---

UNITED
STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C. 20549

FORM 10-Q(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2010

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

Commission File No. 001-34449

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

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

Beihuan Road Junan CountyShandong, China
276600(Address, including zip code, of principal executive
offices)

(86) 539-7318818(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 Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes  [X]  No [   ]

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 company  [X]
|------------------------------ | ------------------------ | ---------------------------- | ------------------------------

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

The numbers of shares outstanding of the issuers class of
common stock as of May 12, 2010 was 30,242,202.

---

Table of Contents

|           |                                                                                             | Page
|---------- | ------------------------------------------------------------------------------------------- | ----
|           | Part I - Financial
      Information                                                        |     
|Item 1     | Financial Statements and Accountants Report                                                | 1   
|Item 2     | Managements Discussion and
      Analysis of Financial Condition and Results of Operations | 28  
|Item 3     | Quantitative and Qualitative Disclosures about
      Market Risk                            | 35  
|Item 4     | Controls and Procedures                                                                     | 36  
|           |                                                                                             |     
|           | Part II - Other
      Information                                                           |     
|ITEM 1     | LEGAL PROCEEDINGS                                                                           | 37  
|ITEM 1A    | RISK FACTORS                                                                                | 37  
|ITEM 2     | UNREGISTERED SALES OF EQUITY SECURITIES AND USE
      OF PROCEEDS                           | 37  
|ITEM 3     | DEFAULTS UPON SENIOR SECURITIES                                                             | 37  
|ITEM 4     | REMOVED AND RESERVED                                                                        | 37  
|ITEM 5     | OTHER INFORMATION                                                                           | 37  
|Item 6     | Exhibits                                                                                    | 37  
|Signatures |                                                                                             | 38  

---

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND ACCOUNTANTS REPORT

AMERICAN LORAIN CORPORATION

|CONTENTS                                                      | PAGES 
|------------------------------------------------------------- | ------
|REPORT OF INDEPENDENT REGISTERED PUBLIC
      ACCOUNTING FIRM | 2     
|CONSOLIDATED BALANCE SHEETS                                   | 3  4 
|CONSOLIDATED STATEMENTS OF INCOME                             | 5     
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY               | 6     
|CONSOLIDATED STATEMENTS OF CASH FLOWS                         | 7     
|NOTES TO FINANCIAL STATEMENTS                                 | 8  27

1

---

REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

|To: | The Board of Directors and Stockholders of
|--- | ------------------------------------------
|    | American Lorain Corporation               

We have reviewed the accompanying interim consolidated balance
sheets of American Lorain Corporation (the Company) as of March 31, 2010 and
December 31, 2009, and the related statements of income, stockholders equity,
and cash flows for the three-month periods ended March 31, 2010 and 2009. These
interim consolidated financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material
modifications that should be made to the accompanying interim consolidated
financial statements for them to be in conformity with U.S. generally accepted
accounting principles.

|South San Francisco, California | Samuel H. Wong & Co., LLP   
|------------------------------- | ----------------------------
|May 12, 2010                    | Certified Public Accountants

2

---

AMERICAN LORAIN CORPORATION

CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2010
AND DECEMBER 31, 2009 (Stated in US Dollars)

|                                             |  |      |  |   |             |  |   | (Audited)   | 
|-------------------------------------------- |  | ---- |  | - | ----------- |  | - | ----------- | 
|                                             |  | Note |  |   | 3/31/2010   |  |   | 12/31/2009  | 
|ASSETS                                       |  |      |  |   |             |  |   |             | 
|Current assets                               |  |      |  |   |             |  |   |             | 
|Cash and cash
      equivalents              |  |      |  | $ | 8,529,664   |  | $ | 12,111,532  | 
|Restricted cash                              |  | 3    |  |   | 1,118,054   |  |   | 1,299,889   | 
|Short-term
      investment                  |  |      |  |   | 9,423,450   |  |   | 7,320,248   | 
|Trade accounts receivable                    |  | 4    |  |   | 20,161,456  |  |   | 23,025,772  | 
|Other
      receivables                      |  | 5    |  |   | 4,544,271   |  |   | 7,837,675   | 
|Related party receivable                     |  | 6    |  |   | 546,384     |  |   | 603,116     | 
|Inventory                                    |  | 7    |  |   | 35,873,815  |  |   | 26,400,117  | 
|Advance to suppliers                         |  |      |  |   | 17,765,172  |  |   | 16,938,872  | 
|Prepaid expenses
      and taxes             |  |      |  |   | 1,034,651   |  |   | 905,266     | 
|Deferred tax asset                           |  |      |  |   | 199,876     |  |   | 199,867     | 
|Total
      current assets                   |  |      |  | $ | 99,196,793  |  | $ | 96,642,354  | 
|                                             |  |      |  |   |             |  |   |             | 
|Property, plant and
      equipment, net     |  | 8    |  |   | 41,342,373  |  |   | 41,280,407  | 
|Land use rights, net                         |  | 9    |  |   | 3,850,713   |  |   | 3,871,547   | 
|Deposit                                      |  |      |  |   | 16,090      |  |   | 16,088      | 
|TOTAL ASSETS                                 |  |      |  | $ | 144,405,969 |  | $ | 141,810,396 | 
|                                             |  |      |  |   |             |  |   |             | 
|LIABILITIES AND STOCKHOLDERS EQUITY         |  |      |  |   |             |  |   |             | 
|Current liabilities                          |  |      |  |   |             |  |   |             | 
|Short-term bank loans                        |  | 10   |  | $ | 35,463,979  |  | $ | 35,488,212  | 
|Long Term Debt 
      Current Portion       |  | 13   |  |   | 186,152     |  |   | -           | 
|Accounts payable                             |  |      |  |   | 2,814,130   |  |   | 2,614,515   | 
|Taxes payable                                |  | 11   |  |   | 707,362     |  |   | 2,235,341   | 
|Accrued liabilities and other
      payables |  | 12   |  |   | 7,448,897   |  |   | 6,422,492   | 
|Customers
      deposits                     |  |      |  |   | 731,413     |  |   | 13,842      | 
|Total
      current liabilities              |  |      |  | $ | 47,351,933  |  | $ | 46,774,402  | 
|                                             |  |      |  |   |             |  |   |             | 
|Long-term bank loans                         |  | 13   |  |   | 25,599      |  |   | 294,873     | 
|                                             |  |      |  |   |             |  |   |             | 
|TOTAL LIABILITIES                            |  |      |  | $ | 47,377,532  |  | $ | 47,069,275  | 

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

3

---

|                                                                                                                                                                             |  | Note |  |   | 3/31/2010   |  |   | 12/31/2009  | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | - | ----------- |  | - | ----------- | 
|STOCKHOLDERS EQUITY                                                                                                                                                         |  |      |  |   |             |  |   |             | 
|Preferred Stock, $.001 par value, 5,000,000 shares
      authorized; 0 shares issued and outstanding at March 31, 2010 and December
      31, 2009                           |  |      |  |   | -           |  |   | -           | 
|Common stock, $0.001 par value, 200,000,000
      shares authorized; 30,240,202 shares issued and outstanding
      as of March 31, 2010 and December 31, 2009, respectively |  | 15   |  |   | 30,240      |  |   | 30,240      | 
|Additional paid-in capital                                                                                                                                                   |  |      |  |   | 35,517,609  |  |   | 35,268,603  | 
|Statutory reserves                                                                                                                                                           |  |      |  |   | 9,982,807   |  |   | 8,895,477   | 
|Retained earnings                                                                                                                                                            |  |      |  |   | 39,228,550  |  |   | 38,455,349  | 
|Accumulated other comprehensive income                                                                                                                                       |  |      |  |   | 6,088,030   |  |   | 6,068,569   | 
|Non-controlling interests                                                                                                                                                    |  | 14   |  |   | 6,181,201   |  |   | 6,022,883   | 
|                                                                                                                                                                             |  |      |  | $ | 97,028,437  |  | $ | 94,741,121  | 
|                                                                                                                                                                             |  |      |  |   |             |  |   |             | 
|TOTAL LIABILITIES AND STOCKHOLDERS
      EQUITY                                                                                                                             |  |      |  | $ | 144,405,969 |  | $ | 141,810,396 | 

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

4

---

|AMERICAN LORAIN CORPORATION                  
|---------------------------------------------
|                                             
|CONSOLIDATED STATEMENTS OF INCOME            
|FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009
|(Stated in US Dollars)                       

