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

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2008

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

Commission File No. 0-31619

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

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

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

Indicate by check mark whether the registrant:  (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YesQNo
£

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

Large accelerated filer
£Accelerated filer
£Non-accelerated filer
£Smaller reporting companyQ

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

Yes
£No Q

The numbers of shares outstanding of each of the issuers
classes of common equity, as of November 12, 2008, are as follows:

|Class of Securities            | Shares Outstanding
|------------------------------ | ------------------
|Common Stock, $0.001 par value | 25,172,640        



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|                                
|--------------------------------
|Table of Contents               
|                                
|                                
|                                
|PART I FINANCIAL
    INFORMATION
|                                
|                                
|ITEM 1.                         
|                                
|ITEM 2.                         
|                                
|ITEM 3.                         
|                                
|ITEM 4.                         
|                                
|PART II OTHER
    INFORMATION   
|                                
|ITEM 1.                         
|                                
|ITEM 1A.                        
|                                
|ITEM 2.                         
|                                
|ITEM 3.                         
|                                
|ITEM 4.                         
|                                
|ITEM 5.                         
|                                
|ITEM 6.                         
|                                
|SIGNATURES                      

i

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|        |  |                      
|------- |  | ---------------------
|PART I  |  | FINANCIAL INFORMATION
|        |  |                      
|ITEM 1. |  | FINANCIAL STATEMENTS.

|AMERICAN LORAIN CORPORATION                 | 
|------------------------------------------- | 
|CONSOLIDATED BALANCE SHEETS                 | 
|AT SEPTEMBER 30, 2008 AND DECEMBER 31, 2007 | 
|(Stated in US Dollars)                      | 
|                                            | 
|                                            | 
|                                            | 
|ASSETS                                      | 
|Current Assets                              | 
|Cash and Cash Equivalents                   | 
|Restricted Cash                             | 
|Short-term Investment                       | 
|Trade Accounts Receivable                   | 
|Other receivables                           | 
|Inventory                                   | 
|Advance to Suppliers                        | 
|Prepaid Expenses and Taxes                  | 
|Total Current Assets                        | 
|Non-Current Assets                          | 
|Long-term Investment                        | 
|Property, Plant and Equipment, net          | 
|Land Use Rights, net                        | 
|                                            | 
|TOTAL ASSETS                                | 
|                                            | 
|LIABILITIES AND STOCKHOLDERS EQUITY        | 
|Current Liabilities                         | 
|Short-term Bank Loans                       | 
|Notes Payable                               | 
|Accounts Payable                            | 
|Income Tax Payable                          | 
|Accrued Liabilities and Other Payables      | 
|Customers Deposits                          | 
|Total Current Liabilities                   | 
|                                            | 
|Long-term Liabilities                       | 
|Long-term Bank Loans                        | 
|                                            | 
|TOTAL LIABILITIES                           | 

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|                                                           |     
|---------------------------------------------------------- | ----
|AMERICAN LORAIN CORPORATION                                |     
|CONSOLIDATED BALANCE SHEETS                                |     
|AT SEPTEMBER 30, 2008 AND DECEMBER 31, 2007                |     
|(Stated in US Dollars)                                     |     
|                                                           |     
|                                                           |     
|                                                           |     
|                                                           | Note
|                                                           |     
|Minority interests                                         | 11  
|                                                           |     
|                                                           |     
|STOCKHOLDERS EQUITY                                       |     
|Common Stock, $0.001 par value, 200,000,000 shares         |     
|authorized; 24,923,178 shares issued and outstanding as of |     
|September 30, 2008 and December 31, 2007                   | 12  
|Additional paid-in-capital                                 |     
|Statutory reserves                                         |     
|Retained earnings                                          |     
|Accumulated other comprehensive income                     |     
|                                                           |     
|                                                           |     
|TOTAL LIABILITIES AND                                      |     
|STOCKHOLDERS EQUITY                                       |     

See Accompanying Notes to the Financial Statements

2

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|                                                               
|---------------------------------------------------------------
|AMERICAN LORAIN CORPORATION                                    
|CONSOLIDATED STATEMENTS OF INCOME                              
|FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
|(Stated in US Dollars)                                         
|                                                               
|                                                               
|                                                               
|Net revenues                                                   
|Cost of revenues                                               
|Gross profit                                                   
|                                                               
|Operating expenses                                             
|Selling and marketing expenses                                 
|General and administrative expenses                            
|                                                               
|Operating Income                                               
|                                                               
|Government subsidy income                                      
|Other income                                                   
|Interest income                                                
|Other expenses                                                 
|Interest expense                                               
|                                                               
|Earnings before tax                                            
|                                                               
|Income tax                                                     
|                                                               
|Income before minority interests                               
|                                                               
|Minority interests                                             
|                                                               
|Net income                                                     
|                                                               
|                                                               
|Earnings per share                                             
|-
basic                                                        
|-
diluted                                                      
|                                                               
|Weighted average shares outstanding                            
|-
basic                                                        
|-
diluted                                                      

See Accompanying Notes to the Financial Statements

3

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|                                                                   
|-------------------------------------------------------------------
|AMERICAN LORAIN CORPORATION                                        
|CONSOLIDATED STATEMENTS OF CASH FLOW                               
|FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007    
|(Stated in US Dollars)                                             
|                                                                   
|                                                                   
|                                                                   
|Cash flows from operating activities                               
|Net income                                                         
|Minority interest                                                  
|Depreciation                                                       
|Amortization                                                       
|Investment income                                                  
|(Increase)/decrease in accounts & other receivables                
|(Increase)/decrease in advances to suppliers                       
|(Increase)/decrease in inventories                                 
|(Increase)/decrease in prepaid tax                                 
|Increase/(decrease) in accounts and other payables                 
|Increase/(decrease) in tax payable                                 
|Increase/(decrease) in accrued liabilities                         
|Increase/(decrease) in customer deposit                            
|Net cash (used in)/provided by operating activities                
|                                                                   
|Cash flows from investing activities                               
|Purchase of plant and equipment                                    
|Construction in progress                                           
|(Increase)/decrease in restricted cash                             
|Payment of land use rights                                         
|Investments in securities                                          
|Reverse from capital reserve                                       
|Payments for deposits                                              
|Net cash used in investing activities                              
|                                                                   
|Cash flows from financing activities                               
|Proceeds from bank borrowings                                      
|(Repayment) of bank loans                                          
|Dividends paid                                                     
|Notes payable                                                      
|Issue of common stock                                              
|Increase in additional paid-in capital                             
|Net cash provided by/(used in) financing activities                
|                                                                   
|Net Increase/(decrease) of Cash and Cash                           
|Equivalents                                                        
|Effect of foreign currency translation on cash
and cash equivalents
|                                                                   
|Cash and cash equivalentsbeginning of period                      
|                                                                   
|Cash and cash equivalentsend of period                            
|                                                                   
|Supplementary cash flow information:                               
|Interest received                                                  
|Interest paid                                                      
|Taxes paid                                                         

