- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

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

For the transition period from ____________ to ____________

Commission File Number: 333-167090

ASIA CARBON INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

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

11 E. 86th Street, Suite 19B

New York, New York 10028-0501

(Address of principal executive offices) (Zip Code)

(646) 623-6999

(Issuer's telephone number, including area code)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange 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 o

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

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

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller 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 o No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 52,357,062 shares of common stock, $.001 par value, as of May 4, 2012.

Table of Contents

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	Page

Item 1.	Financial Statements.	3

	Consolidated Balance Sheets	F-1
	As of March 31, 2012 (Unaudited) and December 31, 2011

	Consolidated Statements of Income and Comprehensive Income	F-2
	For the Three Months Ended March 31, 2012 and 2011 (Unaudited)

	Consolidated Statements of Cash Flows	F-3
	For the Three Months Ended March 31, 2012 and 2011 (Unaudited)

	Notes to Consolidated Financial Statements	F-4
	As of March 31, 2012 (Unaudited)

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	9

Item 4.	Controls and Procedures.	9

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings.	10

Item 1A.	Risk Factors.	10

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	10

Item 3.	Defaults Upon Senior Securities.	10

Item 4.	Mine Safety Disclosures.	10
Item 5.	Other Information.	10

Item 6.	Exhibits.	10

SIGNATURES		11

EXHIBITS/CERTIFICATIONS		12

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

ASIA CARBON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

INDEX TO FINANCIAL STATEMENTS

	Page

Consolidated Balance Sheets March 31, 2012 (Unaudited) and December 31, 2011	F - 1

Consolidated Statements of Income and Comprehensive Income Three Months ended March 31, 2012 and 2011 (Unaudited)	F - 2

Consolidated Statements of Cash Flows Three Months ended March 31, 2012 and 2011 (Unaudited)	F - 3

Notes to Consolidated Financial Statements (Unaudited)	F - 4

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ASIA CARBON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31,		December 31,
	2012		2011
ASSETS	(Unaudited)
Current Assets:
Cash and equivalents	$	7,748,503	$	8,092,411
Accounts receivable, net		5,464,606		4,404,319
Inventories		3,290,128		3,146,756
Prepaid expenses		343,852		11,138
Total Current Assets		16,847,089		15,654,624

Property, Plant and Equipment, Net		18,919,105		18,431,407

Other Assets:
Land use rights, net		215,761		217,145
Total Other Assets		215,761		217,145

TOTAL ASSETS	$	35,981,955	$	34,303,176

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term debt	$	1,375,121	$	1,376,074
Accounts payable		3,167,641		4,009,531
Accrued liabilities		200,966		153,735
Taxes payable		876,970		694,219
Investor deposit payable		-		49,985
Due to shareholder		26,400		26,415
Total Current Liabilities		5,647,098		6,309,959

Commitments and Contingencies

Stockholders' Equity:
Series A Convertible Preferred Stock, $0.001 par value, 5,000,000 authorized, none issued and outstanding		-		-
Blank Check Preferred Stock, $0.001 par value, 5,000,000 authorized, none issued and outstanding		-		-
Common stock, $0.001 par value, 100,000,000 authorized, 52,134,830 and 50,978,580 issued and outstanding at March 31, 2012 and December 31, 2011, respectively		52,135		50,979
Additional paid-in capital		6,491,153		5,942,339
Statutory reserves		2,025,737		2,025,737
Retained earnings		18,945,194		17,138,113
Accumulated other comprehensive income		2,820,638		2,836,049
Total Stockholders' Equity		30,334,857		27,993,217

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	35,981,955	$	34,303,176

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

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ASIA CARBON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended March 31,
	2012			2011

Net Sales	$	12,581,692		$	13,441,516
Cost of Sales		9,655,740			10,260,084
Gross Profit		2,925,952			3,181,432