|                                    |  |      |  |   |             |   |   | (Audited)   |  
|----------------------------------- |  | ---- |  | - | ----------- | - | - | ----------- | -
|                                    |  | Note |  |   | 3/31/2010   |   |   | 3/31/2009   |  
|                                    |  |      |  |   |             |   |   |             |  
|Net revenues                        |  | 17   |  | $ | 24,560,216  |   | $ | 21,200,537  |  
|Cost of revenues                    |  |      |  |   | (18,836,126 | ) |   | (16,038,203 | )
|Gross profit                        |  |      |  | $ | 5,724,090   |   | $ | 5,162.334   |  
|                                    |  |      |  |   |             |   |   |             |  
|Operating expenses                  |  |      |  |   |             |   |   |             |  
|Selling and marketing expenses      |  |      |  |   | (1,372,352  | ) |   | (1,170,847  | )
|General and administrative expenses |  |      |  |   | (1,016,452  | ) |   | (976,306    | )
|                                    |  |      |  |   | (2,388,804  | ) |   | (2,147,153  | )
|                                    |  |      |  |   |             |   |   |             |  
|Operating income                    |  |      |  | $ | 3,335,286   |   | $ | 3,015,181   |  
|                                    |  |      |  |   |             |   |   |             |  
|Government subsidy income           |  |      |  |   | 181,421     |   |   | 98,589      |  
|Interest income                     |  |      |  |   | 2,804       |   |   | 64,990      |  
|Other income                        |  |      |  |   | 119,277     |   |   | 16,379      |  
|Foreign exchange loss               |  |      |  |   | -           |   |   | (87,433     | )
|Other expenses                      |  |      |  |   | (27,523     | ) |   | (24,884     | )
|Interest expense                    |  |      |  |   | (920,424    | ) |   | (603,826    | )
|                                    |  |      |  |   | (644,445    | ) |   | (536,185    | )
|                                    |  |      |  |   |             |   |   |             |  
|Earnings before tax                 |  |      |  | $ | 2,690,841   |   | $ | 2,478,996   |  
|                                    |  |      |  |   |             |   |   |             |  
|Income tax                          |  | 16   |  |   | (671,992    | ) |   | (580,772    | )
|                                    |  |      |  |   |             |   |   |             |  
|Net income                          |  |      |  | $ | 2,018,849   |   | $ | 1,898,224   |  
|                                    |  |      |  |   |             |   |   |             |  
|Net income attributable to:         |  |      |  |   |             |   |   |             |  
|- Common stockholders               |  |      |  |   | 1,860,531   |   |   | 1,756,076   |  
|- Non-controlling interests         |  |      |  |   | 158,318     |   |   | 142,148     |  
|                                    |  |      |  |   | 2,018,849   |   |   | 1,898,224   |  
|                                    |  |      |  |   |             |   |   |             |  
|Earnings per share                  |  |      |  |   |             |   |   |             |  
|- Basic                             |  |      |  | $ | 0.07        |   | $ | 0.07        |  
|- Diluted                           |  |      |  |   | 0.07        |   |   | 0.07        |  
|                                    |  |      |  |   |             |   |   |             |  
|Weighted average shares outstanding |  |      |  |   |             |   |   |             |  
|- Basic                             |  |      |  |   | 26,075,413  |   |   | 25,177,640  |  
|- Diluted                           |  |      |  |   | 26,730,651  |   |   | 25,177,640  |  

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

5

---

|AMERICAN LORAIN CORPORATION                                     
|----------------------------------------------------------------
|                                                                
|STATEMENT OF STOCKHOLDERS EQUITY                               
|FOR THE PERIODS ENDED MARCH 31, 2010 AND DECEMBER 31,
      2009
|(Stated in US Dollars)                                          

AccumulatedNumber
    
    
    
    
    
    Additional
    
    
    
    
    
    
    
    
    Other
    
    
    Non-Of
    
    
    Common
    
    
    Paid-in
    
    
    Statutory
    
    
    Retained
    
    
    Comprehensive
    
    
    ControllingShares
    
    
    Stock
    
    
    Capital
    
    
    Reserves
    
    
    Earnings
    
    
    Income
    
    
    Interests
    
    
    TotalBalance, January 1, 2009
    
    25,172,640
    
    $
    25,172
    
    $
    24,187,019
    
    $
    5,438,723
    
    $
    27,503,991
    
    $
    5 ,178,616
    
    $
    5,122,021
    
    $
    67,455,542Issuance of share based compensation
    
    56,393
    
    
    57
    
    
    166,341
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    166,398Issuance of common stock for cash
    
    5,011,169
    
    
    5,011
    
    
    12,002,150
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    12,007,161Issuance cost of common stock
    
    
    
    
    
    
    
    (1,086,907
    )
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (1,086,907
    )Net income
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    15,308,974
    
    
    -
    
    
    -
    
    
    15,308,974Appropriations to statutory reserves
    
    -
    
    
    -
    
    
    -
    
    
    3,456,754
    
    
    (3,456,754
    )
    
    -
    
    
    -
    
    
    -Allocation to non-controlling interests
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (900,862
    )
    
    -
    
    
    900,862
    
    
    -Foreign currency translation adjustment
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    889,953
    
    
    -
    
    
    889,953Balance, December 31, 2009
    
    30,240,202
    
    $
    30,240
    
    $
    35,268,603
    
    $
    8,895,477
    
    $
    38,455,349
    
    $
    6,068,569
    
    $
    6,022,883
    
    $
    94,741,121Balance, January 1, 2010
    
    30,240,202
    
    $
    30,240
    
    $
    35,268,603
    
    $
    8,895,477
    
    $
    38,455,349
    
    $
    6,068,569
    
    $
    6,022,883
    
    $
    94,741,121Issuance of share based compensation
    
    -
    
    
    -
    
    
    249,006
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    249,006Issuance of common stock for cash
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Issuance cost of common stock
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Net income
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    2,018,849
    
    
    -
    
    
    -
    
    
    2,018,849Appropriations to statutory reserves
    
    -
    
    
    -
    
    
    -
    
    
    1,087,330
    
    
    (1,087,330
    )
    
    -
    
    
    -
    
    
    -Allocation to non-controlling interests
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (158,318
    )
    
    -
    
    
    158,318
    
    
    -Foreign currency translation adjustment
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    19,461
    
    
    -
    
    
    19,461Balance, March 31, 2010
    
    30,240,202
    
    $
    30,240
    
    $
    35,517,609
    
    $
    9,982,807
    
    $
    39,228,550
    
    $
    6,088,030
    
    $
    6,181,201
    
    $
    97,028,437


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

6

---

|AMERICAN LORAIN CORPORATION                  
|---------------------------------------------
|                                             
|CONSOLIDATED STATEMENTS OF CASH FLOWS        
|FOR THE PERIODS ENDED MARCH 31, 2010 AND 2009
|(Stated in US Dollars)                       

|                                                                          |  | Note |  |   | March 31, 2010 |   |   | March 31, 2009 |  
|------------------------------------------------------------------------- |  | ---- |  | - | -------------- | - | - | -------------- | -
|Cash flows from operating activities                                      |  |      |  |   |                |   |   |                |  
|Net income                                                                |  |      |  | $ | 2,018,849      |   | $ | 1,898,224      |  
|Stock and share based
      compensation                                  |  | 18   |  |   | 249,006        |   |   | -              |  
|Depreciation                                                              |  |      |  |   | 365,569        |   |   | 334,454        |  
|Amortization                                                              |  |      |  |   | 35,720         |   |   | 44,377         |  
|(Increase)/decrease in accounts &
      other receivables                 |  |      |  |   | 4,089,021      |   |   | 1,598,659      |  
|(Increase)/decrease in
      inventories                                  |  |      |  |   | (9,473,698     | ) |   | (2,860,568     | )
|(Increase)/decrease in prepayments                                        |  |      |  |   | (238,115       | ) |   | -              |  
|Increase/(decrease) in
      accounts and other payables                  |  |      |  |   | (301,956       | ) |   | (1,485,752     | )
|**Net cash (used in)/provided by
      operating** activities             |  |      |  | $ | (3,255,604     | ) | $ | (470,606       | )
|                                                                          |  |      |  |   |                |   |   |                |  
|Cash flows from investing activities                                      |  |      |  |   |                |   |   |                |  
|Purchase of plant and
      equipment                                     |  |      |  |   | -              |   |   | (143,166       | )
|Sales of short term investment fund                                       |  |      |  |   | 22,227         |   |   | -              |  
|Decrease/(increase) in
      restricted cash                              |  |      |  |   | 181,835        |   |   | -              |  
|Payments for the purchase of land use rights                              |  |      |  |   | (14,887        | ) |   | (22,689        | )
|Payments for Purchase of
      Equipment & Construction Plant             |  |      |  |   | (427,535       | ) |   | -              |  
|Payments for rental deposit                                               |  |      |  |   | -              |   |   | (215,905       | )
|Sales/(purchase) of securities                                            |  |      |  |   | -              |   |   | 2,780          |  
|Net cash used in investing activities                                     |  |      |  | $ | (238,360       | ) | $ | (378,980       | )
|                                                                          |  |      |  |   |                |   |   |                |  
|Cash flows from financing activities                                      |  |      |  |   |                |   |   |                |  
|Issue of common stock                                                     |  |      |  |   | -              |   |   | 5              |  
|Payment of notes                                                          |  |      |  |   | -              |   |   | (5,208,485     | )
|Proceeds from bank borrowings                                             |  |      |  |   | 17,853,746     |   |   | -              |  
|Repayment of bank borrowings                                              |  |      |  |   | (17,961,100    | ) |   | 14,649,047     |  
|**Net cash provided
      by/(used in) financing** activities             |  |      |  | $ | (107,354       | ) | $ | 9,440,566      |  
|                                                                          |  |      |  |   |                |   |   |                |  
|Net in cash and cash equivalents
      (used)/sourced                     |  |      |  |   | (3,601,318     | ) |   | 8,590,979      |  
|                                                                          |  |      |  |   |                |   |   |                |  
|Effect of foreign currency translation on
      cash and cash equivalents |  |      |  |   | 19,450         |   |   | 811,404        |  
|                                                                          |  |      |  |   |                |   |   |                |  
|Cash and cash equivalentsbeginning of year                               |  |      |  |   | 12,111,532     |   |   | 2,841,339      |  
|                                                                          |  |      |  |   |                |   |   |                |  
|Cash and cash equivalentsend of year                                     |  |      |  | $ | 8,529,664      |   | $ | 12,243,722     |  