See Accompanying Notes to the Financial Statements

4

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|                                                                                  | 
|--------------------------------------------------------------------------------- | 
|AMERICAN LORAIN CORPORATION                                                       | 
|STATEMENT OF STOCKHOLDERS EQUITY                                                 | 
|FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND THE YEAR ENDED DECEMBER 31, 2007 | 
|(Stated in US Dollars)                                                            | 
|                                                                                  | 
|                                                                                  | 
|                                                                                  | 
|                                                                                  | 
|                                                                                  | 
|Balance, January 1, 2007                                                          | 
|Issuance of common stock for cash                                                 | 
|Net income                                                                        | 
|Appropriations to statutory reserve                                               | 
|Foreign currency translation adjustment                                           | 
|Balance, December 31, 2007                                                        | 
|                                                                                  | 
|Balance, January 1, 2008                                                          | 
|Net income                                                                        | 
|Contribution to capital reserve                                                   | 
|Foreign currency translation adjustment                                           | 
|Balance, September 30, 2008                                                       | 

9/30/2008
	
	
	12/31/2007Comprehensive IncomeNet Income
	$
	
	8,307,737
	
	$
	9,744,920Other Comprehensive IncomeForeign Currency Translation Adjustment
	
	
	4,233,062
	
	
	840,513Total Comprehensive Income
	$
	
	12,540,799
	
	$
	10,585,433


See Accompanying Notes to the Financial Statements

5

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|   |                                                              
|-- | -------------------------------------------------------------
|1. | ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL ACTIVITIES
|  
|   | (a)                                                          
|  
|   |                                                              
|  
|   | (b)                                                          
|  
|   |                                                              
|  
|   |                                                              
|  
|   | (c)                                                          
|  
|   |                                                              
|  
|   |                                                              
|  
|   |                                                              
|  
|   | (d)                                                          
|  
|   |                                                              
|  
|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                   
|  
|   | (a)                                                          
|  
|   |                                                              
|  

6

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 September 30, 2008, the detailed identities of the consolidating subsidiaries are as follows: -                                                                                                                                                                                                                                                                                                                                                                                             
| |    

Place of
	
	Attributable
	
	
	
	RegisteredName of Company
	
	Incorporation
	
	equity interest %
	
	
	
	capitalShandong Green Foodstuff Co., Ltd
	
	PRC
	
	80.2
	
	$
	
	12,901,823
	
	(RMB 100,860,000)Luotian Green Foodstuff Co., Ltd
	
	PRC
	
	100
	
	$
	
	3,240,013
	
	(RMB 25,328,800)Junan Hongrun Foodstuff Co., Ltd
	
	PRC
	
	100
	
	$
	
	16,245,603
	
	(RMB 127,000,000)Beijing Green Foodstuff Co., Ltd
	
	PRC
	
	100
	
	$
	
	1,279,181
	
	(RMB 10,000,000)International Lorain Holding, Inc.
	
	BVI
	
	100
	
	$
	
	26,234,857
	
	(RMB 183,614,089)


| | (c) | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    
| |     | The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best
information available at the time the estimates are made; however, actual results could differ materially from those estimates.                
| |    
| | (d) | Economic and political risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    
| |     | The Companys operations are conducted in the PRC. Accordingly, the Companys business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by
the general state of the PRC economy.                                                                                                                                                                                                                                                                                                                                                                   
| |    
| |     | The Companys operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others,
the political, economic and legal environment and foreign currency exchange. The Companys results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to
laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.
| |    
| | (e) | Lease prepayments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    
| |     | Lease prepayments represent the cost of land use rights in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the period of rights of 50 years.                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    
| | (f) | Property, plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    
| |     | Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the plant and equipment are as
follows:                                                                                                                                                                                                                                                                                                                                                                                                
| |    

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


The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized.

7

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.                                                                                                                                                                                                                                                                                                                                 
| |    
| |     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    

8

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    
| | (q) | Retirement benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    
| |     | Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the pro forma 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.
| |    
| | (s) | Statutory reserves                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |    
| |     | Statutory reserves are referring to the amount appropriated from the net income in accordance with PRC laws or regulations, which can be used to recover losses and increase capital, as approved, and are to be used to expand
production or operations.                                                                                                                                                                                                                                                                                                                                                                      
| |    
| | (t) | Foreign currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    
| |     | The accompanying financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The financial statements are translated into United States dollars from RMB at year-end
exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.                                                                                                                                                                             
| |    

9/30/2008
	
	12/31/2007
	
	9/30/2007Year end RMB : USD
	
	6.85510
	
	7.3141
	
	7.6248Average yearly RMB : USD
	
	6.99886
	
	7.6172
	
	7.72999


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.

9

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| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 collectability 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 period. During the periods ended September 30, 2008 and September 30, 2007, no dilutive potential ordinary shares were issued.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    
| |     | The Company computes earnings per share (EPS) in accordance with Statement of Financial Accounting Standards No. 128, Earnings per share (SFAS No. 128), and SEC Staff Accounting Bulletin No. 98
(SAB 98). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares
outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options, and warrants) as if they had been converted at the beginning of
the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
| |    
| | (w) | Commitments and contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    
| |     | Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be
reasonably estimated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    
| | (x) | Comprehensive income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    
| |     | Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Companys current component of other comprehensive
income is the foreign currency translation adjustment.                                                                                                                                                                                                                                                                                                                                                                                                     
| |    
| | (y) | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    
| |     | In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and related hedged
items accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash
flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.                                                            
| |    

10

---

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in
the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."                               
|  
|   | In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that
reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.                                       
|  
|   | In September 2008, FASB issued FSP No. 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees, an amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the
Effective Date of FASB Statement No. 161. This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial
performance, and cash flows of the sellers of credit derivatives. The provisions of the FSP that amend Statement 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008.
|  
|   | The Company is currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on its consolidated results of operations and financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  

9/30/2008
	
	
	
	
	12/31/2007Trade Accounts Receivable
	
	$
	
	14,230,290
	
	
	$
	
	33,031,997Less:Allowance for Doubtful Accounts
	
	
	
	(213,454
	)
	
	
	
	(172,309
	)$
	
	14,016,836
	
	
	$
	
	32,859,6889/30/2008
	
	
	
	
	12/31/2007Allowance for Bad Debt:Beginning Balance
	
	$
	
	172,309
	
	
	$
	
	226,881Additions to Allowance
	
	
	
	41,145
	
	
	
	
	-Less: Bad Debt Written-off
	
	
	
	-
	
	
	
	
	(54,572
	)$
	
	213,454
	
	
	$
	
	172,309


|   | The Company offers credit terms of between 90 to 180 days to most of their international distributors and between 30 to 90 days for most of their domestic distributors.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. | INVENTORY                                                                                                                                                               
|  
|   | Inventories at September 30, 2008 and December 31, 2007 consisted of the following:                                                                                     
|  

11

---

9/30/2008
	
	
	
	12/31/2007Raw Material
	
	$
	
	22,873,437
	
	$
	
	5,225,248Finished Goods
	
	
	
	9,128,968
	
	
	
	12,678,096$
	
	32,002,405
	
	$
	
	17,903,344


|6. | PROPERTY, PLANT, AND EQUIPMENT                                                                        
|-- | ------------------------------------------------------------------------------------------------------
|  
|   | Property, plant, and equipment at September 30, 2008 and December 31, 2007 consisted of the following:
|  

9/30/2008
	
	
	