Operating Expenses:
Depreciation		25,808			56,919
Bad debts		14,192			3,282
Selling		91,691			71,076
Professional fees		106,500			108,897
Other		163,888			50,630
Total Operating Expenses		402,079			290,804
Income From Operations		2,523,873			2,890,628
Other Income (Expense)
Interest income		11,060			6,994
Interest expense		(45,634	)		(34,172	)
Total Other Income (Expense)		(34,574	)		(27,178	)
Income Before Provision for Income Tax		2,489,299			2,863,450
Provision for Income Tax		682,218			757,977
Net Income		1,807,081			2,105,473

Other Comprehensive Income (Loss)		(15,411	)		160,042
Comprehensive Income	$	1,791,670		$	2,265,515

Net Income Per Share - Basic	$	0.04		$	0.04
Weighted Average Shares Outstanding - Basic		51,194,583			50,608,077
Net Income Per Share - Diluted	$	0.04		$	0.04
Weighted Average Shares Outstanding - Diluted		51,194,583			50,608,077

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

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ASIA CARBON INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2012 AND 2011 (UNAUDITED)

	2012			2011
Cash Flows from Operating Activities:
Net Income	$	1,807,081		$	2,105,473
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Provision for allowances, returns and doubtful accounts		14,192			3,282
Depreciation		440,307			310,309
Amortization of land use rights		1,231			1,181
Common stock issued for services		450,000			-
Changes in operating assets and liabilities:
Increase in accounts receivable		(1,074,448	)		(50,498	)
Increase in inventories		(143,372	)		(214,812	)
Increase in prepaid expenses		(332,714	)		(47	)
(Decrease) increase in accounts payable		(841,890	)		807,982
Increase in accrued expenses		47,231			40,469
Increase in taxes payable		182,751			93,689
Net Cash Provided by Operating Activities		550,369			3,097,028

Cash Flows from Investing Activities:
Capital expenditures		(939,786	)		-
Net Cash Used in Investing Activities		(939,786	)		-

Cash Flows from Financing Activities
Repayment of short term debt		-			(1,312,163	)
Decrease in investor deposit payable		(49,985	)		-
Proceeds from private placements		99,970			-
Net Cash Provided by (Used in) Financing Activities		49,985			(1,312,163	)

Effect of Exchange Rate Changes on Cash		(4,476	)		66,594
Net (Decrease) Increase in Cash and Equivalents		(343,908	)		1,851,459
Cash and Equivalents - Beginning of the Period		8,092,411			5,717,142

Cash and Equivalents - End of the Period	$	7,748,503		$	7,568,601

Supplemental Cash Flow Information:
Interest Paid	$	45,976		$	31,436
Income taxes	$	589,467		$	665,515

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

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ASIA CARBON INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2012 AND 2011 (UNAUDITED)

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organizations

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

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

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

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

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

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

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

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Basis of Presentation

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

Principles of Consolidation

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

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Fair Value of Financial Instruments

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

Foreign Currency Translation

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

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

	Three Months Ended				Year Ended
	March 31,				December 31,
	2012		2011		2011
RMB/US$ exchange rate at year end		0.15879		0.15271		0.15890
Average RMB/US$ exchange rate for the period		0.15848		0.15200		0.15470

Transaction gains or losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency were included in the consolidated results of operations. There was no material foreign currency transaction gain or loss for the three months ended March 31, 2012 or 2011.

Cash and Equivalents

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

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Inventories

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

Property, Plant and Equipment, Net

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

Long Lived Assets

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

Revenue Recognition

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

Advertising Costs

Advertising costs are expensed as incurred. There were no material advertising costs for the three months ended March 31, 2012 and 2011.

Research and Development

In accordance with the ASC subtopic 730-10, “Research and Development”, the Company expenses all research and development costs as incurred. There were no material research and development cost for the three months ended March 31, 2012 and 2011.

Segment Information

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

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Statement of Cash Flows

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

Income Taxes

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

Reclassifications

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

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” (“ASU 2011-04”). ASU 2011-04 expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. This guidance is effective for the Company as of January 1, 2012. The adoption of this ASU had no material impact on our consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” (“ASU 2011-05”). ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in equity. ASU 2011-05 requires that all non-owner changes in stockholders’ equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance is to be applied retrospectively. This guidance is effective for the Company as of January 1, 2012. The Company adopted this ASU by presenting the comparative components of comprehensive income within our consolidated financial statements of income and comprehensive income (unaudited).