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

7

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(Stated in US Dollars)                                                    

|1. | ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL
      ACTIVITIES
|-- | -------------------------------------------------------------------

| | (a) | Organization history of American Lorain Corporation
      (formerly known as Millennium Quest, Inc.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | American Lorain Corporation (the Company or ALC) is a
      Delaware corporation incorporated on February 4, 1986. From inception
      through May 3, 2007, the Company did not engage in any active business
      operations other than in search and evaluation of potential business
      opportunity to become an acquiree of a reverse- merger deal.                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (b) | Organization History of International Lorain Holding
      Inc. and its subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | International Lorain Holding Inc. (ILH) is a Cayman
      Islands company incorporated on August 4, 2006 and was until May 3, 2007
      wholly-owned by Mr. Hisashi Akazawa. Through restructuring and acquisition
      in 2006, the Company presently has two direct wholly-owned subsidiaries,
      Junan Hongrun and Luotian Lorain, and one indirectly wholly-owned
      subsidiary through Junan Hongrun, which is Beijing Lorain.                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | In addition, the Company directly and indirectly has
      80.2% ownership of Shandong Lorain. The rest of the 19.8%, which is owned
      by the State under the name of Shandong Economic Development Investment
      Co. Ltd., is not included as a part of the Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | On April 9, 2009, the Company, through its Junan Hongrun
      subsidiary, invested cash to establish Dongguan Lorain. Dongguan Lorain is
      indirectly 100% beneficially owned by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (c) | Reverse-Merger                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | On May 3, 2007, the Company entered into a share exchange
      agreement with International Lorain Holding Inc. (ILH) whereby the
      Company consummated its acquisition of ILH by issuance of 697,663 Series B
      voting convertible preferred shares to the shareholders of ILH in exchange
      of 5,099,503 ILH shares. Concurrently on May 3, 2007, the Company also
      entered into a securities purchase agreement with certain investors and
      Mr. Hisashi Akazawa and Mr. Si Chen (each a beneficial owner) whereby
      the Company issued 319,913 (after reverse-split at 32.84 from 10,508,643)
      common shares to its shareholders as consideration of the Companys
      reverse-merger with Lorain.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The share exchange transaction is referred to hereafter
      as the reverse-merger transaction. The share exchange transaction has
      been accounted for as a recapitalization of ALC where the Company (the
      legal acquirer) is considered the accounting acquiree and ILH (the
      acquiree) is considered the accounting acquirer. As a result of this
      transaction, the Company is deemed to be a continuation of the business of
      ILH.                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | Accordingly, the accompanying consolidated financial
      statements are those of the accounting acquirer, ILH. The historical
      stockholders equity of the accounting acquirer prior to the share
      exchange has been retroactively restated as if the share exchange
      transaction occurred as of the beginning of the first period presented.
      See also Note 16 Capitalization.                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (d) | Business Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The Company develops, manufactures, and sells convenience
      foods (includes ready-to-cook (or RTC) foods; ready-to-eat (or RTE) foods
      and meals ready-to-eat (or MRE); chestnut products; and frozen foods, in
      hundreds of varieties. The Company operates through indirect Chinese
      subsidiaries. The products are sold in 26 provinces and administrative
      regions in China and 42 foreign countries. Food products are categorized
      into three types: (1) chestnut products, (2) convenience food, and (3)
      frozen food.                                                                                                                                                                            

8

---

|                                                                          
|--------------------------------------------------------------------------
|AMERICAN LORAIN CORPORATION                                               
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(Stated in US Dollars)                                                    

|   |                                             
|-- | --------------------------------------------
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES

| | (a) | Method of Accounting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The Company maintains its general ledger and journals
      with the accrual method accounting for financial reporting purposes. The
      financial statements and notes are representations of management.
      Accounting policies adopted by the Company conform to generally accepted
      accounting principles in the United States of America and have been
      consistently applied in the presentation of financial statements, which
      are compiled on the accrual basis of accounting.                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (b) | Principles of consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | The consolidated financial statements which include the
      Company and its subsidiaries are compiled in accordance with generally
      accepted accounting principles in the United States of America. All
      significant inter-company accounts and transactions have been eliminated.
      The consolidated financial statements include 100% of assets, liabilities,
      and net income or loss of those wholly-owned subsidiaries; ownership
      interests of minority investors are recorded as minority
  interests.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     | As of March 31, 2009, the detailed identities of the
      consolidating subsidiaries are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                 

| |                                   |  | Place of       |  |  | ***Attributable***          |  |   | Registered | 
| | --------------------------------- |  | -------------- |  |  | --------------------------- |  | - | ---------- | 
| | ***Name of Company***             |  | incorporation  |  |  | ***equity
      interest*** |  |   | capital    | 
| |                                   |  |                |  |  | %                           |  |   |            | 
| | Shandong Lorain Co., Ltd          |  | PRC            |  |  | 80.2                        |  | $ | 14,754,026 | 
| | Luotian Lorain Co., Ltd           |  | PRC            |  |  | 100                         |  | $ | 3,705,154  | 
| | Junan Hongrun Foodstuff Co., Ltd  |  | PRC            |  |  | 100                         |  | $ | 28,700,575 | 
| | Beijing Lorain Co., Ltd           |  | PRC            |  |  | 100                         |  | $ | 1,462,822  | 
| | Dongguan Lorain Co,,Ltd           |  | PRC            |  |  | 100                         |  | $ | 146,282    | 
| | International Lorain Holding Inc. |  | Cayman Islands |  |  | 100                         |  | $ | 37,135,074 | 

(c)
    Use of estimatesThe 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 risksThe 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.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.


9

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | (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 years
| | ----------------------- | --------
| | Machinery and equipment | 10 years
| | Motor vehicles          | 10 years
| | Office 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.                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (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.

10

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|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| |     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

11

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | (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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | 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 Income
| | ---- | --------------
| | Rate | Over          
| | 15%  | 0             
| | 25%  | 50,000        
| | 34%  | 75,000        
| | 39%  | 100,000       
| | 34%  | 335,000       
| | 35%  | 10,000,000    
| | 38%  | 15,000,000    
| | 35%  | 18,333,333    

| | (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.

12

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

(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.

| |                                        | 2010   | 2009  
| | -------------------------------------- | ------ | ------
| | Period end RMB : US$ exchange rate     | 6.8361 | 6.8372
| | Average Period RMB : US$ exchange rate | 6.8360 | 6.8408

| |     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | 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 are
      normally not returnable and sales discount is normally not granted after
      products are delivered.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (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 the quarter ended March 31, 2010, 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) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | The Companys financial instruments are cash and cash
      equivalents, accounts receivable, other receivable, advances to suppliers,
      advances to employees, bank loans and notes, accounts payable, other
      payable, dividend payable, accrued liabilities, and long-term liabilities.
      The recorded values of cash and cash equivalents, accounts receivable,
      other receivable, advances to suppliers, advances to employees, bank loans
      and notes, accounts payable, other payable, dividend payable and accrued
      liabilities approximate their fair values based on their short-term nature. The
      recorded values of long-term liabilities approximate their fair values, as
      interest approximates market rates.                                                                                                                                                                                                                                                              

13

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|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | (x) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (y) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (z) | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | In June 2009, FASB issued FASB Statement No. 166,
      Accounting for Transfers for Financial Assets (FASB ASC 860 Transfers and
      Servicing) and FASB Statement No. 167 (FASB ASC 810 Consolidation), a
      revision to FASB Interpretation No. 46 (Revised December 2003),
      Consolidation of Variable Interest Entities (FASB ASC 810 Consolidation).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Statement 166 is a revision to FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities (FASB ASC 860 Transfers and Servicing), and
      will require more information about transfers of financial assets,
      including securitization transactions, and where entities have continuing
      exposure to the risks related to transferred financial assets. It
      eliminates the concept of a qualifying special-purpose entity, changes
      the requirements for derecognizing financial assets, and requires
      additional disclosures. Statement No. 166 (FASB ASC 860 Transfers and
      Servicing) must be applied as of the beginning of each reporting entitys
      first annual reporting period that begins after November 15, 2009, for
      interim periods within that first annual reporting period and for interim
      and annual reporting periods thereafter. Earlier application is
      prohibited. This Statement must be applied to transfers occurring on or
      after the effective date. The Company is still evaluating the impact of
      the above pronouncement.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     | Statement 167 is a revision to FASB Interpretation No. 46
      (Revised December 2003), Consolidation of Variable Interest Entities (FASB
      ASC 810 Consolidation), and changes how a reporting entity determines when
      an entity that is insufficiently capitalized or is not controlled through
      voting (or similar rights) should be consolidated. The determination of
      whether a reporting entity is required to consolidate another entity is
      based on, among other things, the other entitys purpose and design and
      the reporting entitys ability to direct the activities of the other
      entity that most significantly impact the other entitys economic
      performance. Statement No. 167 (FASB ASC 810 Consolidation) shall be
      effective as of the beginning of each reporting entitys first annual
      reporting period that begins after November 15, 2009, for interim periods
      within that first annual reporting period, and for interim and annual
      reporting periods thereafter. Earlier application is prohibited. The
      Company is still evaluating the impact of the above pronouncement.               

14

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

On June 30, 2009, FASB issued FASB
Statement No. 168, Accounting Standards Codification ( FASB ASC 105 Generally
Accepted Accounting Principles) a replacement of FASB Statement No. 162 the
Hierarchy of Generally Accepted Accounting Principles. On the effective date of
this standard, FASB Accounting Standards Codification (ASC) became the source
of authoritative U.S. accounting and reporting standards for nongovernmental
entities, in addition to guidance issued by the Securities and Exchange
Commission (SEC). This statement is effective for financial statements issued
for interim and annual periods ending after September 15, 2009. If an accounting
change results from the application of this guidance, an entity should disclose
the nature and reason for the change in accounting principle in their financial
statements. This new standard flattens the GAAP hierarchy to two levels: one
that is authoritative (in FASB ASC) and one that is non-authoritative (not in
FASB ASC). Exceptions include all rules and interpretive releases of the SEC
under the authority of federal securities laws, which are sources of
authoritative GAAP for SEC registrants, and certain grandfathered guidance
having an effective date before March 15, 1992. Statement No. 168 is the final
standard that will be issued by FASB in that form. There will no longer be, for
example, accounting standards in the form of statements, staff positions,
Emerging Issues Task Force (EITF) abstracts, or AICPA Accounting Statements of
Position. The Company has adopted the new accounting standard. There was no
material impact on the financial statements presented herein.

|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, 2010 and December 31, 2009:                                                                                                                                                                                                                                                                                                                                                                                                                      

| |                                      |   | 2010       |   |   | 2009       |  
| | ------------------------------------ | - | ---------- | - | - | ---------- | -
| | Trade accounts receivable            | $ | 20,429,090 |   | $ | 23,293,362 |  
| | Less:Allowance for doubtful accounts |   | (267,634   | ) |   | (267,590   | )
| |                                      | $ | 20,161,456 |   | $ | 23,025,772 |  

| | Allowance for bad debt:         |   | 2010     |   |   | 2009     |  
| | ------------------------------- | - | -------- | - | - | -------- | -
| | Beginning balance               | $ | (267,590 | ) | $ | (127,967 | )
| | Additions to Allowance          |   | (44      | ) |   | (139,623 | )
| | Less:Bad
      debt written-off |   | -        |   |   | -        |  
| | Ending balance                  | $ | (267,634 | ) | $ | (267,590 | )

The Company offers credit terms of
between 30 to 60 days to most of their  domestic customers, including supermarkets and wholesalers,
around 90 days to most of their international customers, and between 0 to 15 days for most of
the third-party distributors the Company works with.