	
	12/31/2007At Cost:Buildings
	
	$
	
	22,745,853
	
	
	$
	
	15,547,205Biological Assets
	
	
	
	2,751,739
	
	
	
	
	2,784,136Machinery and Equipment
	
	
	
	6,698,207
	
	
	
	
	5,732,776Office Equipment
	
	
	
	124,184
	
	
	
	
	28,520Motor Vehicles
	
	
	
	669,694
	
	
	
	
	658,547$
	
	32,989,677
	
	
	$
	
	24,751,184Less:Accumulated DepreciationBuildings
	
	
	
	(1,060,494
	)
	
	
	
	(698,732
	)Biological Assets
	
	
	
	-
	
	
	
	
	(1,954,257
	)Machinery and Equipment
	
	
	
	(2,483,684
	)
	
	
	
	(15,643
	)Office Equipment
	
	
	
	(80,104
	)
	
	
	
	(318,468
	)Motor Vehicles
	
	
	
	(337,943
	)
	
	
	
	(2,987,100
	)(3,962,225
	)
	
	
	
	(698,732
	)Construction in Progress
	
	
	
	2,511,289
	
	
	
	
	2,258,097$
	
	31,538,741
	
	
	$
	
	24,022,181


|   | 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 periods disclosed above.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Biological Assets are chestnut tree investments 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.                                                         
|  
|7. | LAND USE RIGHTS, NET                                                                                                                                                                                                                                                
|  
|   | Land Use Rights at September 30, 2008 and December 31, 2007 consisted of the following: -                                                                                                                                                                           
|  

9/30/2008
	
	
	
	
	12/31/2007Land Use Rights, at cost
	
	$
	
	4,297,001
	
	
	$
	
	3,173,931Less:Accumulated amortization
	
	
	
	(336,012
	)
	
	
	
	(126,910
	)$
	
	3,960,989
	
	
	$
	
	3,047,021


|   | 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.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|  
|8. | SHORT-TERM DEBTS                                                                                                                                    
|  

|                                                  |  |   |  | 9/30/2008 |  |   |  | 12/31/2007
|------------------------------------------------- |  | - |  | --------- |  | - |  | ----------
|Loans from Junan County Construction Bank         |  |   |  |           |  |   |  |           
| Interest rate at 6.264% per annum due 8/31/2007 |  | $ |  | -         |  | $ |  | 410,167   

12

---

|                                                    |  |   |  |         |  |   |  |          
|--------------------------------------------------- |  | - |  | ------- |  | - |  | ---------
| Interest rate at 6.264% per annum due 9/7/2007    |  |   |  | -       |  |   |  | 343,173  
| Interest rate at 7.776% per annum due 12/18/2007  |  |   |  | -       |  |   |  | 261,139  
| Interest rate at 7.776% per annum due 12/18/2007  |  |   |  | -       |  |   |  | 355,478  
| Interest rate at 8.541% per annum due 3/5/2008    |  |   |  | -       |  |   |  | 355,478  
| Interest rate at 8.892% per annum due 7/23/2008   |  |   |  | -       |  |   |  | 328,133  
| Interest rate at 6.314% per annum due 9/17/2008   |  |   |  | -       |  |   |  | 256,696  
| Interest rate at 7.884% per annum due 6/11/2008   |  |   |  | -       |  |   |  | 505,872  
| Interest rate at 7.884% per annum due 9/18/2008   |  |   |  | 61,402  |  |   |  | -        
| Interest rate at 6.264% per annum due 8/31/2009   |  |   |  | 437,630 |  |   |  | -        
| Interest rate at 6.264% per annum due 9/7/2009    |  |   |  | 366,151 |  |   |  | -        
| Interest rate at 7.884% per annum due 10/2/2008   |  |   |  | 393,867 |  |   |  | -        
| Interest rate at 7.452% per annum due 10/13/2008  |  |   |  | 787,735 |  |   |  | -        
| Interest rate at 7.452% per annum due 11/7/2008   |  |   |  | 350,104 |  |   |  | -        
| Interest rate at 7.884% per annum due 11/16/2008  |  |   |  | 72,938  |  |   |  | -        
| Interest rate at 7.884% per annum due 12/8/2008   |  |   |  | 115,243 |  |   |  | -        
| Interest rate at 7.452% per annum due 12/24/2008  |  |   |  | 269,872 |  |   |  | -        
| Interest rate at 7.452% per annum due 12/24/2008  |  |   |  | 102,114 |  |   |  | -        
|                                                    |  |   |  |         |  |   |  |          
|Loan from Junan County Agriculture Bank             |  |   |  |         |  |   |  |          
| Interest rate at 10.251% per annum due 1/11/2008  |  | $ |  | -       |  | $ |  | 231,061  
| Interest rate at 10.557% per annum due 1/11/2008  |  |   |  | -       |  |   |  | 345,907  
| Interest rate at 11.016% per annum due 2/21/2008  |  |   |  | -       |  |   |  | 191,411  
| Interest rate at 11.169% per annum due 6/7/2008   |  |   |  | -       |  |   |  | 123,050  
| Interest rate at 11.169% per annum due 6/7/2008   |  |   |  | -       |  |   |  | 41,017   
| Interest rate at 11.169% per annum due 6/29/2008  |  |   |  | -       |  |   |  | 347,274  
| Interest rate at 11.169% per annum due 6/29/2008  |  |   |  | -       |  |   |  | 109,378  
| Interest rate at 11.169% per annum due 7/3/2008   |  |   |  | -       |  |   |  | 505,872  
| Interest rate at 11.169% per annum due 8/13/2008  |  |   |  | -       |  |   |  | 1,476,540
| Interest rate at 11.169% per annum due 9/24/2008  |  |   |  | -       |  |   |  | -        
| Interest rate at 11.169% per annum due7/18/2008   |  |   |  | -       |  |   |  | -        
| Interest rate at 7.884% per annum due 7/18/2008   |  |   |  | -       |  |   |  | 273,444  
| Interest rate at 11.628% per annum due 7/25/2008  |  |   |  | -       |  |   |  | 191,411  
| Interest rate at 11.628% per annum due 8/1/2008   |  |   |  | -       |  |   |  | 82,033   
| Interest rate at 12.393% per annum due 10/30/2008 |  |   |  | 437,630 |  |   |  | 410,167  
| Interest rate at 12.393% per annum due 11/11/2008 |  |   |  | 255,284 |  |   |  | 239,264  
| Interest rate at 12.393% per annum due 11/14/2008 |  |   |  | 218,815 |  |   |  | 205,083  
| Interest rate at 12.393% per annum due 11/14/2008 |  |   |  | -       |  |   |  | 199,614  
| Interest rate at 12.393% per annum due 11/22/2008 |  |   |  | 437,630 |  |   |  | 410,167  
| Interest rate at 12.393% per annum due 11/29/2008 |  |   |  | 306,341 |  |   |  | 287,117  
| Interest rate at 12.393% per annum due 12/4/2008  |  |   |  | 437,630 |  |   |  | 410,167  
| Interest rate at 12.393% per annum due 12/13/2008 |  |   |  | 437,630 |  |   |  | 410,167  
| Interest rate at 12.699% per annum due 1/4/2009   |  |   |  | 58,351  |  |   |  | -        
| Interest rate at 12.699% per annum due 1/4/2009   |  |   |  | 87,526  |  |   |  | -        
| Interest rate at 12.699% per annum due 1/4/2009   |  |   |  | 58,351  |  |   |  | -        
| Interest rate at 12.699% per annum due 2/1/2009   |  |   |  | 116,701 |  |   |  | -        
| Interest rate at 12.70% per annum due 3/20/2009   |  |   |  | 58,351  |  |   |  | -        
| Interest rate at 11.169% per annum due 10/22/2008 |  |   |  | 522,239 |  |   |  |          
| Interest rate at 11.169% per annum due 10/22/2008 |  |   |  | 437,630 |  |   |  | -        
| Interest rate at 12.699% per annum due 8/6/2009   |  |   |  | 583,507 |  |   |  | -        

