UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2009

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

Commission File No. 0-31619

AMERICAN LORAIN CORPORATION(Exact name of registrant as specified in its charter)

|Delaware                                                           |  | 87-0430320                              
|------------------------------------------------------------------ |  | ----------------------------------------
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

Beihuan Road
Junan CountyShandong, China 276600(Address, including zip code, of principal executive offices)(+86) 539-7317959(Registrants telephone number, including area code)

Indicate by check mark whether the registrant:  (1) has filed all
reports required to be filed by Section 13 or 15(d) of the 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.

YesQNo
£

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







£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 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
£Smaller reporting companyQ

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

Yes
£No Q

The numbers of shares outstanding of the issuer's class of common stock as of
May 14, 2009 was 25,177,640.

---

|Table of Contents                                                                                 
|--------------------------------------------------------------------------------------------------
|                                                                                                  
|Part I - Financial Information                                                                    
|Item 1 Financial Statements                                                                       
|Item 2 Management's Discussion and Analysis
      of Financial Condition and Results of Operations
|Item 3 Quantitative and Qualitative Disclosures About
      Market Risk                           
|Item 4 Controls and Procedures                                                                    
|                                                                                                  
|Part II - Other Information                                                                       
|Item 1 Legal Proceedings                                                                          
|Item 1A Risk Factors                                                                              
|Item 2 Unregistered Sales of Equity Securities and Use of
      Proceeds                          
|Item 3 Defaults Upon Senior Securities                                                            
|Item 4 Submission of Matters to a Vote of Security Holders                                        
|Item 5 Other Information                                                                          
|Item 6 Exhibits                                                                                   
|Signatures                                                                                        

1

---

**PART I FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS.**

**AMERICAN LORAIN CORPORATION** **CONSOLIDATED BALANCE
SHEETS** **AS OF MARCH 31, 2009 AND DECEMBER 31, 2008**
**(Stated in US Dollars)**

|                                             |  | Note |  |   | 2009        |  |   | 2008        | 
|-------------------------------------------- |  | ---- |  | - | ----------- |  | - | ----------- | 
|ASSETS                                       |  |      |  |   |             |  |   |             | 
|Current assets                               |  |      |  |   |             |  |   |             | 
|Cash and Cash
      equivalents              |  |      |  | $ | 12,243,722  |  | $ | 2,841,339   | 
|Restricted
      Cash                        |  | 3    |  |   | 1,004,780   |  |   | 3,715,998   | 
|Short-term Investment                        |  |      |  |   | 110,290     |  |   | 113,069     | 
|Trade
      accounts receivable              |  | 4    |  |   | 23,475,617  |  |   | 25,293,326  | 
|Other
      receivables                      |  | 5    |  |   | 8,050,484   |  |   | 5,107,719   | 
|Inventory                                    |  | 6    |  |   | 27,688,491  |  |   | 24,827,922  | 
|Advance to
      Suppliers                   |  |      |  |   | 308,085     |  |   | 415,009     | 
|Prepaid
      Expenses and Taxes             |  |      |  |   | 1,323,073   |  |   | 1,228,648   | 
|                                             |  |      |  |   |             |  |   |             | 
|Total current assets                         |  |      |  | $ | 74,204,542  |  | $ | 63,543,030  | 
|                                             |  |      |  |   |             |  |   |             | 
|Property, plant and
      equipment, net     |  | 7    |  |   | 40,010,398  |  |   | 40,201,686  | 
|Land use rights,
      net                   |  | 8    |  |   | 4,145,144   |  |   | 3,950,927   | 
|                                             |  |      |  |   |             |  |   |             | 
|TOTAL ASSETS                                 |  |      |  | $ | 118,360,085 |  | $ | 107,695,643 | 
|                                             |  |      |  |   |             |  |   |             | 
|                                             |  |      |  |   |             |  |   |             | 
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |      |  |   |             |  |   |             | 
|Current liabilities                          |  |      |  |   |             |  |   |             | 
|Short-term bank
      loans                  |  | 9    |  | $ | 29,063,318  |  | $ | 14,414,996  | 
|Notes payable                                |  | 10   |  |   | -           |  |   | 5,208,485   | 
|Accounts payable                             |  |      |  |   | 4,297,179   |  |   | 6,072,883   | 
|Income tax
      payable                     |  |      |  |   | 1,044,540   |  |   | 2,682,658   | 
|Accrued
      liabilities and other payables |  | 11   |  |   | 11,600,586  |  |   | 10,291,237  | 
|Customers
      deposits                     |  |      |  |   | 1,367,453   |  |   | 748,732     | 
|                                             |  |      |  |   |             |  |   |             | 
|Total current liabilities                    |  |      |  | $ | 47,373,075  |  | $ | 39,418,991  | 
|                                             |  |      |  |   |             |  |   |             | 
|Long-term bank loans                         |  | 12   |  |   | 577,700     |  |   | 576,975     | 
|TOTAL LIABILITIES                            |  |      |  | $ | 47,950,774  |  | $ | 39,995,966  | 

See Accompanying Notes to the Financial Statements and Accountants Report

2

---

**AMERICAN LORAIN CORPORATION** **CONSOLIDATED BALANCE
SHEETS (Continued)** **AS OF MARCH 31, 2009 AND DECEMBER 31,
2008** **(Stated in US Dollars)**



|                                                                               |  | Note |  |   | 2009        |  |   | 2008        | 
|------------------------------------------------------------------------------ |  | ---- |  | - | ----------- |  | - | ----------- | 
|                                                                               |  |      |  |   |             |  |   |             | 
|STOCKHOLDERS EQUITY                                                           |  |      |  |   |             |  |   |             | 
|Common Stock, $0.001 par
      value, 200,000,000 shares                       |  |      |  |   |             |  |   |             | 
|authorized; 25,177,640
      and 25,172,640 shares issued                      |  |      |  |   |             |  |   |             | 
|and outstanding as of
      March 31, 2009 and December 31, 2008, respectively |  |      |  |   |             |  |   |             | 
|                                                                               |  | 14   |  |   | 25,177      |  |   | 25,172      | 
|Additional paid-in-capital                                                     |  |      |  |   | 24,187,019  |  |   | 24,187,019  | 
|Statutory reserves                                                             |  |      |  |   | 5,438,723   |  |   | 5,438,723   | 
|Retained earnings                                                              |  |      |  |   | 29,504,202  |  |   | 27,748,126  | 
|Accumulated other comprehensive                                                |  |      |  |   |             |  |   |             | 
|Income                                                                         |  |      |  |   | 5,968,189   |  |   | 5,178,616   | 
|Minority interests                                                             |  |      |  |   | 5,286,001   |  |   | 5,122,021   | 
|                                                                               |  |      |  |   |             |  |   |             | 
|                                                                               |  |      |  | $ | 70,409,311  |  | $ | 67,699,677  | 
|                                                                               |  |      |  |   |             |  |   |             | 
|TOTAL LIABILITIES AND
      STOCKHOLDERS EQUITY                               |  |      |  | $ | 118,360,085 |  | $ | 107,695,643 | 

See Accompanying Notes to the Financial Statements and Accountants Report

3

---

**AMERICAN LORAIN CORPORATION** **CONSOLIDATED
STATEMENTS OF INCOME** **FOR THE THREE MONTHS ENDED MARCH 31,
2009 AND 2008** **(Stated in US Dollars)**





|                                    |  | Note |  |   | 2009        |   |   | 2008        |  
|----------------------------------- |  | ---- |  | - | ----------- | - | - | ----------- | -
|                                    |  |      |  |   |             |   |   |             |  
|Net revenues                        |  |      |  | $ | 21,200,537  |   | $ | 17,428,299  |  
|Cost of revenues                    |  |      |  |   | (16,038,203 | ) |   | (13,480,324 | )
|                                    |  |      |  |   |             |   |   |             |  
|Gross profit                        |  |      |  | $ | 5,162,334   |   | $ | 3,947,975   |  
|                                    |  |      |  |   |             |   |   |             |  
|Operating expenses                  |  |      |  |   |             |   |   |             |  
|Selling and marketing expenses      |  |      |  |   | (1,170,847  | ) |   | (618,968    | )
|General and administrative expenses |  |      |  |   | (976,306    | ) |   | (544,450    | )
|                                    |  |      |  |   |             |   |   |             |  
|Operating Income                    |  |      |  | $ | 3,015,181   |   | $ | 2,784,557   |  
|                                    |  |      |  |   |             |   |   |             |  
|Investment income                   |  |      |  |   |             |   |   |             |  
|Government subsidy income           |  |      |  |   | 98,589      |   |   | 32,750      |  
|Interest income                     |  |      |  |   | 64,990      |   |   | 39,083      |  
|Other income                        |  |      |  |   | 16,379      |   |   | -           |  
|Foreign exchange loss               |  |      |  |   | (87,433     | ) |   |             |  
|Other expenses                      |  |      |  |   | (24,884     | ) |   | (10,168     | )
|Interest Expense                    |  |      |  |   | (603,826    | ) |   | (590,297    | )
|                                    |  |      |  |   |             |   |   |             |  
|Earnings before tax                 |  |      |  | $ | 2,478,996   |   | $ | 2,255,924   |  
|Income tax                          |  | 15   |  |   | (580,772    | ) |   | (390,381    | )
|                                    |  |      |  |   |             |   |   |             |  
|Income before minority interests    |  |      |  | $ | 1,898,224   |   | $ | 1,865,543   |  
|Net Income Attributable to:         |  |      |  |   |             |   |   |             |  
|-Parent                             |  |      |  |   | 1,756,076   |   |   | 1,731,703   |  
|-Non-controlling
      Interest     |  |      |  |   | 142,148     |   |   | 133,840     |  
|                                    |  |      |  |   |             |   |   |             |  
|                                    |  |      |  |   | 1,898,224   |   |   | 1,865,543   |  
|                                    |  |      |  |   |             |   |   |             |  
|Earnings per share                  |  |      |  |   |             |   |   |             |  
|basic                               |  |      |  | $ | 0.0697      |   | $ | 0.0695      |  
|diluted                             |  |      |  |   | 0.0697      |   |   | 0.0664      |  
|Weighted average shares outstanding |  |      |  |   |             |   |   |             |  
|basic                               |  |      |  |   | 25,177,640  |   |   | 24,923,179  |  
|diluted                             |  |      |  |   | 25,177,640  |   |   | 26,091,382  |  

