Asia Cork Inc. - FORM 10-Q

Attached files

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EX-32.2 - Asia Cork Inc.	v223881_ex32-2.htm
EX-32.1 - Asia Cork Inc.	v223881_ex32-1.htm
EX-31.1 - Asia Cork Inc.	v223881_ex31-1.htm
EX-31.2 - Asia Cork Inc.	v223881_ex31-2.htm

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

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

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

For the transition period from:

Commission file number 000-30115

ASIA CORK INC.

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

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

3rd Floor, A Tower of Chuang Xin

Information Building

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

(Address of principal executive offices, including zip code)

(011) 86-13301996766

(Issuer’s telephone number, including area code)

(Former Address, if changed since last report)

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

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

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

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Small reporting company x

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: On May 20, 2011 there were 35,913,850 shares of Common Stock, par value $.0001 per share, outstanding.

ASIA CORK INC.

FORM 10-Q

QUARTERLY PERIOD ENDED MARCH 31, 2011

INDEX

		Page

PART I - FINANCIAL INFORMATION

Item 1: – Financial Statements		2

Item 2: - Management's Discussion and Analysis of Financial Condition and Results of Operations		25

Item 3: – Quantitative and Qualitative Disclosures About Market Risk		35

Item 4: Controls and Procedures		35

PART II - OTHER INFORMATION

Item 1: - Legal Proceedings		38

Item 1A: Risk Factors		38

Item 2: - Unregistered Sales of Equity Securities and Use of Proceeds		38

Item 3: – Default upon Senior Securities		38

Item 4: – Removed and Reserved		38

Item 5: – Other Information		38

Item 6: – Exhibits		38

PART 1- FINANCIAL INFORMATION

Item 1: – Financial Statements

ASIA CORK, INC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Assets:
Current Assets
Cash and equivalents	$	1,578,496	$	4,250,765
Accounts receivable, net of allowance for doubtful accounts of $490,350 and $372,734, respectively		9,316,640		7,162,355
Inventories		5,505,058		8,335,581
Advance to suppliers		4,182,451		3,356,897
Loan to unrelated party		3,970,314		-
Deferred income taxes assets		5,280		3,367
Prepayments and other current assets		480,129		42,520
Total Current Assets		25,038,368		23,151,485

Property and Equipment - Net		2,189,954		2,218,808
Construction in progress		550,499		-
Non-Refundable Deposit for Purchase of Land Use Right		1,527,044		1,514,621
Investment Properties - Net		3,838,207		3,848,298
Investment - At Cost		2,137,862		2,120,470
Intangible Assets- Net		3,486		3,540
Deferred Income Tax Assets		86,003		68,795
Total Assets		35,371,424		32,926,017

Liabilities and Equity:
Liabilities:
Current Liabilities
Accounts payable and accrued expenses		1,730,790		1,852,351
Convertible note, net		700,000		700,000
Customer deposit		13,595		104,644
Taxes payable		1,145,285		972,591
Due to stockholders/officers		185,132		183,626
Other current liabilities		-		27,263
Total Current Liabilities		3,774,802		3,840,475

Total Liabilities		3,774,802		3,840,475

Equity:
Asia Cork Inc. Stockholders' Equity:
Common stock, $0.0001 par value, 200,000,000 shares authorized,
35,913,850 and 35,663,850 shares issued and outstanding		3,591		3,566
Additional paid-in capital		4,575,421		4,485,446
Additional paid-in capital stock warrant		279,386		279,386
Reserve funds		3,906,010		3,566,911
Retained earnings		16,294,112		14,646,508
Accumulated other comprehensive income		3,849,269		3,594,537
Total Asia Cork Inc. Stockholders' Equity		28,907,789		26,576,354
Noncontrolling Interest		2,688,833		2,509,188
Total Equity		31,596,622		29,085,542

Total Liabilities and Equity	$	35,371,424	$	32,926,017

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

ASIA CORK, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(Stated in US Dollars)

	For The Three Months Ended March 31,
	2011			2010
	Unaudited			Unaudited
Revenues	$	9,737,881		$	3,634,641
Cost of Goods Sold		6,292,939			2,877,486
Gross Profit		3,444,942			757,155

Operating Expenses
Selling expenses		507,456			163,467
Bad debt expense (recover)		114,032			(3,514	)
Research & development costs		-			109,851
General and administrative expenses		287,304			208,508
Total Operating Expenses		908,792			478,312

Income From Operations		2,536,150			278,843

Other Income (Expenses)
Interest expenses , net		(32,117	)		(44,225	)
Other income , net		65,142			32,606
Total Other Income (Expenses)		33,025			(11,619	)

Income from Continuing Operations Before Taxes		2,569,175			267,224
Provision for Income Taxes		402,827			37,367

Net Income Before Noncontrolling Interest		2,166,348			229,857

Less: Net income attributable to the noncontrolling interest		179,645			19,807

Net Income Attributable to Asia Cork Inc.	$	1,986,703		$	210,050

Earnings Per Share - Basic and Diluted:
- Basic	$	0.06		$	0.01
- Diluted:	$	0.05		$	0.01

Weighted Common Shares Outstanding - Basic and Diluted
- Basic		35,827,739			35,663,850
- Diluted:		39,431,155			40,269,113

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

ASIA CORK, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(Stated in US Dollars)

	For The Three Months Ended March 31,
	2011		2010
	Unaudited		Unaudited
Net Income Before Noncontrolling Interest	$	2,166,348	$	229,857
Other Comprehensive Income:
Foreign Currency Translation Income		254,732		4,024
Comprehensive Income	$	2,421,080	$	233,881

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

ASIA CORK, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(Stated in US Dollars)

	For The Three Months Ended March 31,
	2011			2010
	Unaudited			Unaudited
Cash Flows From Operating Activities
Net Income	$	1,986,703		$	210,050
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities
Depreciation and amortization		88,382			85,921
Bad debt adjustment		114,032			(3,514	)
Losses on disposal of inventories		-			1,974
Net income attributable to noncontrolling interest		179,645			19,807
Deferred income tax benefits		(18,444	)		(5,732	)
Consulting fees adjusted from deferred		90,000
Changes in operating assets and liabilities:
Accounts receivable		(2,192,121	)		82,460
Inventories		2,875,307			2,011,133
Advance to suppliers		(791,530	)		(1,247,694	)
Prepayments and other current assets		(433,703	)		106,803
Accounts payable and accrued expenses		(135,641	)		(85,988	)
Customer Deposit		(91,160	)		13,306
Taxes payable		163,377			284,477
Other current liabilities		(27,263	)		(22,528	)
Net Cash Provided by Operating Activities		1,807,584			1,450,475
Cash Flows From Investing Activities
Payment for construction in Progress		(550,499	)		-
Payment for loan to unrelated party		(3,970,314	)		-
Net Cash Used in Investing Activities		(4,520,813	)		-
Cash Flows From Financing Activities
Repayment to the loan		-			(215,321	)
Net Cash Used in Financing Activities		-			(215,321	)
Net Increase in Cash and Equivalents		(2,713,229	)		1,235,154
Effect of Exchange Rate Changes on Cash		40,960			248
Cash and Equivalents at Beginning of Period		4,250,765			49,949
Cash and Equivalents at End of Period	$	1,578,496		$	1,285,351
SUPPLEMENT DISCLOSURES OF CASH FLOW INFORMATION
Interest expenses paid	$	-		$	7,258
Income taxes paid	$	540,762		$	-
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Issued shares for consulting service	$	90,000		$	-

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

ASIA CORK, INC AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(Stated in US Dollars)

1.	BASIS OF PRESENTATION

Interim financial statements:

The unaudited condensed consolidated financial statements of Asia Cork Inc. and subsidiaries (the "Company") have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet information as of December 31, 2010 was derived from the audited consolidated financial statements included in the Company's Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report.

