Asia Cork (PINK:AKRK)

Re-pricing of risk premium

Further Due Diligence into the AKRK Story:

Yesterday we reported that that AKRK may have remedied an outstanding liquidity issue concerning a past due payment of $700,000 and accrued interest owed to Ancora Greater China Fund as part of a funding arrangement in June 2008. Part of our conclusion was due to the close proximity of shares that the CEO and Chairman pledged to secure the arrangement (7,630,814) vs. the amount of stock they disposed of outlined in recent S-4 filings (7,930,000). As always it’s prudent to continue the due diligence process in order to confirm a conclusion or possibly consider alternate scenarios.

Thus, we also took a look at some recent S-3 documents which show that that three board members were allotted an aggregate of2.8 million shares. After several attempts we were able to reach management for a comment on our initial assumption and offer an explanation into the recent share activity.

The Company has informed us that the 7.9 million shares were not transferred to Ancora, but to a number of high level executives in the Company. This action broadens share ownership among the Company’s top executives and board members and will help facilitate a possible public offering by meeting the stock markets' listing requirement, and also to better link the interest of the management personnel to the company. So what does all this mean?

It seems that Asia cork may be planning on a public offering which actually coincides with some information disclosed in its 2009 September quarterly filing stating that it had “signed an exclusive financial advisor agreement with Global Arena Capital Corp., to act as the Lead or Managing or Co-Underwriter or Investment Banker in connection with a proposed public offering.” The initial agreement expires on May 31st, 2010, providing us with a window of when an offering could occur.

We had also eluded that Investors may find it intriguing that an 8K filed on 12/24/2009 revealed some board changes at the company. Specifically, the December 24, 2009 8K outlines the appointment of a new COO, CTO and three independent Board of Directors members as well as the establishment of charters related to the Audit and Governance Committees. These actions can often coincide with an up-listing move and/or a financing transaction. Being that AKRK is below $3 per share it would need to affect a reverse split to minimally qualify for the AMEX, a very common move these days by U.S. listed Chinese companies. While the outstanding Ancora debt still exists we have learned that the due date for the promissory note has been extended for another year which means that AKRK is no longer past due on this obligation. obligation We believe that an offering, depending on Ancora’s involvement, could ultimately address this issue and provide necessary capital for expansion goals.

On the whole we still view these developments as a positive since it aligns management’s incentives with the best interests of public shareholders, offers conjecture that the AKRK may be preparing for an up-listing and takes a short-term liquidity problem off the table. Of course, the topic of dilution is now back on the table, which will depend on the use of funds.