See Accompanying Notes to the Financial Statements and Accountants Report

4

---

**AMERICAN LORAIN CORPORATION** **STATEMENT OF
STOCKHOLDERS EQUITY** **FOR THE YEARS ENDED MARCH 31, 2009 AND
DECEMBER 31, 2008(Stated in US Dollars)**



|                                               |  | Number of Shares |  |   | Common Stock |  |   | Additional Paid-in Capital |   |   | Statutory Reserves |  |   | Retained Earnings |   |   | Accumulated Other Comprehensive
      Income |  |   | Minority Interests |  |   | Total      | 
|---------------------------------------------- |  | ---------------- |  | - | ------------ |  | - | -------------------------- | - | - | ------------------ |  | - | ----------------- | - | - | -------------------------------------------- |  | - | ------------------ |  | - | ---------- | 
|Balance, January 1, 2008                       |  | 24,923,178       |  | $ | 24,923       |  | $ | 24,187,268                 |   | $ | 4,497,647          |  | $ | 13,985,824        |   | $ | 1,846,708                                    |  | $ | 3,887,021          |  | $ | 48,429,391 | 
|Issuance of Common Stock                       |  | 249,455          |  |   | 249          |  |   | (249                       | ) |   | -                  |  |   | -                 |   |   | -                                            |  |   | -                  |  |   | -          | 
|Share Adjustment to Match
      Transfer Agent |  | 7                |  |   | -            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | -                                            |  |   | -                  |  |   | -          | 
|Net Income                                     |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | 14,703,378        |   |   | -                                            |  |   | -                  |  |   | 14,703,378 | 
|Appropriations to Statutory
      Reserves     |  | -                |  |   | -            |  |   | -                          |   |   | 941,076            |  |   | (941,076          | ) |   | -                                            |  |   | -                  |  |   | -          | 
|Minority Interests                             |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | -                                            |  |   | 1,235,000          |  |   | 1,235,000  | 
|Foreign Currency Translation
      Adjustment  |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | 3,331,908                                    |  |   | -                  |  |   | 3,331,908  | 
|Balance, December 31, 2008                     |  | 25,172,640       |  | $ | 25,172       |  | $ | 24,187,019                 |   | $ | 5,438,723          |  | $ | 27,748,126        |   | $ | 5,178,616                                    |  | $ | 5,122,021          |  | $ | 67,699,677 | 
|                                               |  |                  |  |   |              |  |   |                            |   |   |                    |  |   |                   |   |   |                                              |  |   |                    |  |   |            | 
|Balance, January 1, 2009                       |  | 25,172,640       |  | $ | 25,172       |  | $ | 24,187,019                 |   | $ | 5,438,723          |  | $ | 27,748,126        |   | $ | 5 ,178,616                                   |  | $ | 5,122,021          |  | $ | 67,699,677 | 
|Issuance of Common Stock                       |  | 5,000            |  |   | 5            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | -                                            |  |   | -                  |  |   |            | 
|Net Income                                     |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | 1,756,076         |   |   | -                                            |  |   | -                  |  |   | 1,756,076  | 
|Appropriations to Statutory
      Reserves     |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | -                                            |  |   | -                  |  |   | -          | 
|Minority Interests                             |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | -                                            |  |   | 163,980            |  |   | 163,980    | 
|Foreign Currency Translation
      Adjustment  |  | -                |  |   | -            |  |   | -                          |   |   | -                  |  |   | -                 |   |   | 789,573                                      |  |   | -                  |  |   | 789,573    | 
|Balance, March 31, 2009                        |  | 25,177,640       |  | $ | 25,177       |  | $ | 24,187,019                 |   | $ | 5,438,723          |  | $ | 29,504,202        |   | $ | 5,968,189                                    |  | $ | 5,286,001          |  | $ | 70,409,311 | 

5

---

|                             |   | Comprehensive Income 2009 |  |   | Comprehensive Income 2008 |  |   | Total      | 
|---------------------------- | - | ------------------------- |  | - | ------------------------- |  | - | ---------- | 
|Net Income                   | $ | 1,898,224                 |  | $ | 14,703,378                |  | $ | 16601,602  | 
|Foreign Currency Translation |   |                           |  |   |                           |  |   |            | 
|Adjustment                   |   | 789,573                   |  |   | 3,331,908                 |  |   | 4,121,481  | 
|                             | $ | 2,687,797                 |  | $ | 18,035,286                |  | $ | 20,723,083 | 

SeeAccompanyingNotes to theFinancialStatementsandAccountantsReport

6

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**AMERICAN LORAIN CORPORATION** **CONSOLIDATED
STATEMENTS OF CASH FLOWS** **FOR THE THREE MONTHS ENDED MARCH
31, 2009 AND 2008** (**Stated in US Dollars)**



|                                                                          |   | 2009       |   |   | 2008        |  
|------------------------------------------------------------------------- | - | ---------- | - | - | ----------- | -
|Cash flows from operating activities                                      |   |            |   |   |             |  
|Net income                                                                | $ | 1,756,076  |   | $ | 1,731,703   |  
|Minority interest                                                         |   | 142,148    |   |   | 133,840     |  
|Depreciation                                                              |   | 334,454    |   |   | 360,568     |  
|Amortization                                                              |   | 44,377     |   |   | 27,481      |  
|(Increase)/decrease in accounts & other
      receivables                 |   | 1,598,659  |   |   | 7,070,972   |  
|(Increase)/decrease in
      inventories                                  |   | (2,860,568 | ) |   | 3,536,593   |  
|Increase/(decrease) in accounts and other
      payables                  |   | (1,485,752 | ) |   | (10,011,750 | )
|Net cash (used in)/provided by operating
      activities                 | $ | (470,606   | ) | $ | 2,849,407   |  
|Cash flows from investing activities                                      |   |            |   |   |             |  
|Purchase of plant and
      equipment                                     |   | (143,166   | ) |   | (3,237,074  | )
|Purchase of biological assets                                             |   | -          |   |   | (115,731    | )
|Increase of construction in
      progress                                |   | -          |   |   | (1,253,155  | )
|Payments for deposit                                                      |   | (215,905   | ) |   | -           |  
|(Increase)/decrease in
      restricted cash                              |   | -          |   |   | 34,722      |  
|Payment of land use rights                                                |   | (22,689    | ) |   | (131,935    | )
|Investments in securities                                                 |   | -          |   |   | (772,942    | )
|Sales of securities                                                       |   | 2,780      |   |   | -           |  
|                                                                          |   |            |   |   |             |  
|Net cash used in investing activities                                     | $ | (378,980   | ) | $ | (5,476,115  | )
|Cash flows from financing activities                                      |   |            |   |   |             |  
|Issue of common stock                                                     |   | 5          |   |   | -           |  
|Notes repayment                                                           |   | (5,208,485 | ) |   | -           |  
|Bank borrowings                                                           |   | 14,649,047 |   |   | 1,066,888   |  
|Net cash provided by financing
      activities                           | $ | 9,440,566  |   | $ | 1,066,888   |  
|Net in cash and cash equivalents (used)/sourced                           |   | 8,590,979  |   |   | (1,559,820  | )
|Effect of foreign currency translation on
      cash and cash equivalents |   | 811,404    |   |   | 1,052,344   |  
|Cash and cash equivalentsbeginning of year                               |   | 2,841,339  |   |   | 6,769,973   |  
|Cash and cash equivalentsend of year                                     | $ | 12,243,722 |   | $ | 6,262,497   |  
|                                                                          |   |            |   |   |             |  
|Supplementary cash flow information:                                      |   |            |   |   |             |  
|Interest received                                                         | $ | 64,990     |   | $ | 9,378       |  
|Interest paid                                                             |   | 603,826    |   |   | 369,077     |  
|Taxes Paid                                                                |   | 580,772    |   |   | 1,705,431   |  

See Accompanying Notes to the Financial Statements and Accountants Report

7

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|1. | ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL ACTIVITIES
|-- | -------------------------------------------------------------
|   |                                                              
|   | (a)                                                          
|   |                                                              
|   |                                                              
|   |                                                              
|   | (b)                                                          
|   |                                                              
|   |                                                              
|   |                                                              
|   |                                                              
|   |                                                              
|   | (c)                                                          
|   |                                                              
|   |                                                              
|   |                                                              
|   |                                                              
|   |                                                              
|   |                                                              
|   |                                                              
|   | (d)                                                          

8

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|2. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES
|-- | --------------------------------------------
|   |                                             
|   | (a)                                         
|   |                                             
|   |                                             
|   |                                             
|   | (b)                                         
|   |                                             
|   |                                             
|   |                                             
|   |                                             

Name of Company
    Place of
      incorporation
    Attributableequity interest %
    Registered
      capitalShandong Lorain Co., Ltd
    PRC
    80.2
    $12,901,823 (RMB 100,860,000)Luotian Lorain Co., Ltd
    PRC
    100
    $3,240,013 (RMB 25,328,800)Junan Hongrun Foodstuff Co., Ltd
    PRC
    100
    $16,245,603 (RMB 127,000,000)Beijing Lorain Co., Ltd
    PRC
    100
    $1,279,181 (RMB 10,000,000)


| | (c) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     | The preparation of the financial statements in conformity
      with generally accepted accounting principles in the United States of
      America 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 reported amounts of revenues and expenses during the reporting
      periods. Management makes these estimates using the best information
      available at the time the estimates are made; however actual results could
      differ materially from those estimates
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (d) | Economic and political
risks
      The Companys operations are conducted 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 PRC
  economy.                                                                                                                                                                                                                                                                                                                                          