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

Description of business and reverse merger:

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

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

The Company’s common stock is quoted on the Over the Counter Bulletin Board under the trading symbol “AKRK”.

In August 2005, the Company, through Kushi Sub, Inc., a newly formed Delaware corporation and one of our wholly-owned subsidiaries ("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 the Company’s common stock and Series A Preferred Stock. The capitalizations are described in further detail in Note 18 in 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 Science and Technology Co., Ltd. ("Hanxin"), incorporated in July 2002, both Xi'An and Hanxin are People's Republic of China (“PRC”) corporations. Most of the Company’s activities are conducted through Hanxin.

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

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

Use of estimates

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

Revenue recognition

In accordance with the ASC Topic 605, “Revenue Recognition”, the Company's revenues from the sale of products are recognized when the goods are shipped, title passes, the sales price to the customer is fixed and collectability is reasonably assured. Persuasive evidence of an arrangement is demonstrated via purchase order from distributor, our customers, product delivery is evidenced by warehouse shipping log as well as signed bill of lading from the trucking company and no product return is allowed except defective or damaged products, the sales price to the customer is fixed upon acceptance of purchase order, there is no separate sales rebate and volume incentives.

The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which is levied on the majority of its products at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases.

Reclassifications

Certain amounts reflected in the consolidated financial statements for the three months ended March 31, 2010 have been reclassified to conform to the presentation for the three months ended March 31, 2011.

Stock-Based Compensation

The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received. Fair value is measured as the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete. The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital.

Basic and diluted net income per share

The Company accounts for net income per common share in accordance with ASC 260, “Earnings per Share” (“EPS”). ASC 260 requires the disclosure of the potential dilution effect of exercising or converting securities or other contracts involving the issuance of common stock. Basic net income per share is determined based on the weighted average number of common shares outstanding for the period. Diluted net income per share is determined based on the assumption that all dilutive convertible shares and stock options were converted or exercised into common stock.

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.

Recent Accounting Pronouncements

In December 2010, FASB issued an amendment to the disclosure of supplementary pro forma information for business combinations. The amendments in this ASU 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 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 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 adoption of this guidance does not have a material impact on the Company’s consolidated financial statements.

In December 2010, the Financial Accounting Standards Board (FASB) issued amended guidance to clarify the acquisition date that should be used for reporting pro-forma financial information for business combinations. If comparative financial statements are presented, the pro-forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been completed as of the beginning of the comparable prior annual reporting period. The amendments in this guidance became effective prospectively for business combinations for which the acquisition date is on or after January 1, 2011. The adoption of this guidance does not have a material impact on the Company’s consolidated financial statements.

In December 2010, the FASB issued amendments to the guidance on goodwill impairment testing. The amendments modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. 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 making that determination, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The amendments were effective January 1, 2011 and the adoption of this guidance does not have a material impact on the Company’s consolidated financial statements.

2.	ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company generally provides its major customers with short term credit pursuant to which the customers are required to make payment between three months and six months after delivery, depending on the customer’s payment history. Beginning in April 2010, the Company manufactured new series of wood materials products. In purpose of expanding the domestic market in Beijing, Shanghai and Guangzhou, and to promote market share of new series of wood materials products, the Company chose certain long-term good relationship customers in three areas which had good credit history and background. Commencing from May 2010, the Company determined that the payment term of those major customers in three areas were extended from six month to one year. Despite the fact that the payment terms were extended, the Company recognizes its revenues upon reception of good by the customer in full amount. Moreover the Company does not change revenue recognition policy. The total revenues had been raised up for the quarter ended March 31, 2011, which resulted from the extension of payment terms of major customers and the Company implement a promotion activity during the current period. At the same time, in order to reduce the risk in collection, the Company plans to control payment term of those major customers within the nine months during the coming future. For the quarter ended March 31, 2011, the total revenues resulted from a combination of increased orders by existing and new clients as the Company continued to successfully increase sales to customers and expand its customer base, the Company’s accounts receivable balance increased significantly as of March 31, 2011. As of March 31, 2011 the accounts receivable balance was $9,806,990 (equivalent to RMB64,222,057).

The Company’s subsidiary, Hanxin used to maintain a reserve for uncollectible accounts of 0.5% of accounts receivable before third quarter of 2009. However, during the third quarter of 2009, the Company increased the amount of its reserve from 0.5% to 5.0% of accounts receivable due to a high level of increasing accounts receivable from its major customer as a result of the increase in sales to both existing and new customers. Consequently, the Company recognized a provision for bad debts equal to $114,032 for the three months ended March 31, 2011.

The accounts receivable amounts included in the consolidated balance sheets as of March 31, 2011 and December 31, 2010 were as follows:

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Shaanxi Shuta Cork Products Co., Ltd	$	1,582,833	$	718,540
Distributors who had owed the Company more than
USD152,704 (equivalent to RMB1 million)		6,875,505		5,505,008
Distributors or Customers who had owed the Company
equal or less than USD152,704 (equivalent to RMB1 million)		1,348,652		1,311,541
Sub-total		9,806,990		7,535,089
Less: Allowance for doubtful accounts		490,350		372,734
Accounts receivable, net	$	9,316,640	$	7,162,355

The total amounts sold to the customers who had a balance of accounts receivable more than $152,704 (equivalent to RMB1 million) were $5,065,601and $759,637 for the three months ended March 31, 2011 and 2010, respectively. They were represented 52% and 20.9% of total sales in the three months ended March 31, 2011 and 2010.Except for Shaanxi Shuta, none of the customers accounted for more than 10% of total sales for the three months ended March 31, 2011. However, for three month ended March 31, 2010, except the secondary raw materials sold to Sichuan Hanxin had over 10% of the total sales, none of other customers accounted for more than 10% of total sales for three months ended March 31, 2010.

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

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Less than 90 days	$	5,755,579	$	2,558,025
91days-180days		2,340,287		4,468,908
181days-365days		1,711,124		508,156
Total	$	9,806,990	$	7,535,089

The Company’s accounts receivable with ages of less than 90 days represented approximately 59% and 34% of the total receivables as of March 31, 2011 and December 31, 2010, respectively

The following is a summary of the status of allowance for doubtful accounts as of March 31, 2011 and 2010

Period	Amount		Period	Amount
As of January 1, 2011	$	372,734	As of January 1, 2010	$	269,259

As of March 31,2011	$	490,350	As of March 31,2010	$	265,789

The Company uses the allowance method to estimate the uncollectible portion of its account receivables. Based on the percentage of outstanding receivable approach, the Company should recorded bad debt expense in the debit and the related credit to the allowance account at closing day. The Company’s subsidiary, Hanxin maintains a reserve for uncollectible accounts of 0.5% of accounts receivable. During the third quarter of 2009, the Company increased the amount of its reserve from 0.5% to 5.0% of accounts receivable due to an increase in accounts receivable from major customers as well as new customers. Commencing the second quarter of 2010, the payment to the Company by its major customers was extended to one year in order to expand its revenues. As a result, the allowance for doubtful account increased significantly as of March 31, 2011 as compare to March 31, 2010.