In September 2011, the FASB issued ASU No. 2011-08, “Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment” (“ASU 2011-08”). This ASU is intended to simplify how entities test goodwill for impairment and permits an entity to first assess qualitative factors to determine whether it is “more likely than not” that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of these changes had no impact on our consolidated financial statements.

NOTE 3 – ACCOUNTS RECEIVABLE

Accounts receivable at March 31, 2012 and December 31, 2011 consisted of the following:

	2012			2011
Accounts receivable	$	5,563,702		$	4,489,254
Allowance for doubtful accounts		(99,096	)		(84,935	)
Accounts receivable, net	$	5,464,606		$	4,404,319

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NOTE 4 – INVENTORIES

Inventories at March 31, 2012 and December 31, 2011 consisted of the following:

	2012		2011
Raw materials	$	1,183,260	$	1,172,747
Packing and other materials		35,580		43,762
Finished products		2,071,288		1,930,247
	$	3,290,128	$	3,146,756

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at March 31, 2012 and December 31, 2011 is summarized as follows:

	Estimated
	Useful Lives		2012		2011
Plant		20	$	6,722,417	$	5,784,796
Machinary and equipment		10		16,738,791		16,750,387
Transportation equipment		5		116,488		116,569
Other machinary and equipment		5		57,940		57,980
				23,635,636		22,709,732
Less: Accumulated Depreciation				4,716,531		4,278,325
			$	18,919,105	$	18,431,407

Depreciation of property, plant and equipment, including the portion charged to cost of sales, was $440,307 and $310,309 for the three months ended March 31, 2012 and 2011, respectively. Depreciation included in cost of sales was $414,499 and $253,391 for the three months ended March 31, 2012 and 2011, respectively.

NOTE 6 – LAND USE RIGHTS

On December 29, 2005, the Company lent RMB554,130 ($87,990) to Xigu Village (“Village”), which was interest free and due December 29, 2008. The Village failed to repay the loan as of December 29, 2008. Pursuant to the loan agreement, once the Village was in default, the Company had the right to use the outstanding amount as a prepayment to its future rent obligation for a certain leased 49 mu (8.07 acre) parcel of land. The lease requires a yearly payment of RMB10,000 ($1,588) through July, 2053. The Company has no obligation to pay this lease due to the default of Village loan. The balance of the Village loan receivable was capitalized at December 31, 2008 as land use rights and amortized over the remaining life of the land use rights lease.

On October 31, 2007, the Company lent an additional RMB1,000,000 ($158,790) to the Village. The loan was interest free and due October 31, 2010. Xigu Village failed to repay the loan as of October 31, 2010. Pursuant to the loan agreement, if the Village was unable to repay the loan when due, the Company had the right to offset the defaulted loan balance against future rent obligations of the Company’s newly leased second 49 mu (8.07 acre) parcel of land. The lease requires a yearly payment of RMB10,000 ($1,588) through June 2056. The Company has no obligation to pay this lease due to the default of Village loan. The balance of the Village loan receivable was capitalized as land use rights and amortized over the remaining life of the land use rights lease started on November 1, 2010.

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As of March 31, 2012 and December 31, 2011, land use rights were as follows:

	2012			2011
Land use rights	$	246,780		$	246,951
Less: accumulated amortization		(31,019	)		(29,806	)
Land use rights, net	$	215,761		$	217,145

Amortization of land use rights was recorded as rent. Rent expense was $1,231 and $1,181 for the three months ended March 31, 2012 and 2011, respectively.