13

---

|                                                          |  |   |  |           |  |   |  |          
|--------------------------------------------------------- |  | - |  | --------- |  | - |  | ---------
| Interest rate at 11.169% per annum due 11/14/2008       |  |   |  | 860,673   |  |   |  | -        
| Interest rate at 11.169% per annum due 12/18/2008       |  |   |  | 247,991   |  |   |  | -        
| Interest rate at 12.699% per annum due 8/18/2009        |  |   |  | 656,446   |  |   |  | -        
| Interest rate at 11.169% per annum due 12/3/2008        |  |   |  | 1,021,138 |  |   |  | -        
| Interest rate at 12.699% per annum due 8/18/2009        |  |   |  | 364,692   |  |   |  | -        
| Interest rate at 11.169% per annum due 12/3/2008        |  |   |  | 145,877   |  |   |  | -        
| Interest rate at 10.557% per annum due 3/27/2009        |  |   |  | 1,458,768 |  |   |  | -        
|                                                         
|Loan from Junan County Industrial and Commercial Bank     |  |   |  |           |  |   |  |          
| Interest rate at 6.120% per annum due 1/11/2007         |  | $ |  | -         |  | $ |  | 546,889  
| Interest rate at 8.424% per annum due 3/7/2007          |  |   |  | -         |  |   |  | 806,661  
| Interest rate at 6.120% per annum due 11/10/2007        |  |   |  | -         |  |   |  | 136,722  
| Interest rate at 8.073% per annum due 12/7/2007         |  |   |  | -         |  |   |  | 1,278,353
| Interest rate at 7.956% per annum due 1/18/2008         |  |   |  | -         |  |   |  | 478,528  
| Interest rate at 7.956% per annum due 1/18/2008         |  |   |  | -         |  |   |  | 546,889  
| Interest rate at 6.9545% per annum due 2/8/2008         |  |   |  | -         |  |   |  | 604,299  
| Interest rate at 6.570% per annum due 2/8/2008          |  |   |  | -         |  |   |  | 546,889  
| Interest rate at 7.956% per annum due 3/5//2008         |  |   |  | -         |  |   |  | 1,367,222
| Interest rate at 8.892% per annum due 3/7/2008          |  |   |  | -         |  |   |  | 410,167  
| Interest rate at 6.12% per annum due 6/30/2008          |  |   |  | -         |  |   |  | 706,766  
| Interest rate at 7.290% per annum due 6/30/2008         |  |   |  | -         |  |   |  | 232,428  
| Interest rate at 9.711% per annum due 12/22/2008        |  |   |  | 204,228   |  |   |  | -        
| Interest rate at 7.47% per annum due 11/1/2008          |  |   |  | 408,455   |  |   |  | -        
| Interest rate at 7.47% per annum due 12/1/2008          |  |   |  | 583,507   |  |   |  | -        
| Interest rate at 8.541% per annum due 10/12/2008        |  |   |  | 393,867   |  |   |  | -        
| Interest rate at 8.541% per annum due 11/27/2008        |  |   |  | 1,590,057 |  |   |  | -        
| Interest rate at 8.541% per annum due 7/29/2008         |  |   |  | 73,534    |  |   |  | -        
| Interest rate at 8.541% per annum due 11/7/2008         |  |   |  | 233,403   |  |   |  | -        
| Interest rate at 8.541% per annum due 3/4/2009          |  |   |  | 393,867   |  |   |  | -        
|                                                         
|                                                         
|Loan from Junan County Merchants Bank                     |  |   |  |           |  |   |  |          
| Interest rate at 6.210% per annum due 3/13/2008         |  | $ |  | -         |  | $ |  | 1,367,222
| Interest rate at 15% per annum due 10/3/2008            |  |   |  | 1,458,768 |  |   |  | -        
|                                                         
|                                                         
|Loan from Junan County Agricultural Financial Institution |  |   |  |           |  |   |  |          
| Interest rate at 12.15% per annum due 5/20/2008         |  | $ |  | -         |  | $ |  | 25,977   
| Interest rate at 12.420% per annum due 6/20/2008        |  |   |  | -         |  |   |  | 68,361   
| Interest rate at 10.935% per annum due 9/29/2008        |  |   |  | 2,771,659 |  |   |  | 2,597,722
|                                                         
|Loan from Linyi Commercial Bank                           |  |   |  |           |  |   |  |          
| Interest rate at 10.71% per annum due 2/9/2008          |  | $ |  | -         |  | $ |  | 497,221  
| Interest rate at 13.73% per annum due 12/25/2008        |  |   |  | 145,877   |  |   |  | 136,722  
| Interest rate at 13.73% per annum due 1/5/2009          |  |   |  | 685,621   |  |   |  | -        
| Interest rate at 13.73% per annum due 1/12/2009         |  |   |  | 656,446   |  |   |  | -        
| Interest rate at 8.5837% per annum due 1/12/2009        |  |   |  | 1,008,249 |  |   |  | -        
| Interest rate at 8.5837% per annum due 1/12/2009        |  |   |  | 116,701   |  |   |  | -        

14

---

|Loan from China Agricultural Bank, Luotian Branch   |  |   |  |            |  |   |  |           
|--------------------------------------------------- |  | - |  | ---------- |  | - |  | ----------
| Interest rate at 7.722% per annum due 8/28/2008   |  | $ |  | -          |  | $ |  | 1,039,089 
| Interest rate at 7.470% per annum due 9/7/2009    |  |   |  | 816,910    |  |   |  | -         
| Interest rate at 7.470% per annum due 9/7/2009    |  |   |  | 291,754    |  |   |  | -         
|                                                   
|Bank of China, Junan Branch                         |  |   |  |            |  |   |  |           
| Interest rate at 7.500% per annum due 5/19/2009   |  | $ |  | 5,676      |  | $ |  | 9,815     
|                                                   
|International Trust Co., Ltd.                       |  |   |  |            |  |   |  |           
| Interest rate at 5.76% per annum due 6/13/2008    |  | $ |  | 1,458,768  |  | $ |  | 1,367,222 
|                                                   
|United Commercial Bank, China Branch                |  |   |  |            |  |   |  |           
| Interest rate at 5.494% per annum due 1/14/2009   |  | $ |  | 1,047,395  |  | $ |  | -         
|                                                   
|Shenzhen Develop Bank                               |  |   |  |            |  |   |  |           
| Interest rate at 7.47% per annum due 11/15/2008   |  | $ |  | 1,458,768  |  | $ |  | -         
|                                                   
|Credit Union, Junan                                 |  |   |  |            |  |   |  |           
| Interest rate at 8.5837% per annum due 11/7/2008  |  | $ |  | 43,763     |  | $ |  | -         
| Interest rate at 8.5837% per annum due 10/12/2008 |  |   |  | 43,763     |  |   |  | -         
|                                                   
|Bank of Beijing                                     |  |   |  |            |  |   |  |           
| Interest rate at 7.884% per annum due 7/18/2009   |  | $ |  | 291,754    |  | $ |  | -         
|                                                   
|                                                    |  | $ |  | 28,349,048 |  | $ |  | 24,077,504

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

All overdue loans were extended by the financial institution.