Accounts receivable turnover for the three months ended March 31, 2011 and 2010 consisted of the following:

	For Three Months Ended March 31,
	2011		2010
Accounts receivable turnover		0.59		0.17

Since there were significantly increased credit sales, and the increased credit sales amounts were significantly greater than the average accounts receivable increased amount in the first quarter of 2011 as compared to the same period of 2010, the accounts receivable turnover figure for the three months ended March 31, 2011 was greater than the turnover in the same period of 2010.

3.	INVENTORIES

The barks and wood particles are the primary raw materials utilized to manufacture cork planks. The wood particles consist of grinded barks. During the course of manufacture, the Company makes use of reproducible oak barks. Since the growth cycle of oak barks takes long periods of time, the Company generally purchases barks and wood particles in advance in order to ensure production. Moreover, the barks are usually picked in autumn. In order to have sufficient raw materials, the Company purchased a significant amount of barks and wood particles as of March 31, 2011 and December 31, 2010.

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

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Raw materials
Tree skins	$	665,060	$	1,703,715
Wood Particles		1,068,087		792,714
Secondary raw materials		539,159		556,087
Density board		581,783		803,809
Subtotal		2,854,089		3,856,325
Work in progress		467,452		835,142
Finished goods		2,081,430		3,437,125
Packaging and other		102,087		206,989
Total	$	5,505,058	$	8,335,581

Inventories turnover for the three months ended March 31, 2011 and 2010 consisted of the following:

	For The Three Months Ended March 31,
	2011		2010
Inventories turnover		0.96		0.58

As of March 31, 2011, there were significantly increased in average inventories and cost of sales as compared to the same period of 2010. However, the increased cost of goods sold amounts were significantly greater than the average inventories increased amount in the first quarter of 2011 as compared to the same period of 2010. Therefore, the inventories turnover figure for the three months ended March 31, 2011 was greater than the amount in the same period of 2010.

4.	ADVANCE TO SUPPLIERS

The supply of cork raw material is our basis of production. Since the growth cycle of bark used in manufacturing need sufficient growth. In order to acquire sufficient bark and ensure production in the future, the Company generally signs purchase agreements with some unrelated parties at the beginning of every year. Pursuant to the agreements, the Company is required to pay its suppliers in advance. As of March 31, 2011, nearly 94% of these advances outstanding were less than six months. The Company did not incur losses in connection with advances to suppliers as of March 31, 2011. As such, the Company had not recorded the allowance for advances to supplier for the three months ended March 31, 2011, and the net amount of advances to suppliers was $4,182,451and $3,356,897 as of March 31, 2011 and December 31, 2010 respectively.

5.	LOAN TO UNRELATED PARTY

In February 2011, the Company signed four loan agreements with Sichuan Hanxin Cork Merchandises Co, Ltd. (“Sichuan Hanxin”) to keep friendly corporation relationship and support the funds demand of Sichuan Hanxin which plan to expand its facility and purchase the land use right. Those four loan agreements in the total amounted to RMB 26 million at an annual rate of 6% from the inception of actual loan date until eighteen months. As of March 31, 2011, the Company had fully paid the loans amounts of RMB26 million (equivalent to $3,970,314) to Sichuan Hanxin.

6.	PROPERTY AND EQUIPMENT-NET

As of March 31, 2011 and December 31, 2010, property and equipment consisted of the following:

	Estimated	March 31, 2011		December 31, 2010
	Life	(Unaudited)		(Audited)
Buildings and improvements	30-35	$	1,617,555	$	1,604,396
Manufacturing equipments	1-8		1,666,700		1,653,142
Office furniture and equipments	5		32,444		32,180
Vehicle	8		13,051		12,944
Machinery improvements	3		83,986		83,303
Subtotal			3,413,736		3,385,965
Less: Accumulated depreciation			1,223,782		1,167,157
Total		$	2,189,954	$	2,218,808

For the three months ended March 31, 2011 and 2010, depreciation expenses amounted to $46,837 and $56,162 respectively.

7.	NON-REFUNDABLE DEPOSIT FOR PURCHASE OF LAND USE RIGHT

In order to ensure sufficient raw material production base in the future, the Company plans to purchase the right to use a parcel of land of planting oak from Shanxi Shuta Cork Products Co., Ltd (“Shanxi Shuta”) in the Baoji District in Shanxi Province of the PRC in 2007 (oak leather used to produce the company's main raw material). The Company prepaid in amounts of RMB10 million (equivalent to $1,527,044 as of March 31, 2011) to Shanxi Shuta. However, the Company terminated the agreement with Shanxi Shuta in August, 2008. Despite the deposit in amounts of RMB10 million had been fully refunded back to the Company in August and September 2008. However, due to affect adversely financial crisis all over the world during the fourth quarter of 2008, the Company’s financing plans were failed during the fourth quarter of 2008 and first quarter of 2009, and the Company was regretted to terminate the land use right purchase deal from Shanxi Shuta. In year 2008, based upon Hanxin’s sale and manufacturing strategies Shanxi Shuta opened cork retail chain stores exclusively selling Hanxin’s products but Hanxin could not achieve its 500,000 square meters floor and board production plan in year 2008 and had delayed many purchase orders from Shanxi Shuta; thus Shanxi Shuta had to readjust its year 2008 sales strategies and incurred heavy losses. In order to avoid losing an important distribution channel and to assist Shanxi Shuta to recover from this situation, Hanxin had loaned RMB10 million (equivalent to $1,527,044 as of March 31, 2011) to the Shanxi Shuta for one year term starting from October 27, 2008. This loan is non-interest bearing and unsecured. One day subsequent to the due date of the loan, October 28, 2009, Hanxin signed another loan agreement with Shanxi Shuta and loaned the same amount of RMB10 million to Shanxi Shuta again for the term from October 27, 2009 to October 27, 2011. This loan is also non-interest bearing and unsecured.

Hanxin would like to purchase the land use right in Baoji District in Shanxi Providence from Shanxi Shuta as soon as its financing situation allowable, since the price of the land use right is going up, and Hanxin do need a parcel of land use right to plan the Portugal type of cork trees to secure its cork materials in the future. Therefore, on October 20, 2009, Hanxin signed a forgiveness memo with Shanxi Shuta to express its sincerity to acquire 7,000 Mu (equal to 4,669,000 square meters) land use right located in Baoji District in Shanxi Providence from Shanxi Shuta within two years starting from October 20, 2009. In consider of the expenditure of Shanxi Shuta in acquired the land use right for Hanxin, Hanxin agree to purchase this land use right within two years in the same amount of RMB37.8 million listed in prior agreement in 2008. In the event that Hanxin does not purchase the land by October 20, 2011, Hanxin will be liable to pay Shanxi Shuta all upfront operation costs approximately RMB10 million (equivalent to $1,527,044 as of March 31, 2011) that Shanxi Shuta had paid to acquire the land use right from the Baoji District government. The parties anticipate that should Hanxin does not purchase the land by October 20, 2011, Shanxi Shuta will not repay the RMB10 million loan pursuant to Loan Agreement dated October 28, 2009 and the parties will have no further obligation to each other regarding the loan or the land purchase. Therefore, the Company reclassified all of these loan amounts as Non-Refundable deposits for purchase of land use right commencing as of October 20, 2009. It is not assurance that the Company will have the rest of money RMB27.8 million by October 27, 2011 to pay Shanxi Shuta for this land use right purchase.