As of March 31, 2012, the estimated annual amortization of land use rights for the next five years and thereafter is as follows:

2013	$	4,936
2014		4,936
2015		4,936
2016		4,936
2017		4,936
Thereafter		191,081
Total	$	215,761

NOTE 7 – SHORT TERM DEBT

Short term debt at March 31, 2012 and December 31, 2011 consisted of the following:

	2012		2011
To Xigu Credit Union
Interest at 13.25%, payable April 28, 2012	$	511,303	$	511,658
To Chengguan Credit Union
Interest at 13.25%, payable April 28, 2012		863,818		864,416
Total Short Term Debt	$	1,375,121	$	1,376,074

The short term debts are renewable based on the past credit of the Company. Interest is paid quarterly. There are no other terms or loan covenants relating to these short term loans. On April 28, 2012, the Company repaid the $511,303 loan to Xigu Credit Union and the $863,818 loan to Chengguan Credit Union. On April 28, 2012, the Company borrowed (i) $504,952 from Xigu Credit Union at 14.43% and due by December 27, 2012; and (ii) $859,054 from Chengguan Credit Union at 14.43% and due by December 27, 2012.

NOTE 8 – TAXES PAYABLE

Taxes payable at March 31, 2012 and December 31, 2011 consisted of:

	2012		2011
PRC corporation income tax	$	674,448	$	581,697
Value added tax		186,657		102,032
Other		15,865		10,490
Total	$	876,970	$	694,219

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NOTE 9 - COMMITMENTS AND CONTINGENCIES

Country Risk

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

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

Lack of Insurance

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

2011 Stock Incentive Plan

On September 13, 2011, the board of directors of Asia Carbon (the “BOD”) approved a resolution to adopt Asia Carbon’s 2011 Stock Incentive Plan (the “Plan”) which aims to support and increase the Company’s ability to attract, engage and retain individuals of exceptional talent, to provide additional incentive for persons employed by the Company, including without limitation any employee, director, general partner or officer, and to advance the best interests of the Company by providing to those persons who have a substantial responsibility for its management, affairs, and growth, a proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. The Plan reserves 5,0 00,000 shares of common stock of the Company for the issuance of equity awards thereunder.

On March 15, 2012, the BOD approved a resolution to issue 1,000,000 shares of common stock of the Company under the Plan to ten senior managers and key employees as part of compensation for 2012. The cost is estimated at $450,000 based on the closing price of the Company’s common stock on March 15, 2012 of $0.45. The Company plans to expense this compensation cost evenly in 2012, resulting in $112,500 being expensed as general and administrative expenses in the three months ended March 31, 2012.

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NOTE 10 – STOCKHOLDERS’ EQUITY

On September 13, 2011, the BOD approved a resolution to sell and issue 151,910 restricted shares of common stock of the Company to two investors for $121,528 at $0.80 per share.

On September 13, 2011, the BOD approved a resolution to issue 25,000 restricted shares of common stock of the Company to Cody Management in consideration for investor relations services. The stock was valued at $0.71 per share (the market closing price on September 12, 2011). An investor relations expense of $17,750 was recorded during the three months ended September 30, 2011.

On September 13, 2011, the BOD approved a resolution to issue options to purchase 400,000 shares of the Company’s common stock at $1.00 per share to three individuals in consideration for investor relations services. The $155,600 fair value of the stock options was calculated using a Black-Scholes option pricing model and the following assumptions: risk-free interest rate of 0.35%; expected stock price volatility of 100%; stock price of $0.71 per share; exercise price of $1.00 per share; and term of 3 years.

Effective July 1, 2011, the Company granted stock options to its chief financial officer (“CFO”) and to a director as part of their 2011 compensation package. The number of options and specified terms were formalized pursuant to a unanimous written consent of the BOD dated September 30, 2011, whereby the Company granted 220,000 stock options to its CFO and 75,000 stock options to the director. The exercise price of the options is $0.64, the higher of the market closing price at December 31, 2011 and the market closing price at September 30, 2011. These stock options expire on December 31, 2014. The $116,230 fair value of the stock options was calculated using a Black-Scholes option pricing model and the following assumptions: risk-free interest rate of 0.42%; expected stock price volatility of 100%; stock price of $0.64 per share; exercise price of $0.64 per share; and term of 3 years. The $116,230 estimated fair value of these stock options was expensed evenly over the quarters ending September 30 and December 31, 2011.