9

---

| |     | The Companys operations in the PRC are subject to
      special considerations and significant risks not typically associated with
      companies in North America and Western Europe. These include risks
      associated with, among others, the political, economic and legal
      environment and foreign currency exchange. The Companys results 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, anti-inflationary measures, currency conversion, remittances
      abroad, and rates and methods of taxation, among other things.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (e) | Lease prepayments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Lease prepayments represent the cost of land use rights
      in the PRC. Land use rights are carried at cost and amortized on a
      straight-line basis over the period of rights of 50 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (f) | Property, plant and
equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Plant and equipment are carried at cost less accumulated
depreciation. Depreciation is provided over their estimated useful lives, using
the straight-line method. Estimated useful lives of the plant and equipment are
as follows:

Buildings
    40 yearsMachinery
      and equipment
    10 yearsMotor
      vehicles
    10 yearsOffice
      equipment
    5 years


| |     | The cost and related accumulated depreciation of assets
      sold or otherwise retired are eliminated from the accounts and any gain or
      loss is included in the statement of income. The cost of maintenance and
      repairs is charged to income as incurred, whereas significant renewals and
      betterments are capitalized.                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (g) | Accounting for the Impairment of Long-Lived
      Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The long-lived assets held and used by the Company are
      reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of assets may not be recoverable. It is
      reasonably possible that these assets could become impaired as a result of
      technology or other industry changes. Determination of recoverability of
      assets to be held and used is by comparing the carrying amount of an asset
      to future net undiscounted cash flows to be generated by the
  assets.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | 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 assets exceeds the fair value of the assets. Assets
      to be disposed of are reported at the lower of the carrying amount or fair
      value less costs to sell. During the reporting years, there was no
      impairment loss.                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (h) | Construction in progress                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Construction in progress represents direct costs of
      construction or acquisition and design fees incurred. Capitalization of these costs ceases and the
      construction in progress is transferred to plant and equipment when
      substantially all the activities necessary to prepare the assets for their
      intended use are completed. No depreciation is provided until it is
      completed and ready for intended use.                                                                                                 

10

---

| | (i) | Investment securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company classifies its equity securities into trading
      or available-for-sale. Trading securities are bought and held principally
      for the purpose of selling them in the near term. All securities not
      included in trading securities are classified as
  available-for-sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Trading and available-for-sale securities are recorded at
      fair value. Unrealized holding gains and losses on trading securities are
      included in the net income. Unrealized holding gains and losses, net of
      the related tax effect, on available for sale securities are excluded from
      net income and are reported as a separate component of other comprehensive
      income until realized. Realized gains and losses from the sale of
      available-for-sale securities are determined on a specific-identification
      basis.                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | A decline in the market value of any available-for-sale
      security below cost that is deemed to be other-than-temporary results in a
      reduction in carrying amount to fair value. The impairment is charged as
      an expense to the statement of income and comprehensive income and a new
      cost basis for the security is established. To determine whether
      impairment is other-than-temporary, the Company considers whether it has
      the ability and intent to hold the investment until a market price
      recovery and considers whether evidence indicating the cost of the
      investment is recoverable outweighs evidence to the contrary. Evidence
      considered in this assessment includes the reasons for the impairment, the
      severity and duration of the impairment, changes in value subsequent to
      year end, and forecasted performance of the investee.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Premiums and discounts are amortized or accreted over the
      life of the related available-for-sale security as an adjustment to yield
      using the effective-interest method. Dividend and interest income are
      recognized when earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (j) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Inventories consisting of finished goods and raw
      materials are stated at the lower of cost or market value. Finished goods
      are comprised of direct materials, direct labor and an appropriate
      proportion of overhead.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (k) | Trade receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Trade receivables are recognized and carried at the
      original invoice amount less allowance for any uncollectible amounts. An
      estimate for doubtful accounts is made when collection of the full amount
      is no longer probable. Bad debts are written off as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (l) | Customer deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | Customer deposits were received from customers in
      connection with orders of products to be delivered in future
    periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (m) | Cash and cash equivalents
      The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

11

---

| | (n) | Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | All advertising costs are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (o) | Shipping and handling                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | All shipping and handling are expensed as
  incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (p) | Research and development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | All research and development costs are expensed as
      incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (q) | Retirement benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Retirement benefits in the form of contributions under
      defined contribution retirement plans to the relevant authorities are
      charged to the consolidated statement of income as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (r) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | The Company uses the accrual method of accounting to
      determine and report its taxable reduction of income taxes for the year in
      which they are available. The Company has implemented Statement of
      Financial Accounting Standards (SFAS) No. 109, Accounting for Income
      Taxes. Income tax liabilities computed according to the United States and
      Peoples Republic of China (PRC) tax laws are provided for the tax effects
      of transactions reported in the financial statements and consists of taxes
      currently due plus deferred taxes related primarily to differences between
      the basis of fixed assets and intangible assets for financial and tax
      reporting. The deferred tax assets and liabilities represent the future
      tax return consequences of those differences, which will be either taxable
      or deductible when the assets and liabilities are recovered or settled.
      Deferred taxes also are recognized for operating losses that are available
      to offset future income taxes. A valuation allowance is created to
      evaluate deferred tax assets if it is more likely than not that these
      items will either expire before the Company is able to realize that tax
      benefit, or that future realization is uncertain.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | Effective January 1, 2008, PRC government implemented a
      new 25% tax rate across the board for all enterprises regardless of
      whether domestic or foreign enterprise without any tax holiday which is
      defined as "two-year exemption followed by three-year half exemption"
      hitherto enjoyed by tax payers. As a result of the new tax law of a
      standard 15% tax rate, tax holidays terminated as of December 31, 2007.
      However, PRC government has established a set of transition rules to allow
      enterprises already started tax holidays before January 1, 2008, to
      continue enjoying the tax holidays until being fully utilized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |     | The Company is subject to United States Tax according to
      Internal Revenue Code Sections 951 and 957. Corporate income tax is
      imposed on progressive rates in the range of:
-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Taxable IncomeRate
    
    Over
    
    But Not Over
    
    Of Amount Over15%
    
    0
    
    50,000
    
    025%
    
    50,000
    
    75,000
    
    50,00034%
    
    75,000
    
    100,000
    
    75,00039%
    
    100,000
    
    335,000
    
    100,00034%
    
    335,000
    
    10,000,000
    
    335,00035%
    
    10,000,000
    
    15,000,000
    
    10,000,00038%
    
    15,000,000
    
    18,333,333
    
    15,000,00035%
    
    18,333,333
    
    -
    
    -


12

---

| |     | Based on the consolidated net income for the period ended
      March 31, 2009 and the year ended December 31, 2008, the Company shall not
      be subject to income tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company accounts for income tax using an asset and
      liability approach and allows for recognition of deferred tax benefits in
      future years. Under the asset and liability approach, deferred taxes are
      provided for the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting
      purposes and the amounts used for income tax purposes. A valuation
      allowance is provided for deferred tax assets if it is more likely than
      not these items will either expire before the Company is able to realize
      their benefits, or that future realization is uncertain.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (s) | Statutory reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Statutory reserves are referring to the amount
      appropriated from the net income in accordance with laws or regulations,
      which can be used to recover losses and increase capital, as approved, and
      are to be used to expand production or operations.                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (t) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The accompanying financial statements are presented in
      United States dollars. The functional currency of the Company is the
      Renminbi (RMB). The financial statements are translated into United States
      dollars from RMB at year-end exchange rates as to assets and liabilities
      and average exchange rates as to revenues and expenses. Capital accounts
      are translated at their historical exchange rates when the capital
      transactions occurred.                                                                                                                                                                                         

2009
    
    
    2008Year end RMB : US$ exchange rate
    
    6.84560
    
    
    6.8542Average yearly RMB : US$ exchange rate
    
    6.84659
    
    
    6.9622


| |     | The RMB is not freely convertible into foreign currency
      and all foreign exchange transactions must take place through authorized
      institutions. No representation is made that the RMB amounts could have
      been, or could be, converted into US$ at the rates used in
    translation.                                                                                                                                                                                                                                        
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (u) | Revenue recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The Company's revenue recognition policies are in
      compliance with Staff accounting bulletin (SAB) 104. Sales revenue is
      recognized at the date of shipment to customers when a formal arrangement
      exists, the price is fixed or determinable, the delivery is completed, no
      other significant obligations of the Company exist and collectibility is
      reasonably assured. Payments received before all of the relevant criteria
      for revenue recognition are satisfied are recorded as unearned
    revenue.

