issued 1,666 shares of common stock to one individual subscriber at $1.50 per share for $2,500.

On May 11, 2010, the BOD approved the resolution to issue additional 360,809 shares to Friedland LLC, pursuant to the Advisory Services Agreement between the Company and Friedland dated September 8, 2008.

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NOTE 14 - CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in various banks in China. Currently, no deposit insurance system has been set up in China. Therefore, the Company will bear all risk if any of these banks become insolvent. As of March 31, 2011 and December 31, 2010, the Company’s uninsured cash balances were $7,506,832 and $5,559,314, respectively.

NOTE 15 - INCOME TAXES

The provision for income tax was $757,977 and $167,727 for three months ended March 31, 2011 and 2010, respectively, which arose from foreign income tax incurred and or paid to the Chinese tax authorities. The Company’s income tax was assessed on 25% of net income.

Foreign pretax earnings were $2,863,450 and $484,995 for three months ended March 31, 2011 and 2010, respectively. Pretax earnings of a foreign subsidiary are subject to U.S. taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-U.S. subsidiaries except to the extent such earnings are indefinitely invested outside the United States. At March 31, 2011, approximately $14,438,000 of accumulated unadjusted earnings of non-U.S. subsidiaries was indefinitely invested. At the existing U.S. federal income tax rate, additional taxes of approximately $1,299,000 would have to be provided if such earnings were remitted currently.

The Company did not have any significant temporary differences giving rise to deferred tax liabilities as of March 31, 2011 and 2010.

Reconciliation of the differences between the statutory US Federal income tax rate and the effective rate was as follows for the three months ended March 31, 2011 and 2010:

	2011			2010
	(Unaudited)			(Unaudited)
US statutory tax rate		34	%		34	%
Tax rate difference		-9.0	%		-9.0	%
Changes in valuation allowance		1.5	%		9.6	%
Effective rate		26.5	%		34.6	%

At March 31, 2011, the Company had US net operating loss carry forwards of approximately $531,000. A 100% valuation allowance was recorded against their potential tax benefit due to the uncertainty of its realization.

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NOTE 16 – MAJOR CUSTOMERS AND VENDORS

The Company purchased raw materials predominantly from eight and six vendors during the three months ended March 31, 2011 and 2010, respectively. The percentage of total purchases during the periods, and accounts payable balance at the end of the periods to these vendors were as follows:

		Three Months Ended March 31,
		2011					2010
Vendor		% of Purchases			Accounts Payable Balance		% of Purchases			Accounts Payable Balance
	1		12	%	$	597,712		11	%	$	273,966
	2		12	%		608,410		17	%		192,370
	3		12	%		503,182		13	%		311,403
	4		13	%		561,589		20	%		362,513
	5		12	%		570,654		20	%		369,062
	6		13	%		637,658		29	%		286,394
	7		13	%		594,008		-			-
	8		13	%		503,080		-			-
Total			100	%				100	%

During three months ended March 31, 2011, five customers accounted for 84% of sales, each of them accounted for 29%, 21%, 12%, 12% and 10% of sales. At March 31, 2011, accounts receivable from these customers were $1,814,041, $1,222,018, $693,219, $670,381 and $539,843, respectively.

During three months ended March 31 2010, three customers accounted for 74% of sales, each of them accounted for 30%, 22%, and 22% of sales. At March 31, 2010, accounts receivable from these customers were $707,768, $510,771 and $557,740, respectively.

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Item 2. Management’s Discussion and Analysis of Fiancial Condition and Results of Operations.

The following discussion should be read in conjunction with our financial statements and notes thereto included in this report.

The Entrusted Agreements granted Asia Carbon, through Liteweisi, the ability to substantially influence Hongxing’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholders’ approval. As a result of these Entrusted Agreements, which obligate Asia Carbon to absorb a majority of the risk of loss from Hongxing’s activities and enable Asia Carbon to receive a majority of its expected residual returns, Asia Carbon, through its wholly-owned subsidiaries, accounts for Hongxing as its Variable Interest Entity (“VIE”) under FASB Accounting Standards Codification (“ASC”) 810-10-15-14. Accordingly, Asia Carbon consolidates Hongxing’s operating results, assets and liabilities.

Results of Operations

The Three Months Ended March 31, 2011 and 2010

Comparison of Sales for the Three Months Ended March 31, 2011 and 2010

	2011				2010
Product	Sales		Quantity (Metric Ton)		Sales		Quantity (Metric Ton)
N220 - D	$	2,327,289		2,220	$	1,829,960		2,275
N330		2,212,873		2,221		1,738,667		2,304
N660		2,207,716		2,236		1,726,246		2,288
N220 - W		6,245,563		5,463		-		-
Naphthalene oil		448,075		500		-		-
Total Sales	$	13,441,516		12,640	$	5,294,873		6,867

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Sales for the three months ended March 31, 2011 were $13,441,516, an increase of $8,146,643 or 154%, compared to $5,294,873 for the three months ended March 31, 2010. The increase in sales was attributable mainly to our new wet production line which commenced production on October 26, 2010 and sale of our new byproducts, naphthalene oil. During the three months ended March 31, 2011, we sold 5,463 metric tons of N220-W and generated revenue of $6,245,563 from our new wet production line. We sold 500 metric tons naphthalene oil and had revenue of $448,075 in the three months ended March 31, 2011. Revenue from our new wet production line and naphthalene oil together accounted 82% of the increase in sales in the three months ended March 31, 2011. The remaining 18% increase in sales was attributable to the increase of unit sales price which was a result of the recovery of the financial crisis worldwide, and recovery of the demand for our products. The average sales price of our black carbon products was $1,070 per metric ton during the first quarter of 2011, an increase of $299 per ton, or 39%, from $771 per ton during the first quarter of 2010.