On December 23, 2011, the BOD approved a resolution to sell and issue 193,593 restricted shares of common stock of the Company to three investors for $133,780.

On March 15, 2012, the BOD approved a resolution to sell and issue 156,250 restricted shares of common stock of the Company to one investor for $100,000.

NOTE 11 – CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in various banks in China. Currently, no deposit insurance system has been set up in China. Therefore, the Company will bear all risk if any of these banks become insolvent. As of March 31, 2012 and December 31, 2011, the Company’s uninsured cash balances were $7,744,000 and $8,029,000, respectively.

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NOTE 12 – INCOME TAXES

The provision for income tax of $682,218 and $757,977 for the three months ended March 31, 2012 and 2011, respectively, arose from foreign income tax incurred and or paid to the Chinese tax agent. The Company’s income tax was assessed on 25% of net income.

Foreign pretax earnings were $2,722,056 and $2,863,450 for the three months ended March 31, 2012 and 2011, respectively. Pretax earnings of a foreign subsidiary are subject to US taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-US subsidiaries except to the extent such earnings are indefinitely invested outside the US. At March 31, 2012, approximately $22,084,000 of accumulated unadjusted earnings of non-US subsidiaries was indefinitely invested. At the existing US federal income tax rate, additional taxes of approximately $1,988,000 would have to be provided if such earnings were remitted currently.

The Company did not have any significant temporary differences giving rise to deferred tax liabilities as of March 31, 2012 and December 31, 2011.

For the three months ended March 31, 2012 and 2011, reconciliation of the differences between the statutory US Federal income tax rate and the effective rate was as follows:

	2012			2011

US statutory tax rate		34.0	%		34.0	%
Tax rate difference		-9.0	%		-9.0	%
Changes in valuation allowance		2.4	%		1.5	%
Effective rate		27.4	%		26.5	%

At March 31, 2012, the Company had US net operating loss carry forwards of $1,164,582. A 100% valuation allowance was recorded against their potential tax benefit due to the uncertainty of its realization.

NOTE 13 – MAJOR CUSTOMERS AND VENDORS

For the three months ended March 31, 2012, four customers accounted for 72% of total sales. During the comparable period in 2011, five customers accounted for 82% of total sales. The percentage of total sales during the three months ended March 31, 2012 and 2011, and accounts receivable balances at the end of the periods to these customers were as follows:

	2012					2011
Customer	% of Sales			Accounts Receivable Balance		% of Sales			Accounts Receivable Balance
A		11	%	$	707,330		10	%	$	542,365
B		22	%		1,050,284		21	%		1,227,726
C		26	%		1,338,866		29	%		1,822,514
D		-			-		10	%		696,457
E		13	%		728,274		12	%		673,512
Total		72	%	$	3,824,754		82	%	$	4,962,574

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The Company purchased raw materials predominantly from five and eight vendors during the three months ended March 31, 2012 and 2011, respectively. The purchase percentage of total purchases from vendors from whom the Company bought over 10% of its total purchases during the three months ended March 31, 2012 and 2011, and accounts payable balances at the end of the periods to these vendors were as follows:

	2012					2011
Vendor	% of Purchases			Accounts Payble Balance		% of Purchases			Accounts Payble Balance
A		-		$	-		12	%	$	597,712
B		-			-		12	%		608,410
C		-			-		12	%		503,182
D		13	%		457,117		13	%		561,589
E		12	%		455,438		12	%		570,654
F		13	%		470,985		13	%		637,658
G		13	%		460,226		13	%		594,008
H		13	%		449,680		13	%		503,080
Total		64	%	$	2,293,446		100	%	$	4,576,293