15

---

|   |                                                                                                                                                                      
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|9. | NOTES PAYABLE                                                                                                                                                        
|  
|   | The notes payable, which are denominated in the functional currency of Renminbi, at September 30, 2008 and December 31, 2007, are presented in US dollars as follows:
|  

9/30/2008
	
	
	
	12/31/2007Notes to Industrial and Commercial Bank, Bank commission charge at 3.99% due December 20, 2007
	
	$
	
	-
	
	$
	
	546,888 Bank commission charge at 3.99% due December 12, 2007
	
	
	
	-
	
	
	
	1,093,778 Bank commission charge at 3.99% due December 18, 2007
	
	
	
	-
	
	
	
	1,093,778Notes to Jinan Merchant Bank Bank discount rate at 6.72%, due October 3, 2008
	
	$
	
	145,877
	
	$
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	- Bank discount rate at 6.72%, due October 3, 2008
	
	
	
	145,877
	
	
	
	-Notes to Shenzhen Development Bank Bank discount rate at 5.16%, due November 15, 2008
	
	$
	
	1,458,768
	
	$
	
	- Bank discount rate at 5.16%, due November 16, 2008
	
	
	
	729,384
	
	
	
	-Notes to China Construction Bank Bank discount rate at 6.07%, due January 9, 2009
	
	$
	
	554,332
	
	$
	
	-Notes to China Agricultural Bank Bank discount rate at 6.05%, due January 14, 2009
	
	$
	
	277,164
	
	$
	
	-$
	
	4,478,418
	
	$
	
	2,734,444All overdue notes were extended by the financial institution.


|10. | LONG-TERM DEBTS
|--- | ---------------
|   

9/30/2008
	
	
	
	12/31/2007Loan from Agricultural Development Luotian Government, Interest rate at 0.67% per annum due 12/11/2010
	
	$
	
	109,408
	
	$
	
	102,542 Interest rate at 2.10% per annum due 12/11/2011
	
	
	
	25,528
	
	
	
	-Loan from United Commercial Bank, China Branch Interest rate at 5.494% per annum due 1/14/2011
	
	$
	
	434,669
	
	$
	
	-Less: Current maturities of long-term debts
	
	
	
	-
	
	
	
	-$
	
	569,605
	
	$
	
	102,542


Interest expenses for long-term debt were $18,862 and $687 for the period ended September 30, 2008 and the year ended December 31, 2007.

The Loan from Agricultural Development Luotian Government is due in full at December 11, 2010. There is no current portion at December 31, 2007.

16

---

|    |                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|11. | MINORITY INTERESTS                                                                                                                                                                                                                                            
|   
|    | Minority interests represent the 19.8% equity of Shandong Lorain held by a state-owned enterprise, Shandong Economic Development Investment Corporation.                                                                                                      
|   
|12. | CAPITALIZATION                                                                                                                                                                                                                                                
|   
|    | As a result of the reverse-merger on May 3, 2007 involving an exchange of shares, the total number of 24,923,178 shares of the Companys common stock issued and outstanding at September 30, 2008 and December 31, 2007 is
depicted in the following table: -
|   

Number of
	
	
	
	Common
	
	
	
	AdditionalName of Shareholder
	
	Share
	
	
	
	Stock Capital
	
	
	
	Paid-in CapitalShareholders of International Lorain Holding Inc.(697,663 Series B preferred shares converted tocommon shares at one for 23.375Split
	
	16,307,872
	
	$
	
	16,308
	
	$
	
	-Halter Financial Investments LP and other(100,000 Series A preferred shares converted tocommon shares:100,000 x 428.56 = 42,856,000 / 32.84)Reversed-split
	
	1,304,992
	
	
	
	1,305
	
	
	
	-Original Shareholders of Millennium Quest Inc.(Shell) 10,508,643 shares / 32.84reverse-split adjusted for round-down
	
	319,913
	
	
	
	320
	
	
	
	-Original additional paid-in capital from the4 PRC subsidiaries
	
	-
	
	
	
	-
	
	
	
	6,846,620Issuance of common stock for cash
	
	6,990,401
	
	
	
	6,990
	
	
	
	17,340,64824,923,178
	
	$
	
	24,923
	
	$
	
	24,187,268


17

---

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|13. | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    | All of the Groups income before income taxes and related tax expenses are from PRC sources. In accordance with the relevant tax laws and regulations of PRC, the corporation income tax rate was 33% for all periods before
December 31, 2007. However, also in accordance with the relevant taxation laws in the PRC, some of the subsidiaries of the Group are eligible for tax exemption. In particular, from the time that a company has its first profitable tax year, the
company is exempt from corporate income tax for its first two year and is then entitled to a 50% tax reduction for the succeeding three year. Actual income tax expenses reported in the consolidated statements of income and comprehensive income
differ from the amounts computed by applying the PRC statutory income tax rate of 33% to income before income tax for the period from August 4, 2006 (date of incorporation) to December 31, 2007, and 25% for periods thereafter, for the following
reasons: -
|   

9/30/2008
	
	
	
	
	9/30/2007Effect of tax exemption granted
	
	$
	
	10,691,351
	
	
	$
	
	4,905,697Tax Rate
	
	
	
	25
	%
	
	
	
	33
	%Tax at the income tax rate
	
	
	
	2,672,838
	
	
	
	
	1,618,880Effect of tax exemption granted
	
	
	
	884,436
	
	
	
	
	646,621Income tax
	
	$
	
	1,788,402
	
	
	$
	
	972,259Per Share Effect of Tax Exemption9/30/2008
	
	
	
	
	9/30/2007Effect of tax exemption granted
	
	$
	
	884,436
	
	
	$
	
	646,621Weighted-Average Shares Outstanding
	
	
	
	24,923,178
	
	
	
	
	24,923,178Per share effect
	
	$
	
	0.0355
	
	
	$
	
	0.0260


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 taxpayers. 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 that already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized.

Based on the background of each constituent of our group, the income tax rates applicable to the four constituents for 2007, 2008, and 2009 are depicted in the following table.