15

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

|5. | OTHER RECEIVABLES                                                                             
|-- | ----------------------------------------------------------------------------------------------
|   |                                                                                               
|   | Other receivables consisted of the following as of March
      31, 2010 and December 31, 2009:

| |                                                        |   | 2010      |  |   | 2009      | 
| | ------------------------------------------------------ | - | --------- |  | - | --------- | 
| | Advances to employees for purchases of
      materials | $ | 2,793,753 |  | $ | 4,041,986 | 
| | Advances to employees for job/travel disbursements     |   | 242,286   |  |   | 23,890    | 
| | Amount due from a non-related enterprise               |   | 1,329,142 |  |   | 1,999,671 | 
| | Other non-related receivables                          |   | 179,090   |  |   | 1,772,128 | 
| |                                                        | $ | 4,544,271 |  | $ | 7,837,675 | 

|6. | RELATED PARTY RECEIVABLE                                                                             
|-- | -----------------------------------------------------------------------------------------------------
|   |                                                                                                      
|   | Related party receivable consisted of the following as of
      March 31, 2010 and December 31, 2009:

| |            |   | 2010    |  |   | 2009    | 
| | ---------- | - | ------- |  | - | ------- | 
| | Chen Si    | $ | 395,209 |  | $ | 541,245 | 
| | Lu Yundong |   | 121,657 |  |   | 32,358  | 
| | Liu Gang   |   | 29,518  |  |   | 29,513  | 
| |            | $ | 546,384 |  | $ | 603,116 | 

|   | Related party receivable represent advances issued by
      management for the purchase of raw materials in the normal course of
      business. The receivables are neither interest-bearing nor collateralized.
      The receivables had no impact on earnings. The related parties will repay
      the outstanding balances within one operating period.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                              
|7. | INVENTORY                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                              
|   | Inventory consisted of the following as of March 31, 2010
      and December 31, 2009:                                                                                                                                                                                                                                                                       

| |                |   | 2010       |  |   | 2009       | 
| | -------------- | - | ---------- |  | - | ---------- | 
| | Raw materials  | $ | 6,243,075  |  | $ | 12,014,402 | 
| | Finished goods |   | 29,730,740 |  |   | 14,385,715 | 
| |                | $ | 35,873,815 |  | $ | 26,400,117 | 

8.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment
consisted of the following as of March 31, 2010 and December 31, 2009:

16

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| |                                    |   | 2010       |   |   | 2009       |  
| | ---------------------------------- | - | ---------- | - | - | ---------- | -
| | At cost:                           |   |            |   |   |            |  
| | Buildings                          | $ | 29,186,067 |   | $ | 29,181,372 |  
| | Landscaping, plant, and
      tree |   | 2,759,388  |   |   | 2,758,944  |  
| | Machinery and equipment            |   | 7,904,285  |   |   | 7,783,775  |  
| | Office equipment                   |   | 455,601    |   |   | 466,411    |  
| | Motor vehicles                     |   | 459,728    |   |   | 357,902    |  
| |                                    | $ | 40,765,069 |   | $ | 40,548,404 |  
| | Less:accumulated depreciation      |   |            |   |   |            |  
| | Buildings                          |   | (1,973,367 | ) |   | (1,811,423 | )
| | Machinery and equipment            |   | (3,400,252 | ) |   | (3,226,015 | )
| | Office equipment                   |   | (268,967   | ) |   | (264,039   | )
| | Motor vehicles                     |   | (254,801   | ) |   | (230,341   | )
| |                                    |   | (5,897,387 | ) |   | (5,531,818 | )
| |                                    |   |            |   |   |            |  
| | Construction in Progress           |   | 6,474,691  |   |   | 6,263,821  |  
| |                                    | $ | 41,342,373 |   | $ | 41,280,407 |  

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.

|9. | LAND USE RIGHTS, NET                                                                        
|-- | --------------------------------------------------------------------------------------------
|   |                                                                                             
|   | Land use rights consisted of the following as of March
      31, 2010 and December 31, 2009:

| |                                     |   | 2010      |   |   | 2009      |  
| | ----------------------------------- | - | --------- | - | - | --------- | -
| | Land use rights, at cost            | $ | 4,374,309 |   | $ | 4,359,423 |  
| | Less:Accumulated
      amortization |   | (523,596  | ) |   | (487,876  | )
| |                                     | $ | 3,850,713 |   | $ | 3,871,547 |  

|    | 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. The Company carries land use rights at cost less
      accumulated amortization. Land use rights are amortized straight-line over
      the useful life of 50 years.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                      
|10. | SHORT-TERM DEBTS                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                      
|    | Short-term debts consisted of the following as of March
      31, 2010 and December 31, 2009:                                                                                                                                                                                                                                        

17

---

AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND DECEMBER
31, 2009 (STATED IN US DOLLARS)

| |                                                         |  | Remark |  |   | 2010      |  |   | 2009      | 
| | ------------------------------------------------------- |  | ------ |  | - | --------- |  | - | --------- | 
| | Loans from Junan County Construction
      Bank,        |  |        |  |   |           |  |   |           | 
| | Interest rate at 5.3460% per annum due1/18/2010        |  |        |  | $ | -         |  | $ | 212,075   | 
| | Interest rate at 5.3460% per annum due
      1/24/2010 |  |        |  |   | -         |  |   | 144,796   | 
| | Interest rate at 5.3460% per annum due 1/28/2010       |  |        |  |   | -         |  |   | 153,572   | 
| | Interest rate at 5.3460% per annum due
      3/8/2010  |  |        |  |   | -         |  |   | 153,571   | 
| | Interest rate at 5.3460% per annum due 3/25/2010       |  |        |  |   | -         |  |   | 153,572   | 
| | Interest rate at 5.3460% per annum due
      1/22/2010 |  |        |  |   | -         |  |   | 394,899   | 
| | Interest rate at 5.3460% per annum due 1/10/2010       |  |        |  |   | -         |  |   | 394,898   | 
| | Interest rate at 5.3460% per annum due
      1/12/2010 |  |        |  |   | -         |  |   | 475,340   | 
| | Interest rate at 5.8410% per annum due 12/27/2010      |  |        |  |   | 716,783   |  |   | 716,667   | 
| | Interest rate at 5.3460% per annum due
      9/1/2010  |  |        |  |   | 1,170,258 |  |   | 1,117,070 | 
| | Interest rate at 5.3460% per annum due 1/7/2010        |  |        |  |   | -         |  |   | 1,462,587 | 
| | Interest rate at 5.346% per annum due
      4/13/2010  |  |        |  |   | 234,052   |  |   | -         | 
| | Interest rate at 5.346% per annum due 6/7/2010         |  |        |  |   | 950,835   |  |   | -         | 
| | Interest rate at 5.841% per annum due
      1/14/2011  |  |        |  |   | 468,103   |  |   | -         | 
| | Interest rate at 5.346% per annum due 5/21/2010        |  |        |  |   | 848,437   |  |   | -         | 
| | Interest rate at 5.346% per annum due
      5/2/2010   |  |        |  |   | 702,155   |  |   | -         | 
| | Interest rate at 5.841% per annum due 3/4/2011         |  |        |  |   | 380,334   |  |   | -         | 
| | Interest rate at 5.346% per annum due
      6/9/2010   |  |        |  |   | 234,052   |  |   | -         | 
| | Interest rate at 5.346% per annum due 6/15/2010        |  |        |  |   | 96,546    |  |   | -         | 
| | Interest rate at 5.346% per annum due
      5/14/2010  |  |        |  |   | 48,273    |  |   | -         | 
| |                                                         |  |        |  |   |           |  |   |           | 
| |                                                         |  |        |  |   |           |  |   |           | 
| | Loan from Junan County Agriculture Bank,                |  |        |  |   |           |  |   | -         | 
| | Interest rate at 7.965% per annum due
      8/23/2010  |  | A      |  |   | 1,609,105 |  |   | 1,608,846 | 
| | Interest rate at 7.965% per annum due 9/22/2010        |  |        |  |   | 1,448,194 |  |   | 1,447,961 | 
| | Interest rate at 6.804% per annum due
      3/3/2010   |  |        |  |   | -         |  |   | 1,462,587 | 
| | Interest rate at 7.965% per annum due 11/22/2010       |  |        |  |   | 643,642   |  |   | 643,538   | 