Even though Shanxi Shuta is one of major customers of Hanxin in three months ended March 31, 2011 and in the year ended December 31, 2010, but the total amounts sold to Shanxi Shuta in the three months ended March 31, 2011 and the year ended December 31, 2010 were only represented 15.34% and 3.44% of total sales of Hanxin, one of the Company’s subsidiaries in China. Also, Shanxi Shuta does not have the ability, directly or indirectly, to control the Company or exercise significant influence over the Company in making financial and operational decisions. Furthermore, Shanxi Shuta is not subject to common control or common significant influence. Accordingly, Shanxi Shuta is not deemed a related party of the Company for the quarter ended March 31, 2011 and for the year ended December 31, 2010.

8.	INVESTMENT PROPERTIES – NET

On September 27, 2001, the Company purchased certain investment entertainment facilities called YuLerYuan Resort which included certain buildings, machinery, equipment, and the right to use a parcel of land of approximately 10,360 square meters for 40 years. The purchase price of the land use right is being amortized over the term of the right while other facilities are being depreciated over the estimated life of properties. The Company renovated the space and built an additional student dormitory in 2007. The construction was completed in June 2008. In order to pass the inspection from the authorities in China and obtain the ownership certificates, the Company spent additional funds to install fire-fighting equipments in the building starting the second quarter of 2010. During the third quarter of 2010, the installation of fire fighting equipments had been completed. At the same period, the Company obtained the ownership certificates with respect to the dormitory. The YuLerYuan Resort including new student dormitory was leased for $22,801 (equivalent to RMB150,000) per month to the university located at YuLerYuan for the period from March 1, 2010 to February 28, 2011. This lease agreement was renewed on February 21, 2011. All terms remains the same except that the rental fee was increased to $30,401(equivalent to RMB200,000). The lease period was extended to February 28, 2012.

As of March 31, 2011 and December 31, 2010, Investment Properties consisted of the following

	Estimated	March 31, 2011		December 31, 2010
	Life	(Unaudited)		(Audited)
Depreciation Properties:
Buildings and improvements	28	$	958,590	$	950,792
Student dormitory	30		3,263,359		3,236,811
Machinery and equipments	5		27,375		27,153
Subtotal			4,249,325		4,214,755
Less: Accumulated depreciation			573,261		528,600
Total depreciation properties			3,676,064		3,686,155

Amortization Property:
Land use right	40		212,647		210,917
Less: Accumulated amortization			50,504		48,775
Total amortization properties			162,143		162,143
Total Investment Properties, Net		$	3,838,207	$	3,848,298

For the three months ended March 31, 2011 and 2010, depreciation and amortization expenses for these investment entertainment facilities amounted to $41,463 and $29,679, respectively.

The amortization expenses of land use right for the next five years are as follows:

For the Quarter Ending March 31,	Amount
2012	$	5,292
2013		5,292
2014		5,292
2015		5,292
2016		5,292

9.	INVESTMENT – AT COST

On June 28, 2005, the Company purchased a 12% equity interest of Shaanxi DeRong Technology Information Development Co. Ltd. (“DeRong”), a PRC corporation, for $2,137,862 (equivalent to RMB 14 million). DeRong owns a cork tree forest plantation in China. The investment is long term and is stated at cost.

10.	INTANGIBLE ASSETS-NET

During the quarter ended June 30, 2008, the Company acquired ownership of three patent rights from its major stockholder and Chairman, Mr. Fang She Zhang for no consideration,. These three patent rights are used as part of a vital technique for the production of the Company’s products. The application and filing costs of these three patent rights were $4,219 (equivalent to RMB28,800) as of second quarter ended June 30, 2008. As of March 31, 2011 and December 31, 2010, intangible assets, less accumulated amortization consisted of the following:

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Intangible assets	$	4,398	$	4,362
Less: Accumulated amortization		912		822
Total	$	3,486	$	3,540

For the three months ended March 31, 2011 and 2010, amortization expense amounted to $82 and $80 respectively.

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

For the Quarter Ending March 31,	Amount
2012	$	328
2013		328
2014		328
2015		328
2016		328

11.	CONVERTIBLE NOTES

In June 2008, the Company consummated an offering of convertible promissory notes and common stock purchase warrants for aggregate gross proceeds of $700,000. The notes matured in June 2009 and bore interest at an annual rate of 18%, payable at maturity in USD. Upon the successful closing of an equity or convertible debt financing for a minimum of $2,000,000 (the "Financing"), the promissory notes will be convertible into shares of common stock at a 50% discount to the price per share of Common Stock sold in the Financing. Since the Financing was not achieved within the one year term of the promissory notes, each investor has the option to be paid the principal and interest due under the promissory note or convert the note into shares of common stock at a conversion price of $0.228 per share.

The warrants are exercisable at any time after the consummation of the Financing through the fourth anniversary of the consummation of the Financing (the "Financing Expiration Date"). Each holder is entitled to purchase the number of shares of common stock equal to the initial principal amount of such investor's promissory note divided by the lowest cash purchase price paid for the Company's common stock (or the conversion price or exercise price if the Financing consists of convertible securities or warrants, respectively) in the Financing (the "Financing Based Conversion Price") at an exercise price equal to the Financing Based Conversion Price. Since the Financing did not occur within 12 months of the issuance of the warrant, the warrant is exercisable from and after such date and through the fourth anniversary of the issuance date of the warrant. In such event, the holder is entitled to purchase the number of shares of common stock equal to 50% of the initial principal amount of the promissory note divided by $0.228 at an exercise price equal to $0.228, subject to certain adjustments as set forth in the warrant. Since the notes were not paid at maturity in June 2009, the annual interest rate payable since the maturity date increased to 24%. On July 6, 2010, the Company and those investors entered in to an amendment agreement. Pursuant to the amendment agreement, the maturity date was extended to October 31, 2010 and the interest rate under the note remained at 18% per annum from the issuance date through the maturity date.

On October 31, 2010, a second amendment agreement was entered into between the Company and the note holders whereby the maturity date was extended again to February 28, 2011 and the interest rate under the notes remained at 18% per annum from the issuance date through the maturity date. The Company has filed a registration statement with respect to a proposed public offering with the Securities and Exchange Commission (the “Registration Statement”), with respect to certain Units consisting of Common Stock and warrants . Upon the closing of the proposed offering, the Company shall: (1) pay the investors cash by wire transfer in an amount equal to $350,000 (50% of the outstanding principal amount of the notes) and (2) the investors shall receive, upon conversion of the balance due under the note, such whole number of fully paid and non-assessable shares of the securities that is equal to the quotient of the sum of (i) $350,000 and (ii) all accrued a unpaid interest thereon, divided by fifty percent of the offering price per share of Common Stock included in the Units. In the event that the closing shall not occur by February 28, 2011, the interest rate under the note shall increase to 24% per annum, accruing from the first anniversary of the issuance of the note. The interest payable has been accrued and recorded as of March 31, 2011 and December 31, 2010.

Since the warrants issued with convertible notes are basically long-term options to buy common stock at a fixed price, the Company allocated the proceeds from the offering of convertible promissory notes and common stock purchase warrants between the two securities utilizing the incremental method, The difference between the market price of the common stock on the issuance date of the warrants and the warrant exercise price of $0.228 has been carried on the balance sheet as a “discount on convertible note, and the sum also been carried on the balance sheet as an “additional paid-in capital-stock warrant” in the amount of $279,386 as of March 31, 2010 and December 31, 2010, respectively.