Income Tax Rate
	
	2007
	
	
	2008
	
	
	2009Junan Hongran
	
	15
	%
	
	15
	%
	
	25
	%Luotian Lorain
	
	0
	%
	
	15
	%
	
	15
	%Beijing Lorain
	
	0
	%
	
	0
	%
	
	15
	%Shandong Lorain
	
	30
	%
	
	25
	%
	
	25
	%


18

---

|    |                                                             
|--- | ------------------------------------------------------------
|14. | SALES BY PRODUCT TYPE                                       
|   
|    | Sales by categories of product at September 30, as follow: -
|   

Category
	
	
	
	9/30/2008
	
	
	
	9/30/2007Chestnut
	
	$
	
	39,609,810
	
	$
	
	21,392,421Meat
	
	
	
	12,985,400
	
	
	
	11,804,221Vegetable
	
	
	
	23,084,910
	
	
	
	14,879,477Total
	
	$
	
	75,680,120
	
	$
	
	48,076,119Revenue by geography at September 30, was as follows: -Country
	
	
	
	9/30/2008
	
	
	
	9/30/2007Australia
	
	$
	
	-
	
	$
	
	79,039Belgium
	
	
	
	1,797,772
	
	
	
	1,098,947Canada
	
	
	
	-
	
	
	
	14,004Chile
	
	
	
	426,507
	
	
	
	-China
	
	
	
	59,321,493
	
	
	
	34,934,217France
	
	
	
	868,028
	
	
	
	32,918Germany
	
	
	
	722,394
	
	
	
	140,749Hong Kong
	
	
	
	-
	
	
	
	24,205India
	
	
	
	519,401
	
	
	
	-Italy
	
	
	
	177,153
	
	
	
	-Japan
	
	
	
	4,374,448
	
	
	
	7,275,799South Korea
	
	
	
	3,833,565
	
	
	
	1,899,006Malaysia
	
	
	
	144,469
	
	
	
	512,736Netherlands
	
	
	
	508,340
	
	
	
	137,712Saudi Arabia
	
	
	
	110,292
	
	
	
	465,506Singapore
	
	
	
	207,396
	
	
	
	210,459Spain
	
	
	
	222,979
	
	
	
	-Sweden
	
	
	
	83,606
	
	
	
	-Taiwan
	
	
	
	523,231
	
	
	
	-United Arab Emirates
	
	
	
	174,323
	
	
	
	205,229UK
	
	
	
	1,457,012
	
	
	
	251,778USA
	
	
	
	207,711
	
	
	
	780,382Yemen
	
	
	
	-
	
	
	
	13,433Total
	
	$
	
	75,680,120
	
	$
	
	48,076,119


19

---

|    |                   
|--- | ------------------
|15. | EARNINGS PER SHARE
|   

Three
	
	Three
	
	Nine
	
	NineMonths Ended
	
	Months Ended
	
	Months Ended
	
	Months EndedSept. 30, 2008
	
	Sept. 30, 2007
	
	Sept. 30, 2008
	
	Sept. 30, 2007Net Income (A)
	
	4,458,659
	
	2,443,227
	
	8,307,737
	
	3,726,579Basic Weighted Average SharesOutstanding (B)
	
	24,923,178
	
	24,923,179
	
	24,923,178
	
	21,764,553Dilutive Shares:-  Addition to Common Stock fromPotential Exercise of Warrants (C)
	
	-
	
	703,601
	
	359,028
	
	561,333Diluted Weighted Average SharesOutstanding: (D)
	
	24,923,178
	
	25,626,780
	
	25,282,206
	
	22,325,886Earnings Per Share-   Basic (A)/(B)
	
	0.1789
	
	0.0980
	
	0.3333
	
	0.1712-   Diluted (A)/(D)
	
	0.1789
	
	0.0953
	
	0.3286
	
	0.1669Weighted Average Shares Outstanding-   Basic
	
	24,923,178
	
	24,923,179
	
	24,923,178
	
	21,764,553-   Diluted
	
	24,923,178
	
	25,626,780
	
	25,282,206
	
	22,325,886


20

---

ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Caution Regarding Forward-Looking Information

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 below entitled Quantitative and Qualitative Disclosures About Market Risk and in the section entitled Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007.

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 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 quarterly filing. You should read this quarterly filing and the documents that we reference in this quarterly filing, or that we filed as exhibits to the quarterly filing of which this quarterly filing is a part, 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 a Delaware corporation that was incorporated on February 4, 1986 as Millennium Quest, Inc. and we are headquartered in Shandong Province, China. From our inception through May 3, 2007, when we completed a recapitalization with International Lorain Holding, Inc., or Lorain Holding, a Cayman Islands company, we did not engage in any active business operations other than search for, and evaluate a potential business opportunity to become an acquiree of ours through a reverse merger transaction.

As an integrated food manufacturing company, our product mix varies by season.  We develop, manufacture and sell convenience foods; chestnut products; and frozen, canned and bulk foods, in hundreds of varieties. Food products are categorized into three types:

- chestnut products,
- convenience foods, and
- frozen, canned, and bulk food.

We operate through our indirect Chinese subsidiaries, Junan Hongrun, Shandong Lorain, Luotian Lorain, and Beijing Lorain. Our products are sold in 19 provinces and administrative regions in China and 42 foreign countries.

Background and History of Lorain Holding and its Operating Subsidiaries and Affiliates

Lorain Holding was incorporated in the Cayman Islands on August 4, 2006 and until May 3, 2007, was wholly-owned by Mr. Hisashi Akazawa.  We now own 100% of Lorain Holding, as a result of the May 2007 recapitalization.  Lorain Holding presently has two direct, wholly-owned Chinese operating subsidiaries: Luotian Lorain and Junan Hongrun; one indirect wholly owned operating subsidiary, Beijing Lorain; and one majority-owned subsidiary, Shandong Lorain, which is 80.2% owned by us (with the state-owned Shandong Economic Development Investment Co. Ltd. owning the remaining 19.8% interest).

21

---



Uncertainties that Affect our Financial Condition

The rising level of consumer prices in China may cause a decrease of our sales and exports which will lower our revenues and profits.

It is expected that the cost of the raw materials we must purchase to make our finished products may increase in light of a general increase in prices in China.  We expect decreased export sales as we raise our sale prices to our exports customers to pass along the increased price of raw materials.  We expect the decreased sales may lead to lower revenues than if the price increase had not occurred and that our profits may suffer as well.

The anticipated appreciation of RMB may harm our financial condition.

Our government has been facing increasing pressure to allow the RMB to
appreciate from the world marketplace recently.  In 2008, the RMB
appreciated more than 7.13% in the first nine months. Since July of 2005, the
RMB has appreciated 21.4%.  Revenues from sales to foreign countries are
lower as a result of such appreciation.  Should the RMB continue to
appreciate, such appreciation would further impact revenues from sales to
foreign countries.

Tight monetary policy implemented by the Chinese government in 2008 may impede our ability to obtain credit for working capital in a timely manner.

22

---

On December 5, 2007, the central economic work conference determined that a tight monetary policy would be implemented in 2008 to respond to inflationary forces and the excessive growth of monetary credits in China.  On December 8, 2007, the Peoples Bank of China announced it will increase its RMB deposit reserve rate by one percentage point for financial institutions making deposits, resulting in a record high interest rate of 14.5%.  After that, on January 16, 2008, March 18, 2008, April 16, 2008 and May 12, 2008 the RMB deposit reserve rate was increased four times by 0.5% each and it reached 16.5% after May 12, 2008.  Due to this new policy, financial institutions have started to tighten the monetary supply, reduce credit line amounts, raise requirements on borrower qualification, and extend review period on loan applications. Traditionally, our Company has relied on short-term credits as a vehicle to purchase raw materials for our production.  This tightened credit policy will impact on our cash management and our financial conditions.  We have adopted new policy and informed our customers that we would shorten our payment period from 55 days to 30 days.  We may be unable to obtain the credit we need to purchase raw materials in the future which may slow down our production and ultimately lower our revenues.