13

---

| |     | The Company's revenue consists of invoiced value of
      goods, net of a value-added tax (VAT). No product return or sales discount
      allowance is made as products delivered and accepted by
  customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (v) | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Basic earnings per share is computed by dividing net
      income by the weighted average number of ordinary shares outstanding
      during the period. Diluted earnings per share is computed by dividing net
      income by the sum of the weighted average number of ordinary shares
      outstanding and dilutive potential ordinary shares during the years.
      During this quarter ended March 31, 2009 and the year ended 2008 and 2007,
      no dilutive potential ordinary shares were issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The Company computes earnings per share (EPS) in
      accordance with Statement of Financial Accounting Standards No. 128,
      Earnings per share (SFAS No. 128), and SEC Staff Accounting Bulletin
      No. 98 (SAB 98). SFAS No. 128 requires companies with complex capital
      structures to present basic and diluted EPS. Basic EPS is measured as the
      income or loss available to common shareholders divided by the weighted
      average common shares outstanding for the period. Diluted EPS is similar
      to basic EPS but presents the dilutive effect on a per share basis of
      potential common shares (e.g., convertible securities, options, and
      warrants) as if they had been converted at the beginning of the periods
      presented, or issuance date, if later. Potential common shares that have
      an anti-dilutive effect (i.e., those that increase income per share or
      decrease loss per share) are excluded from the calculation of diluted
      EPS.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (w) | Commitments and contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Liabilities for loss contingencies arising from claims,
      assessments, litigation, fines and penalties and other sources are
      recorded when it is probable that a liability has been incurred and the
      amount of the assessment can be reasonably estimated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (x) | Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Comprehensive income is defined to include all changes in
      equity except those resulting from investments by owners and distributions
      to owners. Among other disclosures, all items that are required to be
      recognized under current accounting standards as components of
      comprehensive income are required to be reported in a financial statement
      that is presented with the same prominence as other financial statements.
      The Companys current component of other comprehensive income is the
      foreign currency translation adjustment.                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (y) | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | In March 2008, the FASB issued SFAS No. 161, "Disclosures
      about Derivative Instruments and Hedging Activities, an amendment of FASB
      Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative
      instruments and related hedged items accounted for under SFAS No. 133,
      "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
      133"). SFAS 161 requires entities to provide greater transparency about
      (a) how and why an entity uses derivative instruments, (b) how derivative
      instruments and related hedged items are accounted for
  under                                                                                                                                                                                                                                                                                                                                                                                                               

14

---

SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, results of operations and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of
Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles (the
GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, "The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles."

In May 2008, the FASB issued FSP Accounting Principles Board
("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP
APB 14-1 requires the issuer of certain convertible debt instruments that may be
settled in cash (or other assets) on conversion to separately account for the
liability (debt) and equity (conversion option) components of the instrument in
a manner that reflects the issuer's non-convertible debt borrowing rate. FSP APB
14-1 is effective for fiscal years beginning after December 15, 2008 on a
retroactive basis.

In September 2008, FASB issued FSP No. 133-1 and FIN 45-4,
Disclosures about Credit Derivatives and Certain Guarantees, an amendment of
FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the
Effective Date of FASB Statement No. 161. This FSP is intended to improve
disclosures about credit derivatives by requiring more information about the
potential adverse effects of changes in credit risk on the financial position,
financial performance, and cash flows of the sellers of credit derivatives. The
provisions of the FSP that amend Statement 133 and FIN 45 are effective for
reporting periods (annual or interim) ending after November 15, 2008.

This FSP amends FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities, to require disclosures by
sellers of credit derivatives, including credit derivatives embedded in hybrid
instruments. This FSP also amends FASB Interpretation (FIN) No. 45,

Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness to Others, to
require an additional disclosure about the current status of the
payment/performance risk of a guarantee. The provisions of the FSP that amend
Statement 133 and FIN 45 are effective for reporting periods (annual or interim)
ending after November 15, 2008.

Finally, this FSP clarifies the effective date in FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The disclosures required by Statement 161 should be provided for
any reporting period (annual or quarterly interim) beginning after November 15,
2008. For example, an entity with a March 31 fiscal year-end should provide the
disclosures for its fourth quarter interim period ending March 31, 2009, in its
2009 annual financial statements. This clarification of the effective date of
Statement 161 is effective upon issuance of the FSP.

The Company is currently evaluating the potential impact, if
any, of the adoption of the above recent accounting pronouncements on its
consolidated results of operations and financial condition.



15

---

3.

RESTRICTED CASH

Restricted Cash represents interest bearing deposits placed
with banks to secure banking facilities in the form of loans and notes payable.
The restriction of funds is based on time. The funds that collateralize loans
are held for 60 days in savings account that pay interest at the prescribed
national daily savings account rate. For funds that underline notes payable, the
cash is deposited in six month time deposits that pay interest at the national
time deposit rate.

**4.**

**TRADE ACCOUNTS RECEIVABLE**

Trade accounts
receivable consisted of the following as of March 31, 2009 and December 31,
2008:

| |                                            |  |   | 2009       |   |   | 2008       |  
| | ------------------------------------------ |  | - | ---------- | - | - | ---------- | -
| | Trade accounts receivable                  |  | $ | 23,701,650 |   | $ | 25,421,293 |  
| | Less:Allowance for
      doubtful accounts |  |   | (226,033   | ) |   | (127,967   | )
| |                                            |  |   |            |   |   |            |  
| |                                            |  | $ | 23,475,617 |   | $ | 25,293,326 |  
| |                                            |  |   |            |   |   |            |  
| |                                            |  |   |            |   |   |            |  
| | Allowance for Bad Debt:                    |  |   | 2009       |   |   | 2008       |  
| | Beginning Balance                          |  | $ | 127,967    |   | $ | 172,309    |  
| | Additions to Allowance                     |  |   |            |   |   |            |  
| | Less:Bad debt written-off                  |  |   | 98,066     |   |   | (44,342    | )
| |                                            |  | $ | 226,033    |   | $ | 127,967    |  

The Company offers credit terms of between 30 to 60 days to
most of their international distributors as well as domestic supermarkets and
wholesalers, and between 0 to 15 days for most of their agents.

5.

OTHER RECEIVABLES

Other receivables consisted of the following as of March 31,
2009 and December 31, 2008:

| |                                        |  |   | 2009      |  |   | 2008      | 
| | -------------------------------------- |  | - | --------- |  | - | --------- | 
| | Advances to suppliers                  |  | $ | -         |  | $ | 663,302   | 
| | Advances to Employees for job/travel   |  |   |           |  |   |           | 
| | disbursements                          |  |   | 6,128,596 |  |   | 3,160,886 | 
| | Amount due by a non-related enterprise |  |   | 1,921,888 |  |   | 1,278,501 | 
| | Other non-related receivables          |  |   | -         |  |   | 5,030     | 
| |                                        |  | $ | 8,050,484 |  | $ | 5,107,719 | 

16

---

**6.**

**INVENTORIES**

Inventories consisted of the following as of March 31, 2009 and
December 31, 2008:

| |                 |  |   | 2009       |  |   | 2008       | 
| | --------------- |  | - | ---------- |  | - | ---------- | 
| | Raw materials   |  | $ | 11,794,668 |  | $ | 9,636,050  | 
| | Work in Process |  |   | -          |  |   | 1,143,766  | 
| | Finished goods  |  |   | 15,893,823 |  |   | 14,048,106 | 
| |                 |  | $ | 27,688,491 |  | $ | 24,827,922 | 

**7.**

**PROPERTY, PLANT, AND EQUIPMENT**

Property, plant, and equipment consisted of the following as of
March 31, 2009 and December 31, 2008:

| |                                    |   | 2009       |   |   | 2008       |  
| | ---------------------------------- | - | ---------- | - | - | ---------- | -
| | At cost:                           |   |            |   |   |            |  
| | Buildings                          | $ | 27,833,773 |   | $ | 27,798,849 |  
| | Landscaping, plant, and
      tree |   | 2,755,558  |   |   | 2,752,101  |  
| | Machinery and equipment            |   | 7,322,186  |   |   | 7,229,512  |  
| | Office equipment                   |   | 467,688    |   |   | 859,818    |  
| | Motor vehicles                     |   | 436,800    |   |   | 39,824     |  
| |                                    | $ | 38,816,006 |   | $ | 38,680,104 |  
| | Less:accumulated depreciation      |   |            |   |   |            |  
| | Buildings                          |   | (1,348,065 | ) |   | (1,192,855 | )
| | Machinery and equipment            |   | (2,782,419 | ) |   | (2,628,710 | )
| | Office equipment                   |   | (231,318   | ) |   | (414,478   | )
| | Motor vehicles                     |   | (233,687   | ) |   | (24,992    | )
| |                                    |   | (4,595,489 | ) |   | (4,261,035 | )
| |                                    |   |            |   |   |            |  
| | Construction in Progress           |   | 5,789,882  |   |   | 5,782,617  |  
| |                                    | $ | 40,010,398 |   | $ | 40,201,686 |  

Construction in progress mainly comprises capital expenditures
for construction of the Companys new corporate campus, including offices,
factories and staff dormitories. Capital commitments for the construction are
immaterial for the three years above.

Landscaping, plant and tree is chestnut trees investment in the
development of agricultural operations, which have not been the significant
source of the raw materials needed for the Companys operations to date.

**8.**

**LAND USE
RIGHTS, NET**

Land use rights consisted of the following as of March 31, 2009
and December 31, 2008:

| |                                     |  |   | 2009        |   |  | 2008      |  
| | ----------------------------------- |  | - | ----------- | - |  | --------- | -
| | Land use rights, at cost            |  | $ | 4,474,860 $ |   |  | 4,236,266 |  
| | Less:Accumulated
      amortization |  |   | (329,716    | ) |  | (285,339  | )
| |                                     |  | $ | 4,145,144 $ |   |  | 3,950,927 |  

Land use rights represent the prepaid land use right. The PRC
government owns the land on which the Companys corporate campus is being
constructed.

17



---



9.