The Company currently has three dry method production lines. Each production line has a capacity of 12,000 metric tons per annum. The designed capacity of the new wet production line is 25,000 ton per annum. The prorated production/total capacity utilization rate was 80% and 76% during the three months ended March 31, 2011 and 2010, respectively.

Comparison of Cost of Sales for the Three Months Ended March 31, 2011 and 2010

Cost of sales was $10,260,084 for three months ended March 31, 2011, an increase of $5,755,872, or 128%, compared to $4,504,212 in the three months ended 2010. This increase was mainly attributable to an increase in sales compared to the 2010 period. The principal raw material used in our manufacture is residual heavy oils from distillation of coal tars. Production used 21,692 metric tons of coal tar oil for the three months ended March 31, 2011, an increase of 8,576 tons, or 65%, compared to 13,116 tons for the three months ended March 31, 2010. The increase in consumption of coal tars oil accounted for 46% of the increase in cost of sales. The 48% increase in cost of sales resulted from increased coal tar oil price in 2011. The average price of coal tars was $438 per ton during 2011, an increase of $127 per ton, or 41%, from $311 per ton during 2010. The remaining 6% increase in cost of sales was due to other miscellaneous costs.

Comparison of Gross Profit Rate for the Three Months Ended March 31, 2011 and 2010

Gross profit was $3,181,432 for the three months ended March 31, 2011, an increase of $2,390,771, or 302%, compared to $790,661 for the three months ended March 31, 2010. The gross profit rate was 24% for the three months ended March 31, 2011, an increase of 9%, compared to 15% in the three months ended March 31, 2010. The increase in gross profit rate in 2011 was attributable mainly to production of our new wet production line and sale of byproducts.

Comparison of Operating Expenses for the Three Months Ended March 31, 2011 and 2010

Operating expenses included depreciation, allowance for bad debts, selling, professional fees and other general and administrative expenses. Operating expenses were $290,804 for the three months ended March 31, 2011, an increase of $20,782, or 8% compared to $270,022 for the three months ended March 31, 2010. The increase in operating expenses was mainly attributable to the $40,733 increase in depreciation and the $35,154 increase in selling expenses.

Comparison of Net Income for the Three Months Ended March 31, 2011 and 2010

Net income was $2,105,473 for the three months ended March 31, 2011, an increase of $1,788,205, or 564%, compared to $317,268 for the three months ended March 31, 2010. Increase in net income resulted from our new production capacity and improved gross margin rate.

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Liquidity and Capital Resources

We had cash and equivalents of $7,568,601 and $5,717,142 as of March 31, 2011 and December 31, 2010, respectively. Our funds are kept in financial institutions in China, which do not provide insurance for amounts on deposit. Moreover, we are subject to the regulations of the PRC which restrict the transfer of cash from China, except under certain specific circumstances. Accordingly, such funds may not be readily available to us to satisfy obligations incurred outside the PRC.

Our accounts receivable has been an increasingly significant portion of our current assets, to $6,081,007 and $6,034,573, or 40% and 46%, of current assets, as of March 31, 2011 and December 31, 2010, respectively. If customers responsible for a significant amount of accounts receivable were to become insolvent or otherwise unable to pay for our products, or to fail to make payments in a timely manner, our liquidity and results of operations could be materially adversely affected. An economic or industry downturn could materially adversely affect the servicing of these accounts receivable, which could result in longer payment cycles, increased collections costs and defaults in excess of management’s expectations. A significant deterioration in our ability to collect accounts receivable could affect our cash flow and working capital and could also impact the cost or availability of financing available to us.

Our accounts receivable aging was as follows, as of March 31, 2011 and December 31, 2010:

	Total			Current			31-90		91-120		121-360		Over 361
2011		100.00	%		91.00	%	8.00	%	0.00	%	0.00	%		1.00	%
2010		100.00	%		96.40	%	3.03	%	0.00	%	0.00	%		0.57	%

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Allowance for doubtful accounts is based on our assessment of the collectability of specific customer accounts, the aging of accounts receivable, our history of bad debts, and the general condition of the industry. If a major customer’s credit worthiness deteriorates, or our customers’ actual defaults exceed historical experience, our estimates could change and impact our reported results. We have not experienced any significant amount of bad debt since the inception of our operation. Allowance for doubtful accounts was $101,704 and $97,640 as of March 31, 2011 and December 31, 2010, respectively.