Results of Operations

Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007

The following table summarizes the results of our operations during the three-month periods ended September 30, 2008 and September 30, 2007, respectively and provides information regarding the dollar and percentage increase or (decrease) from the three-month period ended September 30, 2007 to the three-month period ended September 30, 2008.

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

|                                     |   | Three
    months ended September 30, |           |                |     | Percentage
|------------------------------------ | - | ------------------------------------ | --------- | -------------- | --- | ----------
|                                     |   |                                      | Dollar($) |                | (%)
|                                     |   |                                      |           |                |     | Increase  
|                                     |   | 2008                                 |           | 2007           |     | (Decrease)
|                                     |   | (In Thousands)                       |           | (In Thousands) |     |           
|Net revenues                         | $ | 36,727                               | $         | 22,834         | $   | 13,893    
|Cost of revenues                     |   | (29,001)                             |           | (18,122)       |     | 10,879    
|Gross profit                         |   | 7,727                                |           | 4,712          |     | 3,015     
|Operating expenses                   |   |                                      |           |                |     |           
|Selling and marketing expenses       |   | (831)                                |           | (825)          |     | 6         
|General and                          |   |                                      |           |                |     |           
|administrative expenses              |   | (848)                                |           | (1,135)        |     | (287)     
|                                     |   |                                      |           |                |     |           
|Operating Income                     |   | 6,048                                |           | 2,753          |     | 3,295     
|Government subsidy income            |   | -                                    |           | 392            |     | (392)     
|Interest and other income            |   | 181                                  |           | 35             |     | 146       
|Other expenses                       |   | (57)                                 |           | (77)           |     | (20)      
|Interest expense                     |   | (627)                                |           | (305)          |     | 322       
|                                     |   |                                      |           |                |     |           
|Earnings before tax                  |   | 5,658                                |           | 2,800          |     | 2,858     
|                                     |   |                                      |           |                |     |           
|Income tax                           |   | (905)                                |           | (357)          |     | 548       
|                                     |   |                                      |           |                |     |           
|Income before minority
    interests |   | 4,753                                |           | 2,443          |     | 2,310     
|                                     |   |                                      |           |                |     |           
|Minority interests                   |   | (295)                                |           | (51)           |     | 244       
|                                     |   |                                      |           |                |     |           
|Net income                           | $ | 4,459                                | $         | 2,392          | $   | 2,067     

23

---

Revenue

Net Revenues. Our net revenue for the three months ended September 30, 2008 amounted to $36.73 million, which represents an increase of approximately $13.89 million, or 61%, from the three-month period ended on September 30, 2007, in which our net revenue was $22.83 million. The increased revenues were attributable to increased revenues from sales of our chestnut and vegetable products as a result of 68.4% increase in sales volume of such products thanks to our effective marketing efforts and well established domestic and international distribution network. During the three months ended September 30, 2008, revenues from sales of chestnut products increased by $8.68 million, or 115%, and revenues from sales of vegetable products increased by $7.7 million, or 168%, offset by sales of meat products, which decreased $2.48 million, or 23%, compared to the same period in 2007.

Increased revenues for the three months ended September 30, 2008 resulted from sales in China as well as several foreign countries.  During the three months ended September 30, 2008, sales in China increased by $11.96 million, or 72%, compared to the same period in 2007.  In addition, during the three months ended September 30, 2008, sales to France, Belgium, Germany, India, South Korea and the UK increased in the aggregate by $3.49 million, or 198%, offset by a decrease of $1.66 million, or 43%, of sales to Japan and the United States, compared to the same period in 2007.

Cost of Revenues.During the three months ended September 30, 2008, we experienced an increase in cost of revenue of $10.88 million, in comparison to the three months ended September 30, 2007, from $18.12 million to $29 million, reflecting an increase of approximately 60%. Approximately 92.9%, or $10.10 million, of this increase was attributable to an increase in raw material costs, which increased from $18.12 million during the three months ended September 30, 2007 to $28.22 million, or approximately 55.7%, during the three months ended September 30, 2008.  The reason for the increase in raw material costs is that the volume of raw chestnut and meat products purchased during the three months ended September 30, 2008 increased by approximately 71.9% and 878.2%, respectively, when compared to the three months ended September 30, 2007.  The volume of raw vegetable products purchased during the three months ended September 30, 2008 increased by approximately 3.6%, when compared to the three months ended September 30, 2007.

The factors that contributed to the remaining 7.1% 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 $3.02 million, or 64%, to $7.73 million for the three months ended September 30, 2008 from $4.71 million for the same period in 2007 as a result of higher net revenues, offset by higher costs of revenues, for the reasons indicated immediately above.

Operating Expenses

General and Administrative Expenses.We experienced a decrease in general and administrative expense of approximately $0.28 million from approximately $1.13 million to approximately $0.85 million for the three months ended September 30, 2008, compared to the same period in 2007. The following table reflects the main factors that contributed to this decrease as well as the dollar amount that each factor contributed to this decrease:

Factor
  Dollar DecreasePersonnel wages and benefits
  $153,758office expenses
  $26,039Consultation fees
  $19,218Vehicle and transportation costs (in connection with the administrative operation )
  $17,492Entertainment (in connection with the expansion of our distribution channels )
  $11,960


24

---

The third quarter of 2008 compared to the third quarter of 2007 saw a decrease in $153,758 in wages and benefits, and $26,039 decrease in office expenses.

Income Before Taxation and Minority Interest

Income before taxation and minority interest increased $2.85 million, or 102%, to $5.65 million for the three months ended September 30, 2008 from $2.80 million for the same period of 2007. The increase was attributable to 61% increase of our sales revenue and decreased general and administrative expenses in the three months ended September 30, 2008 as compared to the three months ended September 30, 2007.

Income Taxes

Income taxes increased $0.55 million, or 154%, to $0.91 million for the three months ended September 30, 2008 from $0.36 million for the same period of 2007. The increase of tax paid was a result of higher income achieved by all the subsidiaries of American Lorain.

We operate through our three directly or indirectly wholly-owned subsidiaries Junan Hongrun, Luotian Lorain, and Beijing Lorain and one majority-owned subsidiary, Shandong Lorain, in which we own 80.2% of the equity (directly and indirectly). 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 taxpayers.  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 that already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized.

Based on the background of each constituent of our group, the income tax rates applicable to the four constituents for 2007, 2008, and 2009 are depicted in the following table.

Income Tax Rate
  2007
  2008
  2009Junan Hongrun
  15%
  15%
  25%Luotian Lorain
  0%
  15%
  15%Beijing Lorain
  0%
  0%
  15%Shandong Lorain
  30%
  25%
  25%


Net Income

Net income increased $2.07 million, or 86%, to $4.46 million for the three months ended September 30, 2008 from $2.39 million for the same period of 2007.  The increase was attributable to increased sales revenue as a result of increased sales volume of our products and decreased general and administrative expenses, offset by an increase in income taxes, in the three months ended September 30, 2008 as compared to the three months ended September 30, 2007.