18

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | Interest rate at 6.804% per annum due
      3/11/2010           |  | -         |  |  | 2,193,881 | 
| | ---------------------------------------------------------------- |  | --------- |  |  | --------- | 
| | Interest rate at 6.804% per annum due 3/08/2010                 |  | -         |  |  | 1,755,104 | 
| | Interest rate at 7.965% per annum due
      3/17/2010           |  | -         |  |  | 3,363,950 | 
| | Interest rate at 6.804% per annum due 5/9/2010                  |  | 438,847   |  |  | -         | 
| | Interest rate at 7.290% per annum due
      6/3/2010            |  | 1,462,822 |  |  | -         | 
| | Interest rate at 7.290% per annum due 6/7/2010                  |  | 1,755,387 |  |  | -         | 
| | Interest rate at 7.290% per annum due
      6/10/2010           |  | 2,194,234 |  |  | -         | 
| | Interest rate at 6.903% per annum due 3/30/2011                 |  | 92,158    |  |  | -         | 
| |                                                                  |  |           |  |  |           | 
| |                                                                  |  |           |  |  |           | 
| | Loan from Junan County Industrial and
      Commercial Banks,    |  |           |  |  | -         | 
| | Interest rate at 5.346% per annum due1/8/2010                   |  | -         |  |  | 438,776   | 
| | Interest rate at 5.346% per annum
      due1/14/2010            |  | -         |  |  | 541,157   | 
| | Interest rate at 5.346% per annum due1/25/2010                  |  | -         |  |  | 614,287   | 
| | Interest rate at 3.24% per annum due
      3/15/2010            |  | -         |  |  | 463,640   | 
| | Interest rate at 4.007% per annum due 4/23/1010                 |  | 1,243,399 |  |  | -         | 
| | Interest rate at 4.006% per annum due
      4/28/2010           |  | 614,385   |  |  | -         | 
| | Interest rate at 4.006% per annum due 4/16/2010                 |  | 1,316,540 |  |  | -         | 
| | Interest rate at 4.006% per annum due
      5/24/2010           |  | 1,199,514 |  |  | -         | 
| |                                                                  |  |           |  |  |           | 
| |                                                                  |  |           |  |  |           | 
| | Loan from Junan County Agricultural Financial
      Institution, |  | -         |  |  | -         | 
| | Interest rate at 10.939% per annum due
      1/22/2010          |  | -         |  |  | 1,170,070 | 
| |                                                                  |  |           |  |  |           | 
| |                                                                  |  |           |  |  |           | 
| | Loan from Linyi Commercial Bank,                                 |  | -         |  |  | -         | 
| | Interest rate at 9.293% per annum due
      1/19/2010           |  | -         |  |  | 658,164   | 
| | Interest rate at 16.470% per annum due 12/21/2010               |  | 687,527   |  |  | 687,416   | 
| | Interest rate at 11.151% per annum due
      6/16/2010          |  | 1,462,822 |  |  | 1,462,587 | 
| | Interest rate at 11.151% per annum due 6/15/2010                |  | 1,462,822 |  |  | 1,462,587 | 

19

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | Interest rate at 11.151% per annum due
      1/21/2011        |  |   |  |  | 658,270   |  |  | -         | 
| | -------------------------------------------------------------- |  | - |  |  | --------- |  |  | --------- | 
| |                                                                |  |   |  |  | -         |  |  | -         | 
| |                                                                |  |   |  |  | -         |  |  | -         | 
| | Loan from Beijing Miyun County Shilipu Rural                   |  |   |  |  | -         |  |  | -         | 
| | Financial Institution,                                         |  |   |  |  | -         |  |  | -         | 
| | Interest rates at 7.434% per annum due 1/20/2010              |  |   |  |  | -         |  |  | 1,462,587 | 
| | Interest rates at 6.903% per annum due
      9/30/2010        |  |   |  |  | 2,779,363 |  |  | 2,831,918 | 
| |                                                                |  |   |  |  |           |  |  |           | 
| |                                                                |  |   |  |  |           |  |  |           | 
| | Loan from China Merchants Bank, Beijing,                       |  |   |  |  | -         |  |  | -         | 
| | **Interest rate at 5.310% per annum                           |  | B |  |  | 716,782   |  |  | 731,294   | 
| |                                                                |  |   |  |  |           |  |  |           | 
| |                                                                |  |   |  |  |           |  |  |           | 
| | Loan from China Agricultural Bank, Luotian                     |  |   |  |  | -         |  |  | -         | 
| | Branch                                                         |  |   |  |  | -         |  |  | -         | 
| | Interest rate at 6.372% per annum due 8/25/2010               |  |   |  |  | 1,755,387 |  |  | 1,901,363 | 
| |                                                                |  |   |  |  |           |  |  |           | 
| | Bank of Beijing                                                |  |   |  |  |           |  |  |           | 
| | Interest rate at 6.903% per annum due
      7/29/2010         |  |   |  |  | 292,564   |  |  | 292,517   | 
| |                                                                |  |   |  |  |           |  |  |           | 
| | East West Bank (Formerly United Commercial Bank), China Branch |  |   |  |  |           |  |  |           | 
| | Interest rate at 5.494% per annum                             |  | C |  |  | 950,148   |  |  | 1,050,137 | 
| |                                                                |  |   |  |  |           |  |  |           | 
| | HSBC Miyun Branch                                              |  |   |  |  |           |  |  |           | 
| | Interest rate at 6.804% per annum due
      4/8/2010          |  |   |  |  | 292,564   |  |  | 292,517   | 
| |                                                                |  |   |  |  |           |  |  |           | 
| | Shenzhen Development Bank                                      |  |   |  |  |           |  |  |           | 
| | Interest rate at 5.576% per annum due 12/29/2010              |  |   |  |  | 1,462,822 |  |  | 1,462,587 | 

20

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | Luotian Agricultural Development
      Bank  |  |   |  |   |            |  |   |            | 
| | -------------------------------------------- |  | - |  | - | ---------- |  | - | ---------- | 
| | Interest rate at 0.67% month due 12/11/2010 |  |   |  |   | 109,712    |  |   | 109,694    | 
| |                                              |  |   |  |   |            |  |   |            | 
| | Junan Agricultural Credit Cooperative        |  |   |  |   |            |  |   |            | 
| | Interest rate at 10.939% annum due 2/7/2011 |  |   |  |   | 1,170,258  |  |   | -          | 
| | Interest rate at 7.222% annum due 3/1/2011  |  | D |  |   | 1,023,976  |  |   | -          | 
| |                                              |  |   |  |   |            |  |   |            | 
| | Linyi Linzhou Auction Corporation            |  |   |  |   |            |  |   |            | 
| | Interest rate at 10.8% annum due 4/12/2010  |  |   |  |   | 770,907    |  |   | -          | 
| |                                              |  |   |  | $ | 35,463,979 |  | $ | 35,488,212 | 

|    | The short-term loans, which are denominated in the
      functional currency Renminbi (RMB), were primarily obtained for general
      working capital.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Remark:                                                                                                                                                
|    | A: A storage of 8,162 square meters was used as
      collateral for this loan.                                                                        
|    | B: A CD deposit certificate was used as collateral for this
loan.                                                                                      
|    | C: A building of 5,646 square meters of Sishui Xinlu
      Foodstuff Co., Ltd was used as mortgage for this loan.                                      
|    | D: A parcel of land of Shangdong Green Garden Food Company was used as
      collateral for this loan.                                                 
|    |                                                                                                                                                        
|11. | TAXES PAYABLE                                                                                                                                          
|    |                                                                                                                                                        
|    | Taxes payable consisted of the following as of March 31,
      2010 and December 31, 2009:                                                             

| |                                  |   | 2010    |  |   | 2009      | 
| | -------------------------------- | - | ------- |  | - | --------- | 
| | Value added tax payable          | $ | 1,415   |  | $ | 328,608   | 
| | Corporate income tax payable     |   | 639,195 |  |   | 1,842,751 | 
| | Employee payroll tax withholding |   | 5,380   |  |   | 3,449     | 
| | Property tax payable             |   | 16,584  |  |   | 12,279    | 
| | Stamp tax payable                |   | -       |  |   | 359       | 
| | Sales tax payable                |   | -       |  |   | -         | 
| | Land use tax payable             |   | 44,788  |  |   | 41,260    | 
| | Import tariffs                   |   | -       |  |   | 6,635     | 
| |                                  |   |         |  |   |           | 
| |                                  | $ | 707,362 |  | $ | 2,235,341 | 

|12. | ACCRUED EXPENSES AND OTHER
  PAYABLE
|--- | ------------------------------------

21

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

Accrued expenses and other payables
consisted of the following as of March 31, 2010 and December 31, 2009:

| |                                 |   | 2010      |  |   | 2009      | 
| | ------------------------------- | - | --------- |  | - | --------- | 
| | Accrued salaries and wages      | $ | 188,012   |  | $ | 500,390   | 
| | Accrued utility expenses        |   | 191,985   |  |   | 263,492   | 
| | Accrued interest expenses       |   | -         |  |   | 9,264     | 
| | Accrued transportation expenses |   | 136,137   |  |   | 344,841   | 
| | Other accruals                  |   | 21,065    |  |   | 184,860   | 
| | Business and other taxes        |   | 107,962   |  |   | 2,344,746 | 
| | Purchase disbursement payable   |   | 6,760,226 |  |   | 2,750,547 | 
| | Accrued staff welfare           |   | 43,510    |  |   | 24,352    | 
| |                                 |   |           |  |   |           | 
| |                                 | $ | 7,448,897 |  | $ | 6,422,492 | 

|13. | LONG-TERM DEBT                                                                             
|--- | -------------------------------------------------------------------------------------------
|    |                                                                                            
|    | Long-term debt consisted of the following as of March 31,
      2010 and December 31, 2009:

| |                                                                           |   | 2010    |  |   | 2009    | 
| | ------------------------------------------------------------------------- | - | ------- |  | - | ------- | 
| | Loans from Luotian Agricultural
      Development Bank                    |   |         |  |   |         | 
| | Interest rates at 2.10% per annum due 12/11/2011                         |   | 25,599  |  |   | 25,595  | 
| |                                                                           |   |         |  |   |         | 
| | Loans from East West Bank (Formerly United Commercial Bank), China Branch |   |         |  |   |         | 
| | Interest rates at 5.494% per annum due
      1/14/2010                   |   | -       |  |   | 269,278 | 
| | Interest rates at 5.806% per annum on demand                             |   | 186,152 |  |   | -       | 
| |                                                                           |   |         |  |   |         | 
| |                                                                           | $ | 211,751 |  | $ | 294,873 | 

|    | As of the quarter ended March 31, 2010, a loan of $186,152
      from United Commercial Bank is categorized in long-term debt- current
      portion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|14. | MINORITY INTEREST                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | This represents the 19.8% equity of Shandong Lorain held
      by a state-owned interest, Shandong Economic Development Investment
      Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|15. | 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 it 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
December 31, 2008 was 25,172,640.