If the investors exercise the warrants, the Company will reflect the proceeds received and increase “Additional Paid-in Capital – Stock Warrant”, and “Common Stock” and “Additional Paid-in Capital in Excess of Par”. However, if the investors do not exercise the warrants, the Company will reduce “Additional Paid-in Capital –Stock Warrant” for $279,386, and increase “Additional Paid-In Capital from Expired Warrants” for a like amount.

The Company’s obligations under the promissory notes are secured by an aggregate of 7,630,814 shares of common stock pledged by Mr. Pengcheng Chen, the Company’s Chief Executive Officer, Mr. Fangshe Zhang, the Company’s Chairman (the “Escrow Shares”). In the event that subsequent to the issuance of the Convertible Notes, the value of the Escrow Shares is less than 150% of the outstanding principal amount of the promissory notes for 10 consecutive trading days, then the holder of the promissory notes shall have the right to give the Company notice (the “Investor Notice”) to deposit or cause to be deposited additional Escrow Shares such that the value of the Escrow Shares based upon the volume weighted average price per share for the 20 trading days preceding the date of the Investor Notice, is equal to 150% of the outstanding principal amount of the promissory notes. The Company agreed to deposit or cause to be deposited such additional Escrow Shares within 30 days of the date of the Investor Notice. To the extent the Escrow Shares are not sufficient to meet the threshold of 150% of the outstanding principal amount of the promissory notes within 30 days after the Investor Notice, the Company shall grant to investors a security interest on the Company’s tangible assets to the extent permitted under applicable law.

The following is a summary of the status of outstanding warrants as of March 31, 2011:

	Warrants Outstanding		Weighted Average Exercise Price		Average Remaining Life in years		Aggregate Intrinsic Value
Outstanding, January 1, 2011		1,535,088	$	0.228		1.5	$	0.282
Granted								-
Forfeited		-		-		-		-
Exercised		-		-		-		-
Outstanding, March 31, 2011		1,535,088	$	0.228		1.20		0.002

12.	TAX PAYABLE

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

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

On March 31, 2011 and December 31, 2010, taxes payable consisted the following:

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Value-added tax	$	557,518	$	261,814
Corporate income tax provision		566,797		678,778
Local taxes and surcharges		17,756		28,785
Franchise tax		3,214		3,214
Total	$	1,145,285	$	972,591

The deferred income taxes assets results from a loss on disposition of fixed assets that are not deductible and bad debt allowance which is deductible when the bad debt is incurred

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

	For The Three Months Ended March 31,
	2011			2010
Current taxes:
Current income taxes in P.R. China	$	421,271		$	43,099
Deferred taxes benefit		(18,444	)		(5,732	)
Total provision for income taxes	$	402,827		$	37,367

The following is a reconciliation of the statutory taxes rate to the effective taxes rate for the three months ended March 31, 2011 and 2010:

	For Three Months Ended March 31,
	2010			2009
U.S. statutory corporate income taxes rate		34	%		34	%
PRC taxes rate difference		(9	)%		(9	)%
Net effect of taxes exemption/non-taxable income/non-deductible expenses		(9	)%		(12	)%
Valuation allowance		-			1	%
Effective taxes rate		16	%		14	%

The taxes effect of temporary differences that give rise to the Company’s deferred taxes assets as of March 31, 2011 and December 31, 2010 were as follows:

	March 31, 2011		December 31, 2010
	(Unaudited)		(Audited)
Deferred income taxes assets :
Bad debt allowance	$	73,552	$	55,910
Loss carry forward		3,427		1,529
Loss on disposition of fixed assets		14,304		14,723
Total deferred income taxes assets	$	91,283	$	72,162
		.
Reported as:
Current deferred income taxes assets	$	5,280	$	3,367
Long-term deferred income taxes assets		86,003		68,795
Net deferred income taxes assets	$	91,283	$	72,162

13.	DUE TO STOCKHOLDERS/OFFICERS

Amounts due to stockholders/officers are unsecured, non-interest bearing, and do not have a set repayment date. As of March 31, 2011 and December 31, 2010, the total net amounts due to the stockholders/officers were $185,132 and $183,626, respectively which represented the net amounts lent by Mr. Pengcheng Chen, the Chief Executive Officer of the Company, to the Company.

14.	STOCKHOLDERS EQUITY

On August 9, 2005, the Company acquired Hanxin International in exchange for (i) 24,000,000 shares of the Company’s common stock and (ii) 1,000 shares of the Company’s Series A Preferred Stock.

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

On September 1, 2006, the 1,000 shares Series A preferred stock were converted into 29,530,937 shares of the Company’s common stock. Subsequently, the Company issued additional 118,123 shares in October 2006 to reflect an under-issuance to a stockholder of the shares of common stock issued upon conversion of the preferred stock.

In May 2008, the board of directors of the Company authorized, and on July 31, 2008 the Company issued, 150,000 shares of the Company’s common stock to its attorney for services rendered. In June 2008, the board of directors of the Company authorized, and on August 14 2008 the Company issued, 100,000 shares of the Company’s common stock to HAWK Associates, Inc (“Hawk”), its investor relations firm for services rendered pursuant to the agreement. Accordingly the Company has 35,663,850 shares of issued and outstanding common stock as of December 31, 2010. In February 2011, the Company issued 250,000 common stocks to individual for rendering professional services. As a result, the total shares of issued outstanding were 35,913,850 as of March 31, 2011.

In June 2008, the Company was assigned ownership of three patent rights from its major shareholder, Mr. Fangshe Zhang. These patents were assigned without any payment due to Mr. Zhang. The application and filing costs of these three patents was RMB28,800 (equivalent to $4,199) in June 2008. In connection therewith, the Company recorded $4,199 of intangible assets, and same amount of additional paid in capital as of March 31, 2011.

15.	BASIC AND DILUTED EARNING PER SHARE

The following table sets forth the computation of basic and diluted net income per share:

	For The Three Months Ended March 31,
	2011		2010
	(Unaudited)		(Unaudited)
Basic:
Numerator:
Net income for basic calculation	$	1,986,703	$	210,050
Denominator:
Weighted average common shares		35,827,739		35,663,850
Denominator for basic calculation		35,827,739		35,663,850
Net income per share — basic	$	0.06	$	0.01

Diluted:
Numerator:
Net income for basic calculation	$	1,986,703	$	210,050
Effect of dilutive securities issued		37,104		40,606
Net income for diluted calculation	$	2,023,807	$	250,656
Denominator:
Denominator for basic calculation		35,827,739		35,663,850
Weighted average effect of dilutive securities:
Convertible debt		3,070,175		3,070,175
Warrants		533,241		1,535,088
Denominator for diluted calculation		39,431,155		40,269,113
Net income per share — diluted	$	0.05	$	0.01

16.	COMMITMENTS

The Company leases its office space, and production facilities and lands under operating lease agreements that are expiring on December 31, 2011 and October, 2047 respectively. The following is a schedule of future minimum rental land payments required under these operating leases as of March 31, 2011.

For the Quarter Ending March 31,	Amount
2012	$	197,935
2013		18,240
2014		18,240
2015		18,240
2016		18,240
Thereafter		556,334
Total minimum rental payments required	$	827,229

Rent and properties maintenance expenses amounted to $64,458 and $47,790 for the three months ended March 31, 2011 and 2010, respectively.

The Company also leases three patent rights from its Chairman, Mr. Fangshe Zhang, under operating lease agreements that expire on April 16, 2011. This agreement was renewed to April 16, 2012. The following is a schedule of future minimum rental payments required under these operating leases as of March 31, 2011.