SHORT-TERM
DEBTS

Short-term debts consisted of the following as of March 31,
2009 and December 31, 2008:

2009
    
    
    2008Loans from Junan County Construction Bank,-Interest rate at 5.832% per
      annum due 4/8/2009
    
    $
    376,844
    
    $
    --  Interest rate at 5.832% per annum due 4/3/2009
    
    
    460,150
    
    
    --  Interest rate at 5.832% per
      annum due 4/27/2009
    
    
    540,493
    
    
    --  Interest rate at 5.832% per annum due 5/1/2009
    
    
    547,797
    
    
    --  Interest rate at 6.372% per
      annum due 2/18/2010
    
    
    379,806
    
    
    --  Interest rate at 5.832% per annum due 6/3/2009
    
    
    905,691
    
    
    --  Interest rate at 5.832% per
      annum due 6/7/2009
    
    
    584,317
    
    
    --  Interest rate at 5.832% per annum due 6/24/2009
    
    
    65,736
    
    
    --  Interest rate at 10.452% per
      annum due 1/22/2009
    
    
    146,079
    
    
    --  Interest rate at 7.452% per annum due 2/24/2009
    
    
    102,255
    
    
    102,127-  Interest rate at 10.452% per
      annum due 1/22/2009
    
    
    -
    
    
    1,575,676-  Interest rate at 7.236% per annum due 2/3/2009
    
    
    -
    
    
    116,717Loan from Junan County Agriculture Bank,-  Interest rate at 8.262% per
      annum due 4/11/2009
    
    
    1,752,950
    
    
    --  Interest rate at 9.027% per annum due
      11/21/2009
    
    
    642,749
    
    
    --  Interest rate at 7.965% per
      annum due 3/17/2010
    
    
    3,359,822
    
    
    -


2009
    
    
    2008-  Interest rate at 8.262% per
      annum due 6/28/2009
    
    
    876,475
    
    
    --  Interest rate at 8.262% per annum due 6/28/2009
    
    
    2,921,585
    
    
    --  Interest rate at 7.290% per
      annum due 9/30/2009
    
    
    1,446,184
    
    
    --  Interest rate at 12.699% per annum due 8/6/2009
    
    
    584,317
    
    
    583,584-  Interest rate at 12.699% per
      annum due 8/18/2009
    
    
    657,357
    
    
    656,532-  Interest rate at 12.699% per annum due
      8/18/2009
    
    
    365,198
    
    
    364,740-  Interest rate at 10.577% per
      annum due 3/27/2009
    
    
    -
    
    
    1,458,959Loan from Junan County
      Industrial and Commercial *Bank,*-  Interest rate at 5.3460% per
      annum due 5/22/2009
    
    
    460,150
    
    
    --  Interest rate at 5.3460% per
      annum due 6/11/2009
    
    
    438,237
    
    
    --  Interest rate at 5.3460% per
      annum due 6/24/2009
    
    
    723,092
    
    
    --  Interest rate at 6.120% per
      annum due 1/10/2009
    
    
    146,124
    
    
    145,896-  Interest rate at 8.541% per
      annum due 3/4/2009
    
    
    -
    
    
    393,919


18

---

|                                                                            | -  Interest rate at 3.1725% per
      annum due 2/19/2009  |  |  | -         |  |  | 240,035   | 
|--------------------------------------------------------------------------- | ---------------------------------------------------------- |  |  | --------- |  |  | --------- | 
|                                                                            | -  Interest rate at 3.1725% per
      annum due 2/19/2009  |  |  | -         |  |  | 118,161   | 
|                                                                            | -  Interest rate at 10.1825% per
      annum due 2/26/2009 |  |  | -         |  |  | 120,762   | 
|                                                                            | -  Interest rate at 10.1825% per
      annum due 3/5/2009  |  |  | -         |  |  | 173,670   | 
|                                                                            |                                                            |  |  |           |  |  |           | 
|Loan from Junan County
      Agricultural Financial *Institution,*          |                                                            |  |  |           |  | 
|                                                                            | -  Interest rate at 9.1155% per
      annum due 1/22/2010  |  |  | 1,168,634 |  |  | -         | 
|                                                                            |                                                            |  |  |           |  |  |           | 
|Loan from Linyi Commercial
      Bank,                                      |                                                            |  |  |           |  | 
|                                                                            | -  Interest rate at 8.539% per
      annum due 3/27/2009   |  |  | 1,460,792 |  |  | -         | 
|                                                                            | -  Interest rate at 9.293% per
      annum due 1/19/2010   |  |  | 657,357   |  |  | -         | 
|                                                                            | -  Interest rate at 9.293%per
      annum due 12/14/2009   |  |  | 686,572   |  |  | -         | 
|                                                                            | -  Interest rate at 13.073% per
      annum due 1/5/2009   |  |  | -         |  |  | 685,711   | 
|                                                                            | -  Interest rate at 13.073% per
      annum due 1/5/2009   |  |  | -         |  |  | 656,532   | 
|                                                                            | -  Interest rate at 8.539% per
      annum due 3/27/2009   |  |  | -         |  |  | 1,458,959 | 
|                                                                            | -  Interest rate at 8.539% per
      annum due 3/27/2009   |  |  | -         |  |  | 141,885   | 
|                                                                            |                                                            |  |  |           |  |  |           | 
|Loan from Beijing Miyun County
      Shilipu Rural *Financial Institution,* |                                                            |  |  |           |  | 
|                                                                            | -  Interest rates at 7.434% per
      annum due 1/20/2010  |  |  | 1,460,792 |  |  | -         | 
|                                                                            | -  Interest rates at 8.539% per
      annum due 9/30/2009  |  |  | 2,775,505 |  |  | 2,772,023 | 
|                                                                            |                                                            |  |  |           |  |  |           | 
|Loan from China Agricultural
      Bank, Luotian *Branch*                   |                                                            |  |  |           |  | 
|                                                                            | -  Interest rate at 7.47% per
      annum due 9/7/2009     |  |  | 818,044   |  |  | 817,017   | 
|                                                                            | -  Interest rate at 7.47% per
      annum due 9/7/2009     |  |  | 292,158   |  |  | 291,792   | 

2009
    
    
    2008Bank of Beijing-  Interest rate at 7.722% per
      annum due 7/28/2009
    
    
    292,158
    
    
    291,792Bank of China, Junan
      Branch,-  Interest rate at 7.500% per
      annum due 5/19/2009
    
    
    2,321
    
    
    4,014United Commercial Bank, China
      Branch-  Interest rate at 5.494% per
      annum due 1/14/2009
    
    
    965,577
    
    
    1,156,955Credit Union, Junan-  Interest rate at 8.5837% per
      annum due 1/7/2009
    
    
    -
    
    
    43,769- Interest rate at 8.5837% per
      annum due 1/12/2009
    
    
    -
    
    
    43,769$
    29,063,318
    
    $
    14,414,996


19

---

The short-term loans, which are denominated in the functional
currency Renminbi (RMB), were primarily obtained for general working capital.

All overdue loans were extended by the financial institution.

10.

NOTES PAYABLE

Notes payable consisted of the following as of March 31, 2009
and December 31, 2008:

2009
    
    
    2008Notes to Junan County Construction
      Bank,-  Bank commission charge at 4%, due 1/12/2009
    
    
    -
    
    
    554,405Notes to Junan County Agriculture
      Bank,-  Bank commission charge at 4%, due 1/16/2009
    
    
    -
    
    
    277,202Loan to Jinan Branch, Shenzhen
      Development Bank,-  Bank charge commission charge at 3.96%, due
      2/6/2009
    
    
    -
    
    
    4,376,878$
    -
    
    $
    5,208,485


All overdue notes were extended by the financial institution.

11.

ACCRUED EXPENSES AND OTHER PAYABLE

Accrued expenses and other payables consisted of the following
as of March 31, 2009 and December 31, 2008:

| |                                  |  |   | 2009       |  |  | 2008       | 
| | -------------------------------- |  | - | ---------- |  |  | ---------- | 
| | Accrued salaries and wages       |  | $ | 233,806    |  |  | 605,471    | 
| | Accrued utility expenses         |  |   | 333,996    |  |  | 481,678    | 
| | Accrued interest expenses        |  |   | 113,992    |  |  | -          | 
| | Accrued transportation expenses  |  |   | 618,832    |  |  | 1,103,112  | 
| | Business and other taxes         |  |   | -          |  |  | 1,979,650  | 
| | Purchases disbursements payables |  |   | 10,299,960 |  |  | 6,018,057  | 
| | Accrued staff welfare            |  |   | -          |  |  | 103,269    | 
| |                                  |  |   |            |  |  |            | 
| |                                  |  | $ | 11,600,586 |  |  | 10,291,237 | 

**12.**

**LONG-TERM
DEBTS**



Long-term debts consisted of the following as of March 31, 2009
and December 31, 2008:

20

---

2009
      
      
      2008Loan from
      Agricultural Development Luotian Government,Interest at
      0.67% per annum due 12/11/2010
      
      $
      109,559
      
      $
      -Interest at 2.10% per annum due
      12/11/2011
      
      
      25,564
      
      
      25,532Loan from United
      Commercial Bank, China BranchInterest at
      5.494% per annum due 1/14/2011
      
      
      442,577
      
      
      551,443$
      577,700
      
      $
      576,975


|13. | MINORITY INTERESTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | This represents the 19.8% equity of Shangdong Lorain held
      by a state-owned interest, Shandong Economic Development Investment
      Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|14. | CAPITALIZATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Dating back to May 3, 2007, the Company underwent a
      reverse-merger and a concurrent financing transaction that resulted in
      24,923,178 shares of outstanding common stock that remained unchanged
      until through December 31, 2007. During the course of 2008, several
      holders of warrants issued in connection with the financing transaction
      exercised their rights to purchase shares at the prescribed exercise
      price. The holders of the warrants exercised the right to purchase a total
      of 360,207; however, because the holders did not pay in cash for the
      warrants, 110,752 of those shares were cancelled as consideration in lieu
      of the warrant holders paying in cash. Ultimately, 249,455 of new shares
      were issued to those who exercised their warrant. The Company also made an
      adjustment to the outstanding share count for rounding errors as result of
      the split and reverse splits made at the time of the reverse merger. The
      number of shares in the adjustment was an addition of seven shares. The
      Company believes the adjustment of seven shares is immaterial to both
      prior and current earnings per share calculation. As detailed in the table
      below, the total number of outstanding shares at March 31, 2009 was
      25,177,640.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |  | Type of
      Shares |  |  | Number of
      Shares |  |   | Common
      Stock Capital |  |   | Additional
      Paid-in Capital | 
| |  | -------------------- |  |  | ---------------------- |  | - | -------------------------- |  | - | -------------------------------- | 
| |  |                      |  |  |                        |  |   |                            |  |   |                                  | 
| |  | Free Trading Shares  |  |  | 8,406,244              |  | $ | 8,406                      |  | $ | 17,340,648                       | 
| |  | Restricted Shares    |  |  | 16,771,396             |  |   | 16,771                     |  |   | 6,846,371                        | 
| |  |                      |  |  | 25,177,640             |  | $ | 25,177                     |  | $ | 24,187,019                       | 