22

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

During the year of 2009, the company
issued 56,393 shares of stock to its employees and vendors and 5,011,169 shares
to investors. The company issued 1,334,573 stock options to employees on July
28, 2009. 1,753,909 shares of Series A warrants and 501,115 shares of Series B
warrants were issued to investors on October 28, 2009. The total number of
shares issued and outstanding is 30,240,202 at December 31, 2009.

Par
      Value authorized
    Issuance Date
    Shares OutstandingCommon stock at 1/1/2009
    200,000,000
    
    25,172,640New shares issued to employees and vendors during 2009
    
    Various dates
    56,393New shares issued to PIPE investors
    
    10/28/2009
    5,011,169Common stock at
      12/31/2009
    
    30,240,202
    30,240,202


Warrants and options
    Number of warrants or options
    Issuance Date
    Expiration dateIssued to PIPE investors  first round
      financing
    1,037,858
    5/3/2007
    5/2/2010Issued to placement agent  first round financing
    489,330
    5/3/2007
    5/2/2010Employee stock options
    1,334,573
    7/28/2009
    7/27/2014PIPE investors second round financing - Series A
    1,753,909
    10/28/2009
    4/28/2015PIPE investors second round financing -
      Series B
    501,115
    10/28/2009
    10/28/2012Total warrants
    5,116,785


|16. | INCOME TAXES                                                                                                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                      
|    | The following tables provide the reconciliation of the
      differences between the statutory and effective tax expenses for the
      quarters
      ended March 31, 2010 and 2009.

2010
    
    
    2009Income attributed to PRC
    $
    2,951,843
    
    $
    *2,592,416*Loss attributed to US*
    
    (261,002
    )
    
    (113,420
    )Income before tax
    
    2,690,841
    
    
    2,478,996PRC Statutory Tax at 25% Rate
    
    737,961
    
    
    648,104Effect of tax exemption granted
    
    (65,969
    )
    
    (67,332
    )Income tax
    $
    671,992
    
    $
    580,772


23

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | Per Share Effect of Tax Exemption   |   |            |   |   |            |  
| | ----------------------------------- | - | ---------- | - | - | ---------- | -
| |                                     |   | 2010       |   |   | 2009       |  
| | Effect of tax exemption granted     | $ | (65,969    | ) | $ | (67,332    | )
| | Weighted-Average Shares Outstanding |   | 26,075,413 |   |   | 25,177,640 |  
| | Per share effect                    | $ | (0.003     | ) | $ | (0.003     | )

The difference between the U.S. federal
statutory income tax rate and the Companys effective tax rate was as follows
for the quarters ended March 31, 2010 and 2009:

| |                                        |   | 2010    |  |   | 2009    | 
| | -------------------------------------- | - | ------- |  | - | ------- | 
| | U.S. federal statutory income tax rate | $ | 35.00%  |  | $ | 35.00%  | 
| | Lower rates in PRC, net                |   | -10.00% |  |   | -10.00% | 
| | Tax holiday for foreign investments    |   | -0.03%  |  |   | -1.57%  | 
| | The Companys effective tax rate       | $ | 24.97%  |  | $ | 23.43%  | 

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.

The Company has accrued a deferred tax
asset as a result of its net operating loss in 2009 because the Company has
plans to setup operations in the United States. The company anticipates that the
operations within the United States will generate income in the future so that
it will be able to take full advantage of the accrued asset. Accordingly the
Company has not provided a valuation allowances for the accrued tax asset.

The Company has detailed tax rates for
its subsidiaries for 2010 and 2009 in the following table.

| | Income Tax Rate      |  |  | 2010 |  |  | 2009 | 
| | -------------------- |  |  | ---- |  |  | ---- | 
| | International Lorain |  |  | 0%   |  |  | 0%   | 
| | Junan Hongran        |  |  | 25%  |  |  | 25%  | 
| | Luotian Lorain       |  |  | 25%  |  |  | 15%  | 
| | Beijing Lorain       |  |  | 15%  |  |  | 15%  | 
| | Shangdong Lorain     |  |  | 25%  |  |  | 25%  | 
| | Dongguan Lorain      |  |  | 25%  |  |  | 25%  | 

|17. | SALES BY PRODUCT TYPE                                                                         
|--- | ----------------------------------------------------------------------------------------------
|    |                                                                                               
|    | Sales by categories of product consisted of the following
      as of March 31, 2010 and 2009:

| | Category         |   | 2010       |  |   | 2009       | 
| | ---------------- | - | ---------- |  | - | ---------- | 
| | Chestnut         | $ | 12,960,561 |  | $ | 12,685,389 | 
| | Convenience food |   | 7,089,176  |  |   | 1,032,821  | 
| | FCB food         |   | 4,510,479  |  |   | 7,482,327  | 
| | Total            | $ | 24,560,216 |  | $ | 21,200,537 | 

24

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

Revenue by geography consisted of the
following as of March 31, 2010 and 2009:

| | Category                 |   | 2010       |  |   | 2009       | 
| | ------------------------ | - | ---------- |  | - | ---------- | 
| | Belgium                  | $ | 369,076    |  | $ | 38,357     | 
| | Canada                   |   | 71,585     |  |   | -          | 
| | China                    |   | 19,346,486 |  |   | 16,884,801 | 
| | France                   |   | 80,029     |  |   | 98,305     | 
| | Germany                  |   | 64,631     |  |   | 142,321    | 
| | Holland                  |   | -          |  |   | 142,321    | 
| | Hong Kong                |   | 10,413     |  |   | 52,039     | 
| | Japan                    |   | 2,592,836  |  |   | 1,590,369  | 
| | Malaysia                 |   | 300,747    |  |   | 71,684     | 
| | Saudi Arabia             |   | -          |  |   | 992,902    | 
| | Singapore                |   | 157,718    |  |   | 97,935     | 
| | South Korea              |   | 1,151,811  |  |   | 852,009    | 
| | Taiwan                   |   | 45,362     |  |   | 39,795     | 
| | United Kingdom           |   | 297,616    |  |   | 158,589    | 
| | United States of America |   | 41,068     |  |   | 104,477    | 
| | United Arab Emirates     |   | 30,838     |  |   | -          | 
| | Other                    |   | -          |  |   | 76,954     | 
| |                          |   |            |  |   |            | 
| | Total                    | $ | 24,560,216 |  | $ | 21,200,537 | 

|18. | SHARE BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | On July 27, 2009, the Companys Board of Directors
      adopted the American Lorain Corporation 2009 Incentive Stock Plan (the
      Plan). The Plan provides that the maximum number of shares of the
      Companys common stock that may be issued under the Plan is 2,500,000
      shares. The Companys employees, directors, and service providers are
      eligible to participate in the Plan.                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | For the year ended December 31, 2009, the Company
      recorded a total of $166,346 of shared based compensation expense. The
      Company issued warrants that upon exercise would result in the issuance of
      1,334,573 common shares. These stock options vest over three years, where
      33.33% vest annually. The expense related to the stock options was
      $107,375. The Company also recorded expense of $58,971 for the issuance of
      56,393 common shares to participants, respectively. The common shares
      vested immediately. Given the materiality and nature of share based
      compensation, the entire expense has been recorded as general and
      administrative expenses.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | During the quarter ended March 31, 2010, the Company
      recorded a total of $249,006 stock option and its related general and
      administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

25

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

The range of the exercise prices of the
stock options granted since inception of the plan are shown in the following
table:

Price Range
    Number of Shares$0 - $4.99
    1,334,573 shares$5.00 - $9.99
    0 shares$10.00 - $14.99
    0 shares


No tax benefit has yet to be accrued or
realized. For the year ended December 31, 2009 the Company has yet to repatriate
its earnings, accordingly it has not recognized any deferred tax assets or
liability in regards to benefits derived from the issuance of stock options.

The Company used the Black-Scholes
Model to value the warrants granted. The following shows the weighted average
fair value of the grants and the assumptions that were employed in the model:

| | Weighted-average fair value of grants: | $ | 1.6862 | 
| | -------------------------------------- | - | ------ | 
| | Risk-free interest rate:               |   | 2.55%  | 
| | Expected volatility:                   |   | 5.75%  | 
| | Expected life in months:               |   | 51.00  | 

|19. | LEASE COMMITMENTS                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                       
|    | The Company has entered into an operating lease
      agreement leasing a factory building located in Dongguan, China. The lease
      was signed by Shandong Lorain on behalf of Dongguan Lorain and expires on
      August 9, 2018.
|    |                                                                                                                                                                                                                                       
|    | The minimum future lease payments for this property at
      March 31, 2010 are shown in the following
table:                                                                                                                         

| | From     |  | To         |  |   | USD     | 
| | -------- |  | ---------- |  | - | ------- | 
| | 4/1/2010 |  | 12/31/2010 |  | $ | 63,195  | 
| | 1/1/2011 |  | 12/31/2011 |  |   | 84,259  | 
| | 1/1/2012 |  | 12/31/2012 |  |   | 84,259  | 
| | 1/1/2013 |  | 12/31/2013 |  |   | 87,536  | 
| | 1/1/2014 |  | 12/31/2014 |  |   | 92,685  | 
| | 1/1/2015 |  | 12/31/2015 |  |   | 92,685  | 
| | 1/1/2016 |  | 12/31/2016 |  |   | 92,685  | 
| | 1/1/2017 |  | 12/31/2017 |  |   | 92,685  | 
| | 1/1/2018 |  | 8/9/2018   |  |   | 56,641  | 
| |          |  |            |  | $ | 746,630 | 

The outstanding lease commitment as of
March 31, 2010 is $746,630.