NOTE 14 – OTHER SUBSEQUENT EVENTS

On April 17, 2012, pursuant to a certain Call Option Agreements dated December 29, 2009 between Karen Prudente and Ms. Guo Yun Yao, the Chairman and Chief Executive Officer of Asia Carbon, and Mr. Chun De Meng, a director and Chief Operating Officer of Asia Carbon, respectively (the “ Call Option Agreements”), Ms. Guo Yun Yao and Mr. Chun De Meng exercised options to purchase 32,615,455 shares of common stock (the “Exercised Shares”). Of the Exercised Shares, Ms. Guo Yun Yao received 19,680,064 shares, approximately 37.8% of the Company’s outstanding shares of common stock, and Mr. Chun De Meng received 2,535,391 shares, approximately 5% of the Company’s outstanding shares of common stock. 10,400,000 shares of the Exercised Shares were immediately gifted to eight relatives of Ms. Yao and Mr. Meng. The remaining balance of shares in held in trust by Karen Prudente is 3,623,939 shares.

On May 3, 2012, the BOD approved a resolution to sell and issue 222,222 restricted shares of common stock of the Company to two investors for $100,000.

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

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

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

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

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

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

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Results of Operations

Comparison of Sales for the Three Months Ended March 31, 2012 and 2011

	2012				2011
Product	Sales		Quantity (Metric Ton)		Sales		Quantity (Metric Ton)
N220	$	7,815,209		8,000	$	8,572,852		7,683
N330		1,990,807		2,284		2,212,873		2,221
N660		1,922,322		2,289		2,207,716		2,236
Naphthalene oil		853,354		1,050		448,075		500
Total Sales	$	12,581,692		13,623	$	13,441,516		12,640

Sales for the three months ended March 31, 2012 totaled $12,581,692, a decrease of $859,824 or 6%, compared to $13,441,516 for the comparable period of 2011. The decrease in sales was mainly attributable to the decrease in the market price of carbon black, which resulted from the decrease in the market price of coal tars oil, a residual heavy oil from the distillation of coal tars, which is the principal raw material used in our production of carbon black. The average sales price of our products was $924 per metric ton during the three months ended March 31, 2012, a decrease of $140 per ton, or 13%, from $1,063 per ton during the three months ended March 31, 2011. In the first quarter of 2012, we sold 13,623 metric tons of carbon black and naphthalene oil, an increase of 983 metric tons, or 8%, compared to 12,640 metric tons in the comparable period of 2011. The increase in sales quantities offset 55% impact of decreased selling price.

The Company’s total carbon black production capacity was 61,000 tons per annum as of March 31, 2012 and 2011, respectively. The annualized production/total capacity utilization rate was 82% and 80% during three months ended March 2012 and 2011, respectively.

Comparison of Cost of Sales for Three Months Ended March 31, 2012 and 2011

Cost of sales was $9,655,740 for the three months ended March 31, 2012, a decrease of $604,344, or 6%, compared to $10,260,084 in the three months ended March 31, 2011. It was mainly attributable to the decrease in price of raw materials. Production used 22,862 metric tons of coal tar oil in the first quarter of 2012, an increase of 1,170 tons, or 5%, compared to 21,692 tons in the comparable period in 2011. The increase in consumption of coal tars oil resulted from an 8% increase in production quantities. The average price of coal tars was $384 per ton during 2012, a decrease of $54 per ton, or 12%, from $438 per ton during 2011.

Comparison of Gross Profit Rate for Three Months Ended March 31, 2012 and 2011

Gross profit was $2,925,952 in the three months ended March 31, 2012, a decrease of $255,480, or 8%, compared to $3,181,432 in the three months ended March 31, 2011. The profit rate was 23% for the three months ended March 31, 2012, a decrease of 1 percentage point, compared to 24% for the comparable period in 2011. The decrease in profit rate in the first quarter of 2012 was attributable mainly to the decrease in the sales price of carbon black.

Comparison of Operating Expenses for Three Months Ended March 31, 2012 and 2011

Operating expenses included depreciation, allowance for bad debts, selling, professional and consulting fees and other general and administrative expenses. Operating expenses were $402,079 in the three months ended March 31, 2012, an increase of $111,275, or 38% compared to $290,804 in the three months ended March 31, 2011.