Net cash provided by operating activities was $3,097,028 and $1,473,520 for the three months ended March 31, 2011 and 2010, respectively. The increase in net cash provided by operating activities in the three months ended March 31, 2011 compared to the 2010 period, was mainly due to the $1,788,205 increase in net income.

Net cash used in financing activities was $1,312,163 and $1,846,423 for the three months ended March 31, 2011 and 2010, respectively. The Company repaid short term loan of $1,312,163 and $25,500 during the three months ended March 31, 2011 and 2010, respectively. On February 10, 2010, the Company issued 4,146,710 shares of common stock to twenty one individual subscribers at $0.33 per share for $1,368,416. On March 29, 2010 the Company issued 186,726 shares to two individual subscribers at $0.33 per share for $61,620. For the three months ended March 31, 2010, 4,333,436 shares were issued for $1,430,036. For the three months ended March 31, 2010, total commissions paid was $634,966. During the first quarter of 2010, the Company loaned $2,615,993 to two of the Company’s significant shareholders. On June 23, 2010, the Company received repayment of $2,615,993 from aforementioned shareholders.

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Short term debt at December 31, 2010 consisted of the following:

To Xigu Credit Union
Interest at 11.68%, payable March 20, 2011	$	487,894
To Chengguan Credit Union
Interest at 11.68%, payable March 20, 2011		824,269
Total Short Term Debt		1,312,163

The short term debts are renewable based on the past credit of the Company. Interest expense is paid quarterly. There were no other terms or loan covenants relating to these short term loans. On March 21, 2011, the Company repaid the $487,894 loan to Xigu Credit Union and the $824,269 loan to Chengguan Credit Union.

Our ability to maintain sufficient liquidity depends partially on our ability to achieve anticipated levels of revenue, while continuing to control costs. If we did not have sufficient available cash, we would have to seek additional debt or equity financing through other external sources, which may not be available on acceptable terms, or at all. Failure to maintain financing arrangements on acceptable terms would have a material adverse effect on our business, results of operations and financial condition.

We believe that our working capital, together with our cash flow from operations will be sufficient to enable us to meet our cash requirements for the next 12 months. However, we may incur additional expenses as we seek to expand our business in the future, and it is possible that we may require additional funding for that purpose. We cannot assure you that funding will be available when we require funding.

Critical Accounting Policies and Estimates

The Company believes the accounting principles utilized by it conform to accounting principles generally accepted in the United States of America (“US GAAP”). The Company applies the following critical accounting policies related to revenue recognition in the preparation of its financial statements.

General

The Company’s Consolidated Financial Statements are prepared in accordance with US GAAP, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes 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. Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors. Management believes the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.

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Revenue Recognition

We recognize revenue from the sales of products. Sales are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales revenue is presented net of value added tax (“VAT”), sales rebates and returns. No return allowance is made as product returns are insignificant based on historical experience. The Company performs ongoing credit evaluations of its customers’ financial condition, but usually does not require collateral to support customer receivables. The credit risk is controlled through credit approvals, limits and monitoring procedures. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other factors. Accounts receivable are charged against the allowance for doubtful accounts once all collection efforts have been exhausted. The Company does not routinely permit customers to return products and historically, customer returns have been immaterial. The Company will replace products if our customers are not satisfied with their quality. Freight-in costs are included in cost of goods sold.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and equivalents, accounts receivable, prepaid expenses, short term debt, accounts payable and accrued liabilities, and customer advances. The fair value of these financial instruments approximate their carrying amounts reported in the balance sheets due to their short term maturity or by comparison to other instruments with similar terms.

Foreign Currency Translation

The consolidated financial statements of the Company are translated pursuant to ASC 830, “Foreign Currency Matters.” The functional currency of Hongxing and Liteweisi is the Chinese Renminbi (“RMB”). The reporting currency of the Company is the United States dollar (“US dollar”). The financial statements of Hongxing and Liteweisi are translated to US dollars using period-end exchange rates for assets and liabilities, historical rates for equities, and average exchange rates for revenues, costs and expenses. Translation adjustments are recorded in accumulated other comprehensive income as a component of stockholders’ equity. Transaction gains or losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated results of operations.

Segment Information

ASC 280-10, “Disclosure About Segments of and Enterprise and Related Information”, requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers. The Company operates in a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

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Item 3. Quantitative And Qualitative Disclosures About Market Risk.

Not Applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

During the most recent quarter ended March 31, 2011, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

Item 1A. Risk Factors.

Not Appliable

Item 2. Unregistered Sales Of Equity Securities And Use Of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number		Description of Exhibit

31.1		Section 302 Certification of Principal Executive Officer
31.2		Section 302 Certification of Principal Financial Officer
32.1		Section 906 Certification of Principal Executive Officer.
32.2		Section 906 Certification of Principal Financial Officer

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ASIA CARBON INDUSTRIES, INC.

Date: May 16, 2011	By:	/s/ Guo Yun Yao
		Guo Yun Yao
		Chief Executive Officer, President, Secretary and Director
		(principal executive officer)


Date: May 16, 2011	By:	/s/ Xiaolong Zhou
		Xiaolong Zhou
		Chief Financial Officer (principal accounting and financial officer)

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Asia Carbon Industries, Inc. Reports

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