The minimum future lease payments for
this property at December 31, 2009 are shown in the following table:

26

---

|AMERICAN LORAIN CORPORATION                                               
|--------------------------------------------------------------------------
|                                                                          
|NOTES TO FINANCIAL STATEMENTS  MARCH 31, 2010 AND
      DECEMBER 31, 2009
|(STATED IN US DOLLARS)                                                    

| | From     |  | To         |  |   | USD     | 
| | -------- |  | ---------- |  | - | ------- | 
| | 1/1/2010 |  | 12/31/2010 |  | $ | 84,245  | 
| | 1/1/2011 |  | 12/31/2011 |  |   | 84,245  | 
| | 1/1/2012 |  | 12/31/2012 |  |   | 84,245  | 
| | 1/1/2013 |  | 12/31/2013 |  |   | 87,521  | 
| | 1/1/2014 |  | 12/31/2014 |  |   | 92,670  | 
| | 1/1/2015 |  | 12/31/2015 |  |   | 92,670  | 
| | 1/1/2016 |  | 12/31/2016 |  |   | 92,670  | 
| | 1/1/2017 |  | 12/31/2017 |  |   | 92,670  | 
| | 1/1/2018 |  | 8/9/2018   |  |   | 56,631  | 
| |          |  |            |  | $ | 767,567 | 

The outstanding lease commitment as of
December 31, 2009 is $767,567.

27

---

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, 2009 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 foods, ready-to-eat foods, and
  meals ready-to-eat); and
- frozen foods.

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 processed chestnut foods
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 2010. We
derive most of our revenues from sales in China, Japan and South Korea. Our
primary strategy for 2010 is to expand our brand equity in the Chinese market
for our convenience foods products. We are also working to expand our brand
recognition in China for our Chestnut products and frozen products. In addition,
we are working to expand our marketing efforts in Asia, North America, 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.

Sales in the first quarter of 2010 benefited from exports to
Korea and Japan and indicated that American Lorains key export markets in
northeast Asia are rebounding after a soft year in 2009. In the coming quarters,
American Lorain sees higher demand for its traditional chestnut product line
along with additional sales revenues being generated by frozen chestnut summer
promotions in Beijing and Chongqing. On May 3rd, American Lorain
detailed a summer promotion of frozen chestnuts for sales at Lorain®-branded
counters which is expected to contribute approximately $3.6 million in revenues
in 2010.

Frozen foods sold primarily to select export markets in
Europe and wholesale customers like Yums! Foods in China contributed
approximately 18.4% in revenues for the quarter compared to 35.3% in the first
quarter of 2009. American Lorain will continue servicing its frozen food
customers but as part of a broader marketing strategy and in response to a
highly competitive environment in which the Company is not actively seeking new
customers.

28

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American Lorain uses mostly outsourced, third party
manufacturing facilities for its frozen foods and maintains limited production
exposure and contractual obligations in this segment.

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 2010, the
cost of our raw materials increased from $14.5 million to $17.2 million, as
compared to the first quarter of 2009, for an increase of approximately 18.6% .
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.

Seasonality

Chestnut season in China lasts from September to January. We
purchase and produce raw chestnuts during these months and store them in our
refrigerated storage facilities throughout the year. Once we obtain a purchase
order during the rest of the year, we remove the chestnuts from storage, process
them and ship them within one day of production. Since most Chestnuts are
produced and sold in the fourth quarter, the Company generally performs best in
the fourth quarter.

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 prepay for their supplies in cash or pay 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 2010, we paid for approximately 17.1% 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 68% of our working capital
requirements from the proceeds of short-term loans from Chinese banks. We expect
to continue to fund our working capital requirements with such loans in the
future. Such loans are generally secured by our fixed assets, receivables and/or
guarantees by third parties. Our loan balance from short-term bank loans as of
March 31, 2010 was approximately $35.5 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.

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 obtaining 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. However, we successfully
consummated a private placement financing of approximately $12.0 million through
the sale of common stock and warrants to several accredited investors on
November 3, 2009, the proceeds of which are being used to support a planned
nationwide commercial campaign to promote our convenience food products in the
Chinese market and to increase brand awareness for our Ready-to-Cook foods,
Ready-to-Eat foods, and Meals Ready-to-Eat, as well as our chestnut products

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 2010 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 2009, we shortened credit terms for many of our
international and domestic distributors from between 30 and 180 days to between
30 and 60 days for domestic distributors, and around 90 days for international
distributors. 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.

29

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In 2009, we introduced to the market several new products,
including the series of bean products, cold-dish products and lunch-box
products. Such additions to our product family increased the number of
suppliers, many of whom were new to us. Most of these new suppliers require
prepayment, in part or in full amount, before delivery of the supplies. Our cash
flow suffered from these increased advances to suppliers. Our suppliers may not
waive or reduce their prepayment requirements, in which case if we fail to find
alternative suppliers, we may not have sufficient cash flow to fund our
operations and our business could be adversely affected.

Results of Operations

Three Months Ended March 31, 2010 Compared to Three Months
Ended March 31, 2009

The following table summarizes the results of our operations
during the three-month periods ended March 31, 2010 and March 31, 2009,
respectively and provides information regarding the dollar and percentage
increase or (decrease) from the three-month period ended March 31, 2009 compared
to the three-month period ended March 31, 2010.

(All amounts, other than percentages, stated in thousands of
U.S. dollars)

|                                    |  | Three months ended |   |  |                |   |  |                 |  
|----------------------------------- |  | ------------------ | - |  | -------------- | - |  | --------------- | -
|                                    |  | March 31,          |   |  | Dollar($)      |   |  | Percentage (% ) |  
|                                    |  | 2010               |   |  | 2009           |   |  | Increase        |  
|                                    |  | (In Thousands)     |   |  | (In Thousands) |   |  | (Decrease)      |  
|Net revenues                        |  | 24,560             |   |  | 21,201         |   |  | 3,359           |  
|Cost of revenues                    |  | (18,836            | ) |  | (16,038        | ) |  | (2,798          | )
|Gross profit                        |  | 5,724              |   |  | 5,162          |   |  | 562             |  
|Operating expenses                  |  |                    |   |  |                |   |  |                 |  
|Selling and marketing expenses      |  | (1,372             | ) |  | (1,171         | ) |  | (201            | )
|General and administrative expenses |  | (1,016             | ) |  | (976           | ) |  | (40             | )
|                                    |  |                    |   |  |                |   |  |                 |  
|Operating Income                    |  | 3,336              |   |  | 3,015          |   |  | 321             |  
|                                    |  |                    |   |  |                |   |  |                 |  
|Government subsidy income           |  | 181                |   |  | 99             |   |  | 82              |  
|Interest and other income           |  | 122                |   |  | 81             |   |  | 41              |  
|Other expenses                      |  | (28                | ) |  | (25            | ) |  | (3              | )
|Interest expense                    |  | (920               | ) |  | (604           | ) |  | (316            | )
|                                    |  |                    |   |  |                |   |  |                 |  
|Earnings before tax                 |  | 2,691              |   |  | 2,479          |   |  | 212             |  
|                                    |  |                    |   |  |                |   |  |                 |  
|Income tax                          |  | (672               | ) |  | (581           | ) |  | (91             | )
|                                    |  |                    |   |  |                |   |  |                 |  
|Income before minority interests    |  | 2,019              |   |  | 1,898          |   |  | 121             |  
|                                    |  |                    |   |  |                |   |  |                 |  
|Minority interests                  |  | 158                |   |  | 142            |   |  | 16              |  
|Net income                          |  | 1,861              |   |  | 1,756          |   |  | 105             |  

Revenue

Net Revenues. Our net revenue for the three months ended
March 31, 2010 amounted to $24.6 million, which represents an increase of
approximately $3.4 million, or 15.8%, from the three-month period ended on March
31, 2009, in which our net revenue was $21.2 million. The increased revenues
were attributable to increased revenues from sales of our chestnut and
convenience food products as a result of 2.2% and 586.4% (or $6.1 million)
increase in sales respectively of such products thanks to our effective
marketing efforts and well established domestic and international distribution
network. Frozen foods sold primarily to select export markets in Europe and
wholesale customers like Yums! Foods in China contributed approximately 18.4% in
revenues for the quarter compared to 35.3% in the first quarter of 2009.

30

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Cost of Revenues.During the three months ended March
31, 2010, we experienced an increase in cost of revenue of $2.8 million, in
comparison to the three months ended March 31, 2009, from approximately $16
million to $18.8 million, reflecting an increase of approximately 17.4% .
Approximately 96.7%, or $2.7 million, of this increase was attributable to an
increase in raw material costs, which increased from $14.5 million during the
three months ended March 31, 2009 to $17.2 million, or approximately 18.6%,
during the three months ended March 31, 2010.

The factors that contributed to the remaining 3.3% increase in
cost of revenues were: an increase in wage expense for factory workers, an
increase in depreciation expenses for capital equipment and an increase in the
cost of consumables used in conjunction with capital equipment.

Gross Profit. Our gross profit increased $0.6 million, or
10.9%, to $5.7 million for the three months ended March 31, 2010 from $5.2
million for the same period in 2009 as a result of higher revenues, offset by
higher costs of revenues, for the reasons indicated immediately above. However,
our gross margins decreased from 24.4% to 23.3% because our product mix in the
period ended March 31, 2010 consisted of fewer chestnuts and more convenience
foods, as compared to the period ended March 31, 2009. Our convenience food
generate lower margins than our chestnut products. Gross profit margins by
product segment are; 25-28% for chestnuts, 22-24% for convenience foods and
16-18% for frozen foods.