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The increase in operating expenses was attributable to equity awards granted under the Company’s 2011 S tock I ncentive Plan (the “Plan”). The Plan aims to support and increase the Company’s ability to attract, engage and retain individuals of exceptional talent, to provide additional incentive for persons employed by the Company, including without limitation any employee, director, general partner or officer, and to advance the best interests of the Company by providing to those persons who have a substantial responsibility for its management, affairs, and growth, a proprietary interest in the success of the Company, thereby encouraging them to maintain their relationships with the Company. The Plan reserves 5,000,000 shares of common stock of the Company for the issuance of equity awards thereunder. On March 15, 2011, the Company’s board of directors passed a resolution to issue 1,000,000 shares of common stock of the Company under the plan to ten senior managers and key employees as part of compensation for 2012. The cost is estimated at $450,000 based on the closing price of the Company’s common stock on March 15, 2012 of $0.45. The Company plans to expense this compensation evenly in 2012, resulting in $112,500 being expensed as general and administrative expenses in the three months ended March 31, 2012.

Our selling expenses increased $20,615, or 29%, to $91,691 in the three months ended March 31, 2012 from $71,076 in the comparable period of 2011. The increase in selling expense resulted from increased delivery cost, which was driven by higher gas prices.

Comparison of Net Income for Three Months Ended March 31, 2012 and 2011

Net income was $1,807,081 in the three months ended March 31, 2012, a decrease of $298,392, or 14%, compared to $2,105,473 in the three months ended March 31, 2011. Net income per share was $0.04 in 2012 and 2011, respectively. Decrease in net income was a result of decreased unit sales price and increased stock incentive expenses.

Liquidity and Capital Resources

We had cash and equivalents of $7,748,503 and $8,092,411 as of March 31, 2012 and December 31, 2011, respectively. Our funds are kept in financial institutions in the PRC, which do not provide insurance for amounts on deposit. Moreover, we are subject to the regulations of the PRC which restrict the transfer of cash from the PRC, except under certain specific circumstances. Accordingly, such funds may not be readily available to us to satisfy obligations incurred outside the PRC.

Our accounts receivable have been a significant portion of our current assets, at $5,464,606 and $4,404,319 , or 32% and 28%, of current assets, as of March 31, 2012 and December 31, 2011, respectively. If customers responsible for a significant amount of accounts receivable were to become insolvent or otherwise unable to pay for our products, or to fail to make payments in a timely manner, our liquidity and results of operations could be materially adversely affected. An economic or industry downturn could materially adversely affect the servicing of these accounts receivable, which could result in longer payment cycles, increased collections costs and defaults in excess of management’s expectations. A significant deterioration in our ability to collect accounts receivable could affect our cash flow and working capital and could also impact the cost or availability of financing available to us.

Our accounts receivable aging was as follows, as of March 31, 2012 and December 31, 2011:

	Total			Current			31-90 days			91-120 days			121-360 days			Over 361 days
2012		100.00	%		86.14	%		13.20	%		0.00	%		0.00	%		0.66	%
2011		100.00	%		90.50	%		8.69	%		0.00	%		0.00	%		0.81	%

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. Allowance for doubtful accounts is based on our assessment of the collectability of specific customer accounts, the aging of accounts receivable, our history of bad debts, and the general condition of the industry. If a major customer’s credit worthiness deteriorates, or our customers’ actual defaults exceed historical experience, our estimates could change and impact our reported results. We have not experienced any significant amount of bad debt since the inception of our operations. Allowance for doubtful accounts was $99,096 and $84,935 as of March 31, 2012 and December 31, 2011, respectively.

Net cash provided by operating activities was $550,369 and $3,097,028 in three months ended March 31, 2012 and 2011, respectively. The decrease in net cash provided by operating activities in 2012 was mainly due to (i) a $1,023,950 negative change in accounts receivables, as the Company’s accounts receivable balance increased in the three months ended March 31, 2012 compared to that of the three months ended March 31, 2011, (ii) a $1,649,872 negative change in accounts payable, as the Company paid more of its accounts payable in the three months ended March 31, 2012 than in the three months ended March 31, 2011.