For the Quarter Ending March 31,	Amount
2012		364,809
2013		16,214
Total minimum rental payments required	$	381,023

Patent lease expenses amounted to $91,202 and $87,880 for the three months ended March 31, 2011 and 2010, respectively.

17.	CONCENTRATIONS OF BUSINESS AND CREDIT RISK

Financial Risks:

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

Concentrations Risks:

For the three months ended March 31, 2011 and 2010, except for special sales to Shanxi Shuta and Sichuan Hanxin, none of the Company’s customers accounted for more than 10% of its sales.

	Sales to		Number of		Percentage of
Three Months Ended March 31,	Major Customers		Customers		Total Sales Revenue
2010	$	1,185,372		1		32.61	%
2011	$	1,493,465		1		15.37	%

Major Suppliers:

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

	Purchases from		Number of		Percentage
Three Months Ended March 31,	Major Suppliers		Suppliers		of Total
2011	$	2,338,305		5		83.32	%
2010	$	435,272		3		87.50	%

Geographical Risks:

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

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OF OPERATIONS

The following analysis of our consolidated financial condition and results of operations for the three months ended March 31, 2011 and 2010, should be read in conjunction with the consolidated financial statements, including footnotes, and other information presented in our annual report on Form 10-K as filed with the Securities and Exchange Commission on April 15, 2011.

Overview

Asia Cork Inc. (f/k/a Hankersen International Corp.), was incorporated under the laws of the State of Delaware on August 1, 1996. Our 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 shareholders’ best interest for KMC to operate a different business.

In August 2005, the Company, through Kushi Sub, Inc., a newly formed Delaware corporation and one of our wholly-owned subsidiaries, ("Acquisition Sub") acquired all the ownership interest in Hanxin (Cork) International Holding Co., Ltd. ("Hanxin International"), a British Virgin Islands limited liability corporation, organized in September 2004. The Company acquired Hanxin International in exchange for 24,000,000 shares of the Company’s common stock and 1,000 shares of Series A Preferred Stock, which converted into 29,530,937 shares of our common stock. Subsequent to the merger and upon the conversion of the Series A Preferred Stock, the former shareholders of Hanxin International owned 95% of the outstanding shares of our common stock as of December 31, 2005.

Hanxin International has no other business activities other than owning 100% of Xi'An Cork Investments Consultative Management Co., Ltd. ("Xi'An"), which owns 92% of Xi’an Hanxin Science and Technology Co., Ltd. ("Hanxin"), incorporated in July 2002; both Xi'An and Hanxin are People's Republic of China (PRC) corporations. Most of our operating and business activities are conducted through Hanxin. Hanxin is our principal operating subsidiary.

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

On July 11, 2008, the our wholly-owned subsidiary, Asia Cork Inc., was merged into its parent, Hankersen International Corp., as approved by our Board of Directors pursuant to the Delaware General Corporation Law. Our Company is the surviving company of the merger and, except for the adoption of the new name, from Handkersen International Corp. to Asia Cork, Inc., its Certificate of Incorporation is otherwise unchanged.

The Company’s common stock used to quoted on the Over the Counter Bulletin Board under the trading symbol “AKRK.OB”. However, the Company’s shares of common stock are currently traded under the symbol of “AKRK.PK” on the Pink Sheet market since year 2011.

Business Overview

The Company, through its subsidiaries, engages in developing, manufacturing and distribution of cork wood floor, wall and decorating products. The cork industry is generally regarded as environmentally friendly. The sustainability of production and the easy recycling of cork products and by –products are two of its most distinctive aspects. For the quarter ended March 31, 2011, we sold all our products to our clients in China, and then part of our China clients resold our products to their overseas clients. Our products have also been distributed to India, the U.S., Germany and Japan. The sales to distributors, sales agents and our direct sales to clients have no difference as reflected in accounting policies, as the price and the means of delivery have no material differences. All sales revenues are recognized when reception and inspection of goods are completed by our clients. We have the right to use 17 patents developed by Fangshe Zhang, our Chairman and principal shareholder regarding cork processing technologies. We own 3 patents, lease 3 patents, and have exclusive right to use another 11 patents for free. We believe that these 17 patents give us a competitive advantage in our product quality. With the patents we own and develop, we believe that we will be able to keep our leading status in cork production industry in China.

Foreign Exchange Considerations

Even though we are a U.S. company, because all of our operations are located in the People’s Republic of China (“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.

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

Critical Accounting Policies

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

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

We record property and equipment at cost. Depreciation is provided using the straight-line method over the estimated economic lives of the assets, which are from 1 to 35 years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. We review the carrying value of long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

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

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2011 COMPARED TO THREE MONTHS ENDED MARCH 31, 2010

	For The Three Months Ended March 31,
	2011			2010
	Unaudited			Unaudited			(Decrease)/ Increase
Revenues	$	9,737,881		$	3,634,641		$	6,103,240		167.92	%
Cost of Goods Sold		6,292,939			2,877,486			3,415,453		118.70	%
Gross Profit		3,444,942			757,155			2,687,787		354.99	%
Gross Profit Percentage		35.38	%		20.83	%		44.04	%
Operating Expenses
Selling expenses		507,456			163,467			343,989		210.43	%
Bad debt expense (recover)		114,032			(3,514	)		117,546		-3345.08	%
Research & development costs		-			109,851			(109,851	)	-100.00	%
General and administrative expense		287,304			208,508			78,796		37.79	%
Total Operating Expenses		908,792			478,312			430,480		90.00	%
Income From Operations		2,536,150			278,843			2,257,307		809.53	%
Other Income (Expenses)
Interest expenses, net		(32,117	)		(44,225	)		12,108		-27.38	%
Other income, net		65,142			32,606			32,536		99.79	%
Total Other Income ( Expenses )		33,025			(11,619	)		44,644		-384.23	%
Income from Continuing Operations Before Taxes		2,569,175			267,224			2,301,951		861.43	%
Income Tax Provision		402,827			37,367			365,460		978.03	%
Net Income Before Noncontrolling Interest		2,166,348			229,857			1,936,491		842.48	%
Less: Net income attributable to the noncontrolling interest		179,645			19,807			159,838		806.98	%
Net Income Attributable to Asia Cork Inc.	$	1,986,703		$	210,050		$	1,776,653		845.82	%

Revenues

For the three months ended March 31, 2011, our revenues were $9,737,881 as compared to $3,634,641for the three months ended March 31, 2010, an increase of $6,103,240or 167.92%. The primary reason for the increase was that our major sales of finished goods comprised of wood materials and floors increased for the quarter ended March 31, 2011 as compared to the same period in 2010. In order to expand market share of products for floors, we implemented a sales promotion for our products of floors in January and February 2011, which caused the quantities of floors to increase enormously during this current period. Since we manufactured a new series of products for wood materials commencing April 2010, this generated an increase in revenues for the three months ended March 31, 2011 as compared to the same period in 2010. Likewise, we promoted the unit sales price for our products commencing the first quarter of 2011 thereby further increasing revenues this quarter.