21

---

**15.**

**INCOME TAXES**

All of the Groups income before income taxes and related tax
expenses are from PRC sources. In accordance with the relevant tax laws and
regulations of PRC, the corporation income tax rate is 33%. However, also in
accordance with the relevant taxation laws in the PRC, some of the subsidiaries
of the Group are eligible for tax exemption. In particular, from the time that a
company has its first profitable tax year, the company is exempt from corporate
income tax for its first two year and is then entitled to a 50% tax reduction
for the succeeding three year. Actual income tax expenses reported in the
consolidated statements of income and comprehensive income differ from the
amounts computed by applying the PRC statutory income tax rate of 33% to income
before income tax for the period from August 4, 2006 (date of incorporation) to
March 31, 2009 for the following reasons: -

2009
    
    
    2008Income before tax
    $
    2,478,996
    
    $
    2,255,924Tax at the income tax rate
    
    648,057
    
    
    563,981Effect of tax exemption granted
    
    67,285
    
    
    173,600Income tax
    $
    580,772
    
    $
    390,381Per Share Effect of Tax
      Exemption2009
    
    
    2008Effect of tax exemption granted
    $
    67,285
    
    $
    173,600Weighted-Average Shares Outstanding
    
    25,177,640
    
    
    24,923,179Per share effect
    $
    0.0027
    
    $
    0.0070


Effective January 1, 2008, PRC government implements a new 25%
tax rate across the board for all enterprises regardless of whether domestic or
foreign enterprise without any tax holiday which is defined as two-year
exemption followed by three-year half exemption hitherto enjoyed by tax payers.
As a result of the new tax law of a standard 15% tax rate, tax holidays
terminated as of December 31, 2007. However, PRC government has established a
set of transition rules to allow enterprises already started tax holidays before
January 1, 2008, to continue enjoying the tax holidays until being fully
utilized.

22

---

Based on the background of each constituent of our group, the
income tax rates applicable to the four constituents for 2008 and 2009 are
depicted in the following table.

Income Tax Rate
    
    2008
    
    
    2009Junan Hongran
    
    15%
    
    
    25%Luotian Lorain
    
    15%
    
    
    15%Beijing Lorain
    
    0%
    
    
    15%Shangdong Lorain
    
    25%
    
    
    25%


16.

SALES BY PRODUCT TYPE

Sales by categories of product consisted of the following as of
March 31, 2009 and 2008:

Category
    
    2009
    
    
    2008Chestnut
    $
    12,685,389
    
    $
    10,969,045Convenience food
    
    1,032,821
    
    
    992,298Frozen, Canned and Bulk food
    
    7,482,327
    
    
    5,466,956Total
    $
    21,200,537
    
    $
    17,428,299


Revenue by geography consisted of the following as of March 31,
2009 and 2008:

Country
    
    2009
    
    
    2008Belgium
    $
    38,357
    
    $
    670,834China
    
    16,884,801
    
    
    12,831,157France
    
    98,305
    
    
    92,522Holland
    
    142,321
    
    
    -Hong Kong
    
    52,039
    
    
    43,117Japan
    
    1,590,369
    
    
    1,818,668Malaysia
    
    71,684
    
    
    145,553Netherlands
    
    -
    
    
    180,540


Saudi Arabia
    
    992,902
    
    
    107,574Singapore
    
    97,935
    
    
    59,400South Korea
    
    852,009
    
    
    892,646Taiwan
    
    39,795
    
    
    24,564United Kingdom
    
    158,589
    
    
    532,883United States of America
    
    104,477
    
    
    28,841Other
    
    76,954
    
    
    -Total
    $
    21,200,537
    
    $
    17,428,299


23



---



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Caution Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from
any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned Risk Factors in our
Annual Report on Form 10-K for the year ended December 31, 2008 filed with the Securities and Exchange Commission.

In some cases, you can identify forward-looking statements by terms such as anticipates, believes, could, estimates, expects, intends, may, plans,
potential, predicts, projects, should, would and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to
future events and are based on assumptions and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report completely and with the understanding that our actual future results may be materially different from what we
expect.

Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information
becomes available in the future.

Overview

We are an integrated food manufacturing company with headquarters in Shandong Province, China. We develop, manufacture and sell the following types of food products:

- chestnut products,
- convenience foods (including ready-to-cook, or RTC, meals, ready-to-eat, or RTE, meals and meals ready-to-eat, or MRE); and
- frozen, canned, and bulk food.

We conduct our production activities in China. Our products are sold in 26 provinces and administrative regions in China and 42 foreign countries.  We believe that we are the largest chestnut processing manufacturer in China. We have developed brand
equity for our chestnut products in China, Japan and South Korea over the past 10 to 15 years. We produced over 50 high value-added processed chestnut products in the first quarter of 2009. We derive most of our revenues from sales in China, Japan
and South Korea. Our primary strategy for 2009 is to expand our brand equity in the Chinese market for our chestnut products. We are also working to expand our brand recognition in China for our convenience food products and frozen, canned and bulk
food products. In addition, we are working to expand our marketing efforts in Asia, Europe and the Middle East. We currently have limited sales and marketing activity in the United States, although our long-term plan is to significantly expand our
activities there.

Production Factors that Affect our Financial and Operational Condition

Our business depends on obtaining a reliable supply of various agricultural products, including chestnuts, vegetables, fruits, red meat, fish, eggs, rice, flour and packaging products. During the first quarter of 2009, the cost of our raw materials
increased from $12.5 million to $14.5 million, as compared to the first quarter of 2008, for an increase of approximately 16.4% . We may have to increase the number of our suppliers of raw materials and expand our own agricultural operations
in the future to meet growing production demands. Despite our efforts to control our supply of raw materials and maintain good relationships with our suppliers, we could lose one or more of our suppliers at any time. The loss of several suppliers
may be difficult to replace and could increase our reliance on higher cost or lower quality suppliers, which could negatively affect our profitability. In addition, if we have to increase the number of our suppliers of raw materials in the future to
meet growing production demands, we may not be able to locate new suppliers who could provide us with sufficient materials to meet our needs. Any interruptions to, or decline in, the amount or quality of our raw materials supply could materially
disrupt our production and adversely affect our business and financial condition and financial prospects.

24

---

Uncertainties that Affect our Financial Condition

We spend a significant amount of cash on our operations, principally to procure raw materials for our products. Many of our suppliers, including chestnut, vegetable and fruit farmers, and suppliers of packaging materials, require us to pay for their
supplies in cash on the same day that such supplies are delivered to us. However, some of the suppliers with whom we have a long-standing business relationship allow us to pay on credit. In the first quarter of 2009, we paid for approximately 26% of
our raw materials on credit. We fund the majority of our working capital requirements out of cash flow generated from operations. If we fail to generate sufficient sales, or if our suppliers stop offering us credit terms, we may not have sufficient
liquidity to fund our operating costs and our business could be adversely affected.

We also fund approximately 42% of our working capital requirements from the proceeds of short-term loans from Chinese banks. We expect to continue to do so in the future. Such loans are generally secured by our fixed assets, receivables and/or
guarantees by third parties. Our average loan balance from short-term bank loans in the first quarter of 2009 was approximately $26 million. The term of almost all such loans is one year or less. Historically, we have rolled over such loans on
an annual basis. However, we may not have sufficient funds available to pay all of our borrowings upon maturity. Failure to roll over our short-term borrowings at maturity or to service our debt could result in the imposition of penalties, including
increases in rates of interest, legal actions against us by our creditors, or even insolvency. In addition, in 2008, we funded approximately $3 million, in the aggregate, of our working capital requirements from the proceeds of a private
placement transaction conducted in May 2007. We can provide no assurances that we will be able to enter into any future financing or refinancing agreements on terms favorable to us, especially considering the current instability of the capital
markets.

We anticipate that our existing capital resources and cash flows from operations and current and expected short-term bank loans will be adequate to satisfy our liquidity requirements for the next 12 months. However, if available liquidity is not
sufficient to meet our operating and loan obligations as they come due, our plans include considering pursuing alternative financing arrangements or further reducing expenditures as necessary to meet our cash requirements. However, there is no
assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required liquidity. Currently, the capital markets for small capitalization companies are extremely difficult and banking
institutions have become stringent in their lending requirements. Accordingly, we cannot be sure of the availability or terms of any third party financing.

The crisis of the financial and credit markets worldwide in the second half of 2008 has led to a severe economic recession worldwide, and the outlook for the remainder of 2009 is uncertain. A continuation or worsening of unfavorable economic
conditions, including the ongoing credit and capital markets disruptions, could have an adverse impact on our business, operating results or financial condition in a number of ways. For example, we may experience declines in revenues, profitability
and cash flows as a result of reduced orders, delays in receiving orders, delays or defaults in payment or other factors caused by the economic problems of our customers and prospective customers. We may experience supply chain delays, disruptions
or other problems associated with financial constraints faced by our suppliers and subcontractors. In addition, changes and volatility in the equity, credit and foreign exchange markets and in the competitive landscape make it increasingly difficult
for us to predict our revenues and earnings into the future.

In the first quarter of 2009, some of our customers, including some of our large supermarket customers, delayed their payments for up to 60 to 90 days beyond their term. Our cash flow suffered while waiting for such payments. Consequently, at times
we had to delay payments to our suppliers and to postpone business expansion as a result of these delayed payments. In 2008, we shortened credit terms for many of our international and domestic distributors from between 30 and 180 days to between 30
and 60 days. Our large customers may fail to meet these shortened credit terms, in which case we may not have sufficient cash flow to fund our operating costs and our business could be adversely affected.