Operating Expenses

Selling and Marketing Expenses. Our selling and
marketing expenses increased approximately $0.2 million, or 17.2%, to $1.4
million in the first quarter of 2010 from $1.2 million in the first quarter of
2009. 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 U.S. dollars)            | Increase in Costs in the Three
      Months Ended March 31, 2010 over the Three Months Ended
      31-Mar-09
|---------------------------- | ------------------------------------------------------------------------------------------------------------
|                             |                                                                                                             
|Shipping and inspection fees | 183,047                                                                                                     
|Transportation               | 56,759                                                                                                      
|Advertising Expenses         | 86,627                                                                                                      

The increases listed in the table above were partially offset
by decreases in dollar amount 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. In addition, we introduced several
new convenience food products and initiated a marketing and promotional campaign
for our chestnut and convenience food products.

31

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General and Administrative Expenses.We experienced an
increase in general and administrative expense of approximately $0.04 million
from approximately $0.97 million to approximately $1.02 million for the three
months ended March 31, 2010, compared to the same period in 2009. 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:

|Factor           |  | Dollar Increase | 
|---------------- |  | --------------- | 
|                 |  |                 | 
|Staff Welfare    |  | 29,125          | 
|Insurance Fees   |  | 34,465          | 
|Rental           |  | 27,648          | 
|Pension Expenses |  | 73,402          | 

The increases listed in the table above were partially offset
by decreases in dollar amount of other factors, including office expenses,
consulting fees and waste water treatment expenses.

Income Before Taxation and Minority Interest

Income before taxation and minority interest increased $0.2
million, or 8.6%, to $2.7 million for the three months ended March 31, 2010 from
$2.5 million for the same period of 2009. The increase was mainly attributable
to the increase of our sales revenue as described above in the three months
ended March 31, 2010 as compared to the three months ended March 31, 2009.

Income Taxes

Income taxes increased $0.09 million, or 15.7%, to $0.67
million in the first quarter of 2010, as compared to $0.58 million in the first
quarter of 2009. This increase was attributable to the higher earnings before
tax and higher income tax rate in 2010 as compared to 2009.

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.

The income tax rates applicable to our Chinese operating
subsidiaries in 2009 and 2010 are depicted in the following table:

2009
    2010Junan Hongrun
    25%
    25%Luotian Lorain
    15%
    25%Beijing Lorain
    15%
    15%Shandong Lorain
    25%
    25%


Net Income

Net income increased $0.11 million, or 6.0%, to $1.86 million
for the three months ended March 31, 2010 from $1.76 million for the same period
of 2009. The increase was attributable to increased sales revenue and partially
offset by increased cost of goods sold, selling and marketing expenses and
higher income tax in the three months ended March 31, 2010 as compared to the
three months ended March 31, 2009.

Liquidity and Capital Resources

As of March 31, 2010, we had cash and cash equivalents
(including restricted cash) of $8.5 million. Our cash and cash equivalents
decreased by approximately $3.6 million from December 31, 2009, due to cash
spent on our inventories. The following table provides detailed information
about our net cash flow for all financial statements periods presented in this
report.

32

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|                                                          |  | Cash Flow (in thousands) |  
|--------------------------------------------------------- |  | ------------------------ | -
|                                                          |  | Three Months Ended       |  
|                                                          |  | March 31,                |  
|                                                          |  | 2010                     |  
|Net cash provided by (used in) operating
      activities |  | (3,256                   | )
|Net cash provided by (used in) investing activities       |  | (238                     | )
|Net cash provided by (used in) financing
      activities |  | (107                     | )
|Net cash flow (outflow)                                   |  | (3,601                   | )

Operating Activities

Net cash used in operating activities was $3.3 million for the
three months period ended March 31, 2010 and net cash used by operating
activities in the first quarter of 2009 was approximately $0.5 million. The
increase of approximately $2.8 million in net cash flows used in operating
activities in the first three months of fiscal 2010 was primarily a result of
additional increase in inventory of approximately $6.6 million, which was
partially offset by additional decrease in accounts and other receivables of
approximately $2.5 million as compared to the same period in 2009.

Investing Activities

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

Net cash used in investing activities for the three months
period ended March 31, 2010 was $0.24 million, which is a decrease of 0.14
million from net cash used in investing activities of $0.38 million for the same
period of 2009. The decrease was primarily due to decrease in restricted cash
and decrease in payments for rental deposit in 2010.

Financing Activities

Net cash provided by financing activities for the three months
period ended March 31, 2010 was ($0.1) million, which is an decrease of $9.5
million from $9.4 million net cash provided by financing activities during the
same period in 2009. The decrease of the net cash provided by financing
activities was primarily a result of decreased short term bank borrowing in
2010.

Loan Facilities

As of March 31, 2010, the amounts and maturity dates for our
short-term bank loans are as set forth in the Notes to the Financial Statements.
The total amounts outstanding were $35.5 million as of March 31, 2010, compared
with $35.5 million as of December 31, 2009. We believe that our currently
available working capital, after receiving the aggregate proceeds of the credit
facilities referred to above, should be adequate to sustain our operations at
our current levels through at least the next twelve months.

Obligations under Material Contracts

We do not have any material contractual obligations as of March
31, 2010.

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:

33

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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, 2010, the details pertaining to our
subsidiaries were as follows:

|                                  |  | Place of       |  |  | Attributable Equity |  |   | Registered | 
|--------------------------------- |  | -------------- |  |  | ------------------- |  | - | ---------- | 
|Name of Company                   |  | Incorporation  |  |  | Interest %          |  |   | Capital    | 
|                                  |  |                |  |  |                     |  |   |            | 
|Shandong Lorain Co., Ltd          |  | PRC            |  |  | 80.2                |  | $ | 14,754,026 | 
|Luotian Lorain Co., Ltd           |  | PRC            |  |  | 100                 |  | $ | 3,705,154  | 
|Junan Hongrun Foodstuff Co., Ltd  |  | PRC            |  |  | 100                 |  | $ | 28,700,575 | 
|Beijing Lorain Co., Ltd           |  | PRC            |  |  | 100                 |  | $ | 1,462,822  | 
|Dongguan Lorain Co,,Ltd           |  | PRC            |  |  | 100                 |  | $ | 146,282    | 
|International Lorain Holding Inc. |  | Cayman Islands |  |  | 100                 |  | $ | 37,135,074 | 

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 period, 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.

34

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Recent Accounting Pronouncements

In June 2009, FASB issued FASB Statement No. 166, Accounting
for Transfers for Financial Assets (FASB ASC 860 Transfers and Servicing) and
FASB Statement No. 167 (FASB ASC 810 Consolidation), a revision to FASB
Interpretation No. 46 (Revised December 2003), Consolidation of Variable
Interest Entities (FASB ASC 810 Consolidation).

Statement 166 is a revision to FASB Statement No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities (FASB ASC 860 Transfers and Servicing), and will require more
information about transfers of financial assets, including securitization
transactions, and where entities have continuing exposure to the risks related
to transferred financial assets. It eliminates the concept of a qualifying
special-purpose entity, changes the requirements for derecognizing financial
assets, and requires additional disclosures. Statement No. 166 (FASB ASC 860
Transfers and Servicing) must be applied as of the beginning of each reporting
entitys first annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period and for interim and
annual reporting periods thereafter. Earlier application is prohibited. This
Statement must be applied to transfers occurring on or after the effective date.
The Company is still evaluating the impact of the above pronouncement.

Statement 167 is a revision to FASB Interpretation No. 46
(Revised December 2003), Consolidation of Variable Interest Entities (FASB ASC
810 Consolidation), and changes how a reporting entity determines when an entity
that is insufficiently capitalized or is not controlled through voting (or
similar rights) should be consolidated. The determination of whether a reporting
entity is required to consolidate another entity is based on, among other
things, the other entitys purpose and design and the reporting entitys ability
to direct the activities of the other entity that most significantly impact the
other entitys economic performance. Statement No. 167 (FASB ASC 810
Consolidation) shall be effective as of the beginning of each reporting entitys
first annual reporting period that begins after November 15, 2009, for interim
periods within that first annual reporting period, and for interim and annual
reporting periods thereafter. Earlier application is prohibited. The Company is
still evaluating the impact of the above pronouncement.

On June 30, 2009, FASB issued FASB Statement No. 168,
Accounting Standards Codification ( FASB ASC 105 Generally Accepted Accounting
Principles) a replacement of FASB Statement No. 162 the Hierarchy of Generally
Accepted Accounting Principles. On the effective date of this standard, FASB
Accounting Standards Codification (ASC) became the source of authoritative U.S.
accounting and reporting standards for nongovernmental entities, in addition to
guidance issued by the Securities and Exchange Commission (SEC). This statement
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. If an accounting change results from the
application of this guidance, an entity should disclose the nature and reason
for the change in accounting principle in their financial statements. This new
standard flattens the GAAP hierarchy to two levels: one that is authoritative
(in FASB ASC) and one that is non-authoritative (not in FASB ASC). Exceptions
include all rules and interpretive releases of the SEC under the authority of
federal securities laws, which are sources of authoritative GAAP for SEC
registrants, and certain grandfathered guidance having an effective date before
March 15, 1992. Statement No. 168 is the final standard that will be issued by
FASB in that form. There will no longer be, for example, accounting standards in
the form of statements, staff positions, Emerging Issues Task Force (EITF)
abstracts, or AICPA Accounting Statements of Position. The Company has adopted
the new accounting standard. There was no material impact on the financial
statements presented herein.

Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not required.

35

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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, 2010. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that as of March 31, 2010, our disclosure controls
and procedures were effective.

Changes in Internal Controls over Financial
Reporting.

During the fiscal quarter ended March 31, 2010, 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.

36

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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

Not applicable.

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

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. REMOVED AND RESERVED

Not applicable

ITEM 5. OTHER INFORMATION

No events occurred during the period covered by this Form 10-Q
that were required to be disclosed in a report on Form 8-K during the period but
not reported.

ITEM 6. EXHIBITS

|Exhibit No. | Description                                                                                                                                                       
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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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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 12, 2010

AMERICAN LORAIN CORPORATION/s/ Si
      ChenSi ChenChief Executive Officer/s/ Yilun
      JinYilun JinChief Financial Officer


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