The following table sets forth information regarding the sales of our principal products during the three months ended March 31, 2011 and 2010

	For The Three months Ended March 31
	2011							2010							2011 Less 2010
Product Name	Quantities (Square Meter)		Amount		Sale %			Quantities (Square Meter)		Amount		Sale %			Quantity (square meter)		Amount			Sale %
Wood Materials		777,232	$	1,382,271		14	%		100,340	$	380,751		10	%		676,892	$	1,001,520			263	%
Boards		43,104		504,415		5	%		22,180		236,013		6	%		20,924		268,402			114	%
Floors		313,902		7,829,238		80	%		92,590		1,817,884		50	%		221,312		6,011,354			331	%
Secondary raw materials		-		-		0	%		-		1,185,371		33	%		-		(1,185,371	)		0	%
Others		-		21,956		0	%		-		14,622		0	%		-		7,334			50	%
Total		1,134,239	$	9,737,881		100	%		215,111	$	3,634,641		100	%		919,128	$	6,103,239			168	%

The increase in quantities per square meter, as reflected in the table, is primarily attributable to the fact that orders from our new and existing major customers have increased. At the same time, we implemented a promotion activity for our floor products during the first quarter of 2011. There was a substantial increase in sales volume from 215,111 for the three months ended March 31, 2010 to 1,134,239 for the three months ended March 31, 2011.

The following table sets forth information regarding the average unit sales price per square meter of our principal products during the three months ended March 31, 2011 and 2010.

	Average Unit Sales Price Per Square Meter				Basic Change Per Square
Product Name	2011		2010		Meter
Wood Materials	$	1.78	$	3.79	$	(2.02	)
Boards		11.70		10.64		1.07
Floors		24.94		19.63		5.31
Overall Average Products		8.59		11.32		(2.73	)

The decrease in average sales price per square meter, as reflected in the table, was part of our sales promotion that if you purchase floor materials, you would and get wood materials free.

Cost of Sales and Gross Profit

For the three months ended March 31, 2011, cost of sales amounted to $6,292,939 or 64.62% of net revenues as compared to cost of sales of 2,877,486 or 79.17% of net revenues for the three months ended March 31, 2010. Gross profit for the three months ended March 31, 2011 was $3,444,942 or 35.38% of revenues, as compared to $757,155 or 20.83% of revenues for the three months ended March 31, 2010. The gross margin increased primarily as a result of increase in unit sales price for our products from this current quarter. Moreover, there is a low margin sale of secondary raw materials to Sichuan Hanxin during the three months ended March 31, 2010. No such transaction was made in the first quarter of 2011.

The following table sets forth information regarding the average cost per square meter of our principal products during the three months ended March 31, 2011 and 2010.

	Average Cost Per Square Meter				Basic Change Per Square
Product Name	2011		2010		Meter
Wood Materials	$	2.12	$	2.77	$	(0.65	)
Boards		6.50		6.13		0.37
Floors		13.86		13.85		0.01
Overall Average Products		5.55		7.89		(2.34	)

The decrease in average cost per square meter, as reflected in the table, is primarily because we sold more the products of wood materials which had represented low unit cost for the three months ended March 31, 2011 as compared to the same periods of 2010.

Operating Expenses

For the three months ended March 31, 2011, total operating expenses were $908,792 as compared to $478,312 for the three months ended March 31, 2010, an increase of $430,480 or 90%. This increase was attributable to an increase in selling expenses, freight costs and commission fees, which were in line with the increase in revenues. In addition, we incurred increased promotion fees to expand market share of products in the first quarter of 2011. The increase in general and administrative expenses was primarily attributable to increases in employee salaries and consulting costs in the first quarter of 2011 as compared to the first quarter of 2010.

For three months ended March 31, 2011, bad debt expense amounted to $114,032 as compared to recover of $3,514 for three months ended March 31, 2010, an increase of $117,546 or 3345.08%, which was in line with the increase in the outstanding account receivable.

For three months ended March 31, 2010, research and development costs amounted to $109,851. The reason is primarily due to the Company engaging an unrelated party in August 2009 to develop a project focused on cork material carbonizing in order to acquire advanced technical procedures for future manufacturing.

Other Income (expense)

For the three months ended March 31, 2011, other income, net, amounted to $33,025 as compared to other expense net of $11,619 for the three months ended March 31, 2010, an increase of $44,644 or 384.23%. Other income for the three months ended March 31, 2011 and 2010 was related to the income received from the leasing of our Yu Ler Yuan Resort.

For the three months ended March 31, 2011, net interest expense was $32,117 as compared to net interest expenses of $44,225 for three months ended March 31, 2010, a decrease of $12,108, or 27.38%. In June 2008, the Company issued convertible notes and common stock purchase warrants resulting in aggregate gross proceeds of $700,000. The notes matured one year from the date of issuance and bore interest at an annual rate of 18%, payable at maturity in USD. Since the notes were not paid at maturity, the annual interest rate increased to 24%. On July 6, 2010, the Company and those investors entered in to an amendment agreement. Pursuant to the amendment agreement, the maturity date was extended to October 31, 2010 and the interest rate under the note remained at 18% per annum from the issuance date through the maturity date. On October 31, 2010, a second amendment agreement was entered into between the Company and the note holders whereby the maturity date was extended again to February 28, 2011 and the interest rate under the notes remained at 18% per annum from the issuance date through the maturity date. Upon the closing of the concurrent Offering, the Company shall: (1) pay the investors cash by wire transfer in an amount equal to $350,000 (50% of the outstanding principal amount of the notes); and (2) the investors shall receive, upon conversion of the balance due under the note, such whole number of fully paid and non-assessable shares of the securities that is equal to the quotient of the sum of (i) $350,000 and (ii) all accrued a unpaid interest thereon, divided by fifty percent of the offering price per share of Common Stock included in the Units. In the event that the closing shall not occur by February 28, 2011, the interest rate under the note shall increase to 24% per annum, accruing from the first anniversary of the issuance of the note. Since the Company did not incur any financing as of February 28, 2011, the Company calculated the interest expense at 24% for the three months ended March 31, 2011. Moreover the Company has more cash flow during this current. As a result the Company acquired more interest income from bank for the three months ended March 31, 2011. Therefore, after offset with the increased interest income, the net interest expenses decreased for the first quarter of 2011 as compared to the net interest expenses in three months ended March 31, 2010

Income Tax

Net income taxes expense increased by$365,460 to $402,827 for the three months ended March 31, 2011 as compared to $37,367 for the three months ended March 31, 2010. This increase was primarily due to an increase in net income before income taxes in the first quarter of 2011 as compared to the first quarter of 2010.

LIQUIDITY AND CAPITAL RESOURCES

Operating working capital (cash and equivalents plus accounts receivable plus inventory less accounts payable and accrued expenses) decreased by $3,226,946 from $17,896,350 as of December 31, 2010 to $14,669,404 as of March 31, 2011. The decrease was primarily due to a decrease in inventories and cash and equivalent in the amount of $2,830,523 and $2,672,269 during the current period, respectively.

Cash provided by operating activities was $1,807,584 for the three months ended March 31, 2011 as compared to $1,450,475 for the three months ended March 31, 2010. The increase in cash provided by operating activities for the three months ended March 31, 2011 was a result of an increase of net income.

Net cash used in investing activities amounted to $4,520,813 for the three months ended March 31, 2011. The use of cash for the three months ended March 31, 2011 was primarily attributable to payment of a loan to Sichuan Hanxin to keep friendly corporation relationship. In addition, the Company paid significant funds to construct and install new facilities in the first quarter of 2011. There was no such use of cash during the three months ended March 31, 2010.