25

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Results of Operations

The following tables set forth key components of our results of
operations for the periods indicated, and the differences between the two
periods expressed in dollars and percentages:

Three Months Ended March 31, 2009 Compared to Three
Months Ended March 31, 2008

|(in
      thousands of U.S.dollars) |  | Three
      MonthsEnded March31, 2009 |   |  | Three
      MonthsEnded March31, 2008 |   |  | Increase/Decrease($) |   |  | Increase/Decrease(%) | 
|----------------------------------- |  | ------------------------------------- | - |  | ------------------------------------- | - |  | -------------------- | - |  | -------------------- | 
|Revenue                             |  | 21,201                                |   |  | 17,428                                |   |  | 3,772                |   |  | 21.6                 | 
|Cost of Revenue                     |  | (16,038                               | ) |  | (13,480                               | ) |  | (2,558               | ) |  | 19.0                 | 
|                                    |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Gross profit                        |  | 5,162                                 |   |  | 3,948                                 |   |  | 1,214                |   |  | 30.8                 | 
|Gross margin                        |  | 24.4%                                 |   |  | 22.7%                                 |   |  | -                    |   |  | 1.7                  | 
|                                    |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Operating Expenses:                 |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Selling and Marketing               |  | (1,171                                | ) |  | (619                                  | ) |  | (552                 | ) |  | 89.2                 | 
|General andAdministrative           |  | (976                                  | ) |  | (544                                  | ) |  | (432                 | ) |  | 79.3                 | 
|                                    |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Operating Income                    |  | 3,015                                 |   |  | 2,785                                 |   |  | 231                  |   |  | 8.3                  | 
|                                    |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Non-operating Income                |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|(Expenses):                         |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Government SubsidyIncome            |  | 99                                    |   |  | 33                                    |   |  | 66                   |   |  | 201.0                | 
|Interest income                     |  | 65                                    |   |  | 39                                    |   |  | 26                   |   |  | 66.3                 | 
|Other income                        |  | 16                                    |   |  | -                                     |   |  | 16                   |   |  | -                    | 
|Foreign Exchange                    |  | (87                                   | ) |  | -                                     |   |  | (87                  | ) |  | -                    | 
|Other expense                       |  | (25                                   | ) |  | (10                                   | ) |  | (15                  | ) |  | 144.7                | 
|Interest Expense                    |  | (604                                  | ) |  | (590                                  | ) |  | (14                  | ) |  | 2.3                  | 
|                                    |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Income before taxes                 |  | 2,479                                 |   |  | 2,256                                 |   |  | 223                  |   |  | 9.9                  | 
|Income Taxes                        |  | (581                                  | ) |  | (390                                  | ) |  | (190                 | ) |  | 48.8                 | 
|Income before Minority              |  | 1,898                                 |   |  | 1,866                                 |   |  | 33                   |   |  | 1.8                  | 
|Interests                           |  |                                       |   |  |                                       |   |  |                      |   |  |                      | 
|Minority Interests                  |  | 142                                   |   |  | 134                                   |   |  | 8                    |   |  | 6.2                  | 
|Net Income                          |  | 1,756                                 |   |  | 1,732                                 |   |  | 24                   |   |  | 1.4                  | 

Revenue

Revenue. Revenue increased by $3.8 million, or
approximately 21.6%, to $21.2 million in the first quarter of 2009 from $17.4
million in the first quarter of 2008. This increase was attributable to the
increased revenues generated from sales of each of our product segments, as
reflected in the following table:

26

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|(in thousands of U.S. dollars) | Revenue:
      Three Months Ended March 31, 2009 ($) | Revenue:
      Three Months Ended March 31, 2008 ($) | Increase ($) | Increase (%)
|------------------------------ | ---------------------------------------------------- | ---------------------------------------------------- | ------------ | ------------
|Chestnut Products              | 12,685                                               | 10,969                                               | 1,716        | 15          
|Convenience Products           | 1,032                                                | 992                                                  | 40           | 4           
|Frozen, Canned and             | 7,482                                                | 5,467                                                | 2,015        | 36          
|Bulk Products                  |                                                      |                                                      |              |             
|Total                          | 21,201                                               | 17,428                                               | 3,773        | 21          

We believe that the increases reflected in the table above are
attributable to the following factors, by percentage:

|Category                             | Chestnut Products | Convenience Products | Frozen, Canned and Bulk
      Products
|------------------------------------ | ----------------- | -------------------- | --------------------------------------
|Increase in volume sold              | 67%               | (132)%               | 82%                                   
|Increase in average sales price      | 31%               | (259)%               | 14%                                   
|Increase in value of the U.S. dollar | 2%                | 491%                 | 4%                                    

The greatest increase in volume sold in the first quarter of
2009, as compared to the first quarter of 2008, was in the domestic PRC market.
Revenues from sales in this market increased by approximately $4.0 million, or
approximately 31.6%, in the first quarter of 2009, as compared to the first
quarter of 2008. As a percentage of total revenues, revenues from sales in the
domestic PRC market increased to approximately 79.6% in the first quarter of
2009 from approximately 73.6% in the first quarter of 2008. This increase was
partially offset by a decrease of an aggregate of $1.5 million, in the
aggregate, of sales to Belgium, Japan, Malaysia, the Netherlands, South Korea
and the United Kingdom, as compared to the first quarter of 2008. See Note 16 to
the financial statements contained in Item 1 of this report for more information
on the breakdown of our sales per geographic region.

Cost of Revenue.Our cost of revenue increased by $2.6
million, or approximately 19.0%, to approximately $16 million in the first
quarter of 2009 from approximately $13.5 million in the first quarter of 2008.
This increase was attributable to the following factors, by percentage:

|                                            | Allocation of Increase in Cost
      of Revenues
|------------------------------------------- | ------------------------------------------------
|Category                                    | (%)                                             
|Raw Materials                               | 53                                              
|Currency (RMB) Appreciation                 | 28                                              
|Other Allocated Overhead                    | 3                                               
|(utilities, freight, equipment consumables) |                                                 
|Wages                                       | 14                                              
|Depreciation                                | 3                                               

27

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Raw material costs increased to $14.5 million in the first
quarter of 2009 from $12.5 million in the first quarter of 2008. This increase
was attributable to the increase of approximately 6.7% and 0.7%, respectively,
in the volume of raw chestnuts and meats purchased, and an increase of
approximately 25.4% in the volume of raw vegetables and fruits purchased, in the
first quarter of 2009 as compared to the first quarter of 2008. We purchased a
significantly higher volume of raw fruits and vegetables for use in our
convenience and frozen, canned and bulk products.

The following table reflects the changes in our cost of
revenues in the first quarter of 2009 as compared to the first quarter of 2008
among our different segments:

|(thousands of U.S. dollars)      | Cost of Revenue:
      Three Months Ended March 31, 2009 | Cost of Revenue:
      Three Months Ended March 31, 2008 | Increase/ (Decrease)
|-------------------------------- | -------------------------------------------------------- | -------------------------------------------------------- | --------------------
|                                 | ($)                                                      | ($)                                                      | (%)                 
|Chestnut Products                | 9,437                                                    | 8,419                                                    | 12                  
|Convenience Products             | 787                                                      | 770                                                      | 2                   
|Frozen, Canned and Bulk Products | 5,814                                                    | 4,291                                                    | 35                  
|Total                            | 16,038                                                   | 13,480                                                   | 19                  

Gross Profit. Our gross profit increased approximately
$1.2 million, or 30.8%, to $5.2 million in the first quarter of 2009 from $3.9
million in the first quarter of 2008 as a result of higher revenue, partially
offset by higher cost of revenue, for the reasons indicated above.

Gross Margin. Our gross margin increase approximately
1.7%, to 24.4% in the first quarter of 2009 from 22.7% in the first quarter of
2008 as a result of the lower cost of raw materials.

Operating Expenses

Selling and Marketing Expenses. Our selling and
marketing expenses increased approximately $0.5 million, or 89.2%, to $1.2
million in the first quarter of 2009 from $0.6 million in the first quarter of
2008. The following table reflects the main factors that contributed to this
increase as well as the dollar amount that each factor contributed to this
increase:

|(in thousands of U.S. dollars) | Increase in Costs in the Three Months
      Ended March 31, 2009 over the Three Months Ended March 31,
      2008
|------------------------------ | -----------------------------------------------------------------------------------------------------------------
|Shipping and inspection fees   | 354                                                                                                              
|Port surcharges                | 47                                                                                                               
|Tariffs                        | 5                                                                                                                
|Supermarket fees               | 19                                                                                                               
|Wages (sales personnel)        | 111                                                                                                              

28

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The increases listed in the table above were partially offset
by an aggregate of $41,000 of decreases of other factors, including customer
lodging, phone, postage and courier charges, toll road expense, warehousing
costs and expenses for professional movers.

Selling and marketing expenses increased because we expanded
the distribution of our products in China from 19 provinces to 26 provinces. In
addition, we introduced several new convenience food products and initiated a
marketing and promotional campaign for our chestnut, convenience food and
frozen, canned and bulk food products.