Net cash used in investing activities were $939,786 and $0 in the three months ended March 31, 2012 and 2011, respectively. The capital expenditures of $939,786 in the three months ended March 31, 2012 related to the Company’s new warehouse built in 2012.

Net cash provided by financing activities was $49,985 in the three months ended March 31, 2012, which was received from one private investor. In the three months ended March 31, 2011, the Company repaid short term loans of $1,312,163.

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Short Term Borrowings

Short term debt at March 31, 2012 and December 31, 2011 consisted of the following:

	2012		2011
To Xigu Credit Union
Interest at 13.25%, payable April 28, 2012	$	511,303	$	511,658
To Chengguan Credit Union
Interest at 13.25%, payable April 28, 2012		863,818		864,416
Total Short Term Debt	$	1,375,121	$	1,376,074

The short term debts are renewable based on the past credit of the Company. Interest is paid quarterly. There are no other terms or loan covenants relating to these short term loans. On April 28, 2012, the Company repaid the $511,303 loan to Xigu Credit Union and the $863,818 loan to Chengguan Credit Union. On April 28, 2012, the Company borrowed (i) $504,952 from Xigu Credit Union at 14.43% and due by December 27, 2012, and (ii) $859,054 from Chengguan Credit Union at 14.43% and due by December 27, 2012.

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

We believe that our working capital, together with our cash flow from operations will be sufficient to enable us to meet our cash requirements for the next 12 months. However, we may incur additional expenses as we seek to expand our business in the future, and it is possible that we may require additional funding for that purpose. We cannot be sure that funding will be available on acceptable terms when we require funding, if at all. Any equity financing may result in dilution to existing stockholders and any debt financing may include restrictive covenants.

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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

General

The Company’s Consolidated Financial Statements are prepared in accordance with US GAAP, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors. Management believes the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.

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Revenue Recognition

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

Fair Value of Financial Instruments

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

Foreign Currency Translation

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

Segment Information

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Smaller reporting companies are not required to provide the information required by this Item.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures .

At the conclusion of the period ended March 31, 2012 we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive and principal financial officers, of the effectiveness of the design and operation 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 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures were not effective and adequately designed to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal controls .

As reported in our Annual Report on Form 10-K for our fiscal year ended December 31, 2011, as of such fiscal year end we identified material weaknesses in our internal control over financial reporting and described several actions we plan to take to remedy such material weaknesses. As an initial step, during the quarter ended March 31, 2012, we have modified and reassigned jobs responsibilities and continued on job training of accounting and other related personnel.

Other than as set forth herein, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

Smaller reporting companies are not required to provide the information required by this item.

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

Effective March 16, 2012, the Board of Directors of the Company authorized the Company to issue an aggregate of 1 million shares of common stock to ten employees, including directors and officers of the Company. The issuance of 1,000,000 shares of common stock was pursuant to the Company’s 2010 Stock Incentive Plan (the “Plan”).

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Effective as of March 16, 2012, the Board of Directors of the Company appointed Mr. Baozhu Ren as a director of the Company. Mr. Ren’s bio was set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the Securities and Exchange Commission on March 29, 2012. Upon Mr. Ren’s appointment, the Company’s board increased from five members to six members.

Item 6. Exhibits.

The exhibits required by this item are set forth in the Exhibit Index attached hereto.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ASIA CARBON INDUSTRIES, INC.

Date: May 14, 2012	By:	/s/ Guo Yun Yao
		Guo Yun Yao
		Chief Executive Officer, President, Secretary and Chairman of the Board
		(principal executive officer)


Date: May 14, 2012	By:	/s/ Xiaolong Zhou
		Xiaolong Zhou
		Chief Financial Officer
		(principal financial officer and principal accounting officer)

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EXHIBIT INDEX

No. Description

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

* Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income and Comprehensive Income, (iii) the Consolidated Statements of Cash Flows, and (iv) related notes to these financial statements tagged as blocks of text. The XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.