Financing activities for the three months ended March 31, 2010 was $215,321 of net cash used. The use of cash for the three months ended March 31, 2010 was primarily attributable to repayment of a loan from unrelated party. There was no such use of cash during the three months ended March 31, 2011

In June 2008, the Company consummated an offering of convertible promissory notes and common stock purchase warrants for aggregate gross proceeds of $700,000. The notes matured in June 2009 and bore interest at an annual rate of 18%, payable at maturity in USD. Upon the successful closing of an equity or convertible debt financing for a minimum of $2,000,000 (the "Financing"), the promissory notes will be convertible into shares of common stock at a 50% discount to the price per share of common stock sold in the Financing. Since the Financing was not achieved within the one year term of the promissory notes, each investor has the option to be paid the principal and interest due under the promissory note or convert the note into shares of common stock at a conversion price of $0.228 per share.

The warrants are exercisable at any time after the consummation of the Financing through the fourth anniversary of the consummation of the Financing (the "Financing Expiration Date"). Each holder is entitled to purchase the number of shares of common stock equal to the initial principal amount of such investor's promissory note divided by the lowest cash purchase price paid for the Company's common stock (or the conversion price or exercise price if the Financing consists of convertible securities or warrants, respectively) in the Financing (the "Financing Based Conversion Price") at an exercise price equal to the Financing Based Conversion Price. Since the Financing did not occur within 12 months of the issuance of the warrant, the warrant is exercisable from and after such date and through the fourth anniversary of the issuance date of the warrant. In such event, the holder is entitled to purchase the number of shares of common stock equal to 50% of the initial principal amount of the promissory note divided by $0.228 at an exercise price equal to $0.228, subject to certain adjustments as set forth in the warrant. Since the notes were not paid at maturity in June 2009, the annual interest rate payable since the maturity date increased to 24%. On July 6, 2010, the Company and those investors entered into an amendment agreement. Pursuant to the amendment agreement, the maturity date was extended to October 31, 2010 and the interest rate under the note remained at 18% per annum from the issuance date through the maturity date.

On October 31, 2010, a second amendment agreement was entered into between the Company and the note holders whereby the maturity date was further extended to February 28, 2011 and the interest rate under the notes remained at 18% per annum from the issuance date through the maturity date. The Company has filed a registration statement with respect to a proposed public offering with the Securities and Exchange Commission (the “Registration Statement”), with respect to certain Units consisting of Common Stock and warrants. Upon the closing of the proposed offering, the Company shall: (1) pay the investors cash by wire transfer in an amount equal to $350,000 (50% of the outstanding principal amount of the notes) and (2) the investors shall receive, upon conversion of the balance due under the note, such whole number of fully paid and non-assessable shares of the securities that is equal to the quotient of the sum of (i) $350,000 and (ii) all accrued a unpaid interest thereon, divided by fifty percent of the offering price per share of Common Stock offered in the Financing. In the event that the closing shall not occur by February 28, 2011, the interest rate under the note shall increase to 24% per annum, accruing from the first anniversary of the issuance of the note. The interest payable has been accrued and recorded as of March 31, 2011. This amended agreement was expired as the financing did not close until February 28, 2011. The company is negotiating with note holders for extension but there is no assurance that any extension can be obtained by the company.

With approximately $21.3 million of net working capital (total current assets less total current liabilities), improvements in our collections of accounts receivable and positive cash flow from operations as of March 31, 2011. This increase was primarily because our accounts receivable balance increased from improvements in credit sales commencing from the second quarter of 2010, despite our extension of the payment terms by our major customers to one year as of March 31, 2011. For the first quarter of 2011, as a result of the extended payment terms to ours major customers, we generated total net sales revenues of $9,737,881, and the balance of net accounts receivable increased by $2,154,285 to 9,316,640 as of March 31, 2011 from 7,162,355 as of December 31, 2010, which accounts for 22% of the total net sales revenue. In the same period, we had collected $3,751,544 of the total accounts receivable. Simultaneously, in order to reduce the risk in collections, we hope to control payment terms of those major customers during the coming year. Based on the foregoing, we believe that it has sufficient resources to finance its operations for the coming year provided it keeps the current payment terms and maintains collection of accounts receivable.

Since the Company’s PRC operation subsidiaries, Xian Hanxin Technology Co., Ltd. ("Hanxin") and Cork Import and Export Co. Ltd (“CIE”) have not paid or declared any dividends on their common stock within the past three years and do not foresee doing so in the foreseeable future. Hanxin and CIE intend to retain any future earnings for the operation and expansion of their business in the PRC. Any decision as to future payment of dividends will depend on the future available earnings, the capital requirements of Hanxin and CIE, their general financial condition and other factors deemed pertinent by the Board of Directors. In addition, as discussed below, there are restrictions on the ability of our Chinese operating subsidiaries to pay dividends due to foreign exchange control and other regulations of China.

Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulated amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of a liquidation.

Furthermore, the ability of our Chinese operating subsidiaries to pay dividends may be restricted due to the foreign exchange control policies and availability of cash balance of the Chinese operating subsidiaries. Because substantially all of our operations are conducted in China, all of our revenue and currency received are denominated in Renminbi (RMB). RMB is subject to the exchange control regulations in China, and, as a result, we may unable to distribute any dividends outside of China due to PRC exchange control regulations that restrict our ability to convert RMB into U.S. Dollars.

Our inability to receive dividends or other payments from our Chinese operating subsidiaries could adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. The funds of Hanxin and CIE may not be readily available to us to satisfy obligations which have been incurred outside the PRC, which could adversely affect our business and prospects or our ability to meet our cash obligations. Accordingly, if we do not receive dividends from our Chinese operating subsidiaries, we may not have sufficient cash flow to fund our corporate overhead and regulatory obligations in the United States and may be unable to pay dividends on our shares of capital stock.

INFLATION

No applicable.

Web Site Access to Our Periodic SEC Reports

You may read and copy any public reports we filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E. Room 1580, Washington D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site http://www.sec.gov that contains reports and information statements, and other information we filed electronically

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of March 31, 2011. Based on this evaluation, our Principal Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures, subject to the limitations as noted below, were effective during the period and as of the end of the period covered by this annual report to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures.

Because of inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls system are met. Because of the inherent limitations in all controls systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of March 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.

Based on this assessment, management determined that, as of March 31, 2011, we maintained effective internal control over financial reporting, although we did recognize a significant deficiency. A significant deficiency is a deficiency, or a combination of deficiencies, that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the Company’s financial reporting.

Although currently we do not identify any material weaknesses in the process of self assessment, we have recognized a significant deficiency in our internal controls. Currently we do not have sufficient in-house expertise in US GAAP reporting. Instead, we rely very much on the expertise and knowledge of external financial advisors in US GAAP conversion. External financial advisors have helped prepare and review the consolidated financial statements. Although we have not identified any material errors with our financial reporting or any material weaknesses with our internal controls, no assurances can be given that there are no such material errors or weaknesses existing. We will seek to recruit experienced professionals to augment and upgrade our financial staff to address issues of timeliness and completeness in US GAAP financial reporting. In addition, we do not believe we have sufficient documentation with our existing financial processes, risk assessment and internal controls. We plan to work closely with external financial advisors to document the existing financial processes, risk assessment and internal controls systematically.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management’s report in this annual report.

Changes in internal control over financial reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the first quarter of ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 1A Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits

Exhibit
Number		Description
31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer Certification pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has caused his report to be signed on its behalf by the undersigned, thereunto duly authorized.

ASIA CORK INC.


Dated: May 23, 2011			By:	/s/ Pengcheng Chen
			Pengcheng Chen, Chief Executive Officer


	By:	/s/ Yi Tong
		Yi Tong, Chief Financial Officer

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