General and Administrative Expenses.Our general and
administrative expenses increased approximately $0.4 million, or 79%, to $0.9
million in the first quarter of 2009 from $0.5 million in the first quarter of
2008. The following table reflects the main factors that contributed to this
increase as well as the dollar amount that each factor contributed to this
increase:

|(in thousands of U.S. dollars)         | Increase in Costs in the Three Months
      Ended March 31, 2009 over the Three Months Ended March 31,
      2008
|-------------------------------------- | -----------------------------------------------------------------------------------------------------------------
|Personnel Benefits (non-wage benefits) | 25                                                                                                               
|Consultation fees                      | 132                                                                                                              
|Entertainment                          | 20                                                                                                               
|Insurance fees                         | 9                                                                                                                
|Research and development fees          | 23                                                                                                               

Non-Operating Income (Expenses)

Government Subsidy Income. Government subsidy income
increased $0.7 million, or 201%, from approximately $0.3 million in the first
quarter of 2008 to approximately $1.0 million in the first quarter of 2009,
representing grants received from local government agencies in connection with
their plan to support small and medium sized companies in 2009.

Income Before Taxation and Minority Interest.Income
before taxation and minority interest increased $0.2 million, or 9.9%, to $2.5
million in the first quarter of 2009 from $2.3 million in the first quarter of
2008 as a result of higher revenues, partially offset by higher costs of
revenues and operating expenses, for the reasons indicated above.

Income Taxes. Income taxes increased $0.2 million, or
49.0%, to $0.6 million in the first quarter of 2009, as compared to $0.4 million
in the first quarter of 2008. This increase was attributable to the higher
income earned in 2009 as compared to 2008.

Effective January 1, 2008, the PRC government implemented a new
25% tax rate across the board for all enterprises, without any tax holiday.
However, the PRC government has established a set of transition rules to allow
enterprises that already started tax holidays before January 1, 2008 to continue
utilizing such tax holidays until they are fully utilized.

29

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The income tax rates applicable to our Chinese operating
subsidiaries in 2008, and 2009 are depicted in the following table:

|                | 2008 | 2009
|--------------- | ---- | ----
|Junan Hongrun   | 15%  | 25% 
|Luotian Lorain  | 15%  | 15% 
|Beijing Lorain  | -    | 15% 
|Shandong Lorain | 25%  | 25% 

Net Income. Net income increased approximately $0.1
million, or 7.9%, to $1.9 million in the first quarter of 2009 from $1.7 million
in the first quarter of 2008, as a result of the factors described above.

Liquidity and Capital Resources

Our primary capital need in 2009 has been to fund our working
capital. Our primary sources of financing are cash generated from operations and
short-term loans from banks in China. See Overview-Uncertainties that Affect
Our Financial Condition above. At March 31, 2009, cash and cash equivalents
(including restricted cash) were $13,248,502, as compared to $8,249,614 at March
31, 2008.

The following table provides detailed information about our net
cash flow for the three months ended March 31, 2008 and March 31, 2009.

|Cash Flows Data:                                                |  |                              |   |  |        |  
|--------------------------------------------------------------- |  | ---------------------------- | - |  | ------ | -
|(in thousands of U.S. dollars)                                  |  | Three Months Ended March 31, |  
|                                                                |  | 2009                         |   |  | 2008   |  
|Net cash flows provided by (used in)
      operating activities |  | (471                         | ) |  | 2,849  |  
|Net cash flows provided by (used in) investing activities       |  | (379                         | ) |  | (5,476 | )
|Net cash flows provided by (used in)
      financing activities |  | 9,441                        |   |  | 1,067  |  

Operating Activities

Net cash used in operating activities for the first quarter of
2009 was approximately $0.5 million and net cash provided by operating
activities in the first quarter of 2008 was approximately $2.8 million. The
decrease of approximately $3.3 million in net cash flows provided by operating
activities resulted from an increase in inventories of approximately $6.4
million, primarily of raw materials for our chestnut products which are being
stored until production and delivery in subsequent periods, and higher
receivables of approximately $5.5 million, incurred in connection with the
procurement of raw materials, partially offset by higher accounts payable of
approximately $8.5 million as compared to the first quarter of 2008.

Days sales outstanding for the first quarter of 2009 were 104
days, compared to 165 days in the first quarter of 2008. Days inventory
outstanding for the first quarter of 2009 were 147 days, compared to 114 days in
the first quarter of 2008.

Investing Activities

Our uses of cash for investment activities are primarily payments for the acquisition and construction of property, plants and equipment.

30

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Net cash used in investing activities was $0.4 million and $5.5 million, respectively, for the first quarter of each of 2009 and 2008. The decrease of approximately $5.1 million in net cash flows used in investing activities resulted
from our decision to minimize investing activities in 2009 in order to mitigate the impact from the global economic crisis. Payments of plant and equipment purchases and deposits were payments of residual balances from 2008, and did not represent
any new investments in 2009.

Financing Activities

Net cash provided by financing activities was $9.4 million and $1.0 million, respectively, for the first quarter of each of 2009 and 2008. The increase of approximately $8.4 million in net cash provided by financing activities resulted
primarily from an increase of approximately $13.6 million in bank borrowings, partially offset by note repayments of approximately $5.2 million.

Loan Facilities

Note 9 to the financial statements contained in Item 1 of this report sets forth the amounts and maturity dates for our bank loans as of March 31, 2009.

Critical Accounting Policies

The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make assumptions, estimates and judgments that affect the amounts reported in our financial statements,
including the notes thereto, and related disclosures of commitments and contingencies, if any. We consider our critical accounting policies to be those that require significant judgments and estimates in the preparation of financial statements,
including the following:

Method of Accounting --We maintain our general ledger and journals with the accrual method accounting for financial reporting purposes. Accounting policies adopted by us conform to generally accepted accounting principles in the United
States and have been consistently applied in the presentation of our financial statements, which are compiled on the accrual basis of accounting.

Use of estimates --The preparation of the financial statements in conformity with generally accepted accounting principles in the United States 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 reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information
available at the time the estimates are made; however, actual results could differ materially from those estimates.

Principles of consolidation --Our consolidated financial statements, which include information about our company and our subsidiaries, are compiled in accordance with generally accepted accounting principles in the United States. All
significant inter-company accounts and transactions have been eliminated. Our consolidated financial statements include 100% of assets, liabilities, and net income or loss of our wholly-owned subsidiaries. Ownership interests of minority investors
are recorded as minority interests.

As of March 31, 2009, the details pertaining to our subsidiaries were as follows:

31

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|Name of Company                         | Place of
      Incorporation | Attributable
      Equity Interest % | Registered
      Capital |                  
|--------------------------------------- | ---------------------------- | ------------------------------------ | ------------------------ | -----------------
|Shandong Lorain Co., Ltd.               | PRC                          | 80.2                                 | $12,901,823              | (RMB 100,860,000)
|Luotian Lorain Co., Ltd.                | PRC                          | 100                                  | $3,240,013               | (RMB 25,328,800) 
|Junan Hongrun Foodstuff Co.,
      Ltd. | PRC                          | 100                                  | $16,245,603              | (RMB 127,000,000)
|Beijing Lorain Co., Ltd.                | PRC                          | 100                                  | $1,279,181               | (RMB 10,000,000) 

Accounting for the Impairment of Long-Lived Assets--
The long-lived assets held and used by us are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of assets
may not be recoverable. It is reasonably possible that these assets could become
impaired as a result of technology or other industry changes. Determination of
recoverability of assets to be held and used is by comparing the carrying amount
of an asset to future net undiscounted cash flows to be generated by the
assets.

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
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to sell.
During the reporting periods, there was no impairment loss.

Revenue recognition --Our revenue recognition policies
are in compliance with Staff Accounting Bulletin (SAB) 104. Sales revenue is
recognized at the date of shipment to customers when a formal arrangement
exists, the price is fixed or determinable, the delivery is completed, no other
significant obligations of ours exist and collectability is reasonably assured.
Payments received before all of the relevant criteria for revenue recognition
are satisfied are recorded as unearned revenue.

Our revenue consists of invoiced value of goods, net of a
value-added tax. No product return or sales discount allowance is made as
products delivered and accepted by customers are normally not returnable and
sales discount is normally not granted after products are delivered.

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement
No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and
related hedged items accounted for under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires
entities to provide greater transparency about (a) how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, results of operations and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of
Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the
sources of accounting principles and the framework for selecting the principles
used in the preparation of financial statements of nongovernmental entities that
are
presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."

32

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In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 requires the
issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the
issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.

In September 2008, FASB issued FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees, an amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161. This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows
of the sellers of credit derivatives. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.

This FSP amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. This FSP also amends
FASB Interpretation (FIN) No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, to require an additional disclosure about the current status of the
payment/performance risk of a guarantee. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.

Finally, this FSP clarifies the effective date in FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities. The disclosures required by Statement 161 should be provided for any reporting period (annual or
quarterly interim) beginning after November 15, 2008. For example, an entity with a March 31 fiscal year-end should provide the disclosures for its fourth quarter interim period ended March 31, 2009, in its 2009 annual financial statements. This
clarification of the effective date of Statement 161 is effective upon issuance of the FSP.

We are currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on our consolidated results of operations and financial condition.

Off-Balance Sheet Arrangements 
We do not have any off-balance arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

33

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31,
2009.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2009, our disclosure controls and procedures were effective.

Changes in Internal Controls over Financial Reporting.

During the fiscal quarter ended March 31, 2009, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

34

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we have disputes that arise in the ordinary course of business. Currently, there are no material legal proceedings to which we are a party, or to which any of our property is subject.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A Risk Factors of Part 1included in our annual report on Form 10-K for the quarter ended March 31, 2009.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the quarter ended March 31, 2009.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the quarter ended March 31, 2009.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

|31.1 | Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                         
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                       
|31.2 | Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                         
|     |                                                                                                                                                       
|32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     |                                                                                                                                                       
|32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

35

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SIGNATURES

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

Date: May 15, 2009

AMERICAN LORAIN CORPORATION
/s/ Si ChenSi Chen 
Chief Executive Officer
/s/ Yilun JinYilun Jin 
Chief Financial Officer


36

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EXHIBIT INDEX

|31.1 | Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                         
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                       
|31.2 | Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                         
|     |                                                                                                                                                       
|32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|     |                                                                                                                                                       
|32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

37

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