Nine months Ended September 30, 2008 Compared to Nine months Ended September 30, 2007

The following table summarizes the results of our operations during the nine-month periods ended September 30, 2008 and September 30, 2007, and provides information regarding the dollar and percentage increase or (decrease) from the nine-month period ended September 30, 2007 to the nine-month period ended September 30, 2008.

25

---

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

|                                        |   | Ninemonths ended September 30, |           |                |     | Percentage
|--------------------------------------- | - | ------------------------------ | --------- | -------------- | --- | ----------
|                                        |   |                                | Dollar($) |                | (%)
|                                        |   |                                |           |                |     | Increase  
|                                        |   | 2008                           |           | 2007           |     | (Decrease)
|                                        |   | (In Thousands)                 |           | (In Thousands) |     |           
|Net revenues                            | $ | 75,680                         | $         | 48,076         | $   | 27,604    
|Cost of revenues                        |   | (58,819)                       |           | (37,463)       |     | 21,356    
|Gross profit                            |   | 16,861                         |           | 10,613         |     | 6,248     
|Operating expenses                      |   |                                |           |                |     |           
|Selling and marketing expenses          |   | (2,066)                        |           | (1,247)        |     | 819       
|General and administrative
    expenses |   | (2,480)                        |           | (1,955)        |     | 525       
|                                        |   |                                |           |                |     |           
|Operating Income                        |   | 12,314                         |           | 7,411          |     | 4,903     
|                                        |   |                                |           |                |     |           
|Government subsidy income               |   | 37                             |           | 393            |     | (356)     
|Interest and other income               |   | 288,439                        |           | 35             |     | 288,434   
|Other expenses                          |   | (48)                           |           | (1,376)        |     | (1,328)   
|Interest expense                        |   | (1,901)                        |           | (1,608)        |     | 293       
|                                        |   |                                |           |                |     |           
|Earnings before tax                     |   | 10,691                         |           | 4,855          |     | 5,836     
|                                        |   |                                |           |                |     |           
|Income tax                              |   | (1,788)                        |           | (972)          |     | 816       
|                                        |   |                                |           |                |     |           
|Income before minority
    interests    |   | 8,903                          |           | 3,882          |     | 5,021     
|                                        |   |                                |           |                |     |           
|Minority interests                      |   | (595)                          |           | (207)          |     | 388       
|                                        |   |                                |           |                |     |           
|Net income                              | $ | 8,308                          | $         | 3,676          | $   | 4,632     

Revenue

Net Revenues. Our net revenue for the nine months ended September 30, 2008 amounted to $75.68 million, which represents an increase of approximately $27.6 million, or 57%, in comparison to the nine months ended September 30, 2007, in which our net revenue was $48.08 million. This increase was attributable to increased revenues from sales of our chestnut, vegetable and meat products as a result of 60.1% increase in sales volume of such products.  During the nine months ended September 30, 2008, revenues from sales of chestnut products increased by $18.22 million, or 85%, revenues from sales of vegetable products increased by $8.2 million, or 55%, and revenues from sales of meat products increased $1.18 million, or 10%, compared to the same period in 2007.

Increased revenues for the nine months ended September 30, 2008 resulted from sales in China as well as several foreign countries.  During the nine months ended September 30, 2008, sales in China increased by $24.39 million, or 70%, compared to the same period in 2007.  In addition, during the nine months ended September 30, 2008, sales to France, Belgium, Germany, India, South Korea, Taiwan and the UK increased in the aggregate by $6.3 million, or 184%, offset by a decrease of $3.47 million, or 43%, of sales to Japan and the United States, compared to the same period in 2007.

Cost of Revenues.During the nine months ended September 30, 2008, the Company experienced an increase in cost of revenue of $21.36 million, in comparison to the nine months ended September 30, 2007, from $37.46 million to $58.81 million, reflecting an increase of 57%.  Approximately 91.8%, or $19.61 million, of this increase was attributable to an increase in raw material costs, which increased from $33.16 million during the nine months ended September 30, 2007 to $52.77 million, or approximately 59.1%, during the nine months ended September 30, 2008.  The reason for the increase in raw material costs is that the volume of raw chestnut and vegetable products purchased during the nine months ended September 30, 2008 increased by approximately 55.5% and 42.4%, respectively, when compared to the nine months ended September 30, 2007.  The volume of raw meat products purchased during the nine months ended September 30, 2008 decreased by approximately 3.8%, when compared to the nine months ended September 30, 2007.

26

---

The factors that contributed to the remaining 8.2% 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 $6.25 million, or 59%, to $16.86 million for the nine months ended September 30, 2008 from $10.61 million for the same period in 2007 as a result of higher net revenues, offset by higher costs of revenues, for the reasons indicated immediately above.

Operating Expenses

Selling and Marketing Expenses.  During the nine months ended September 30, 2008, compared to the same period in 2007, the Company recorded an increase in selling and marketing expenses of $818,853, from $1,247,303 to $2,066,156, or approximately 66%. 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 IncreaseShipping and inspection fees
  $291,173Transportation expenses
  $219,891Supermarket fees
  $95,390Wages
  $59,141Advertisement expenses
  $15,705


The increases listed in the table above were partially offset by an aggregate of $106,183 of decreases of other factors, including customer lodging, phone, postage and courier, toll road expense, warehousing costs and professional movers.

General and Administrative Expenses.The Company experienced an increase in general and administrative expense of $525,512, from $1,954,728 to $2,480,240 for the nine months ended September 30, 2008, compared to the same period in 2007.  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 IncreasePersonnel wages and benefits
  $375,062Land use expenses
  $72,496Travel expenses
  $46,368Amortization of land use rights and other intangibles
  $35,617Entertainment (in connection with the expansion of our distribution channels)
  $17,520


Income Before Taxation and Minority Interest

Income before taxation and minority interest increased $5.79 million, or 120%,
to $10.69 million for the nine months ended September 30, 2008 from $4.9 million
for the same period of 2007. The increase was primarily a result of the higher
revenue during the nine month period ended on September 30, 2008 as compared to
2007.

27

---

Income Taxes

Income taxes increased $0.82 million, or 84%, to $1.78 million for the nine months ended September 30, 2008 from $0.97 million for the same period of 2007. The increase of tax paid was primarily a result of the increase of income in the first nine months ended September 30, 2008, as compared to the same period in 2007.

Net Income

Net income increased $4.58 million, or 126%, to $8.3 million for the nine months ended September 30, 2008 from $3.68 million for the same period of 2007. The increase was attributable to increased sales revenue as a result of increased sales volume of our products and decreased general and administrative expenses, offset by an increase in income taxes, in the three months ended September 30, 2008 as compared to the three months ended September 30, 2007.  In addition, in the second quarter of 2007, we incurred $1.3 million of non-operational expenses due to a fire at our Beijing Lorain facility.

Liquidity and Capital Resources

As of September 30, 2008, we had cash and cash equivalents (including restricted cash) of $13.05 million. The following table provides detailed information about our net cash flow for all financial statements periods presented in this report.

|                                                    | Cash Flow (in thousands)       
|--------------------------------------------------- | -------------------------------
|                                                    | Nine months Ended September 30,
|                                                    |                                
|Net cash provided by (used in) operating activities | $                              
|Net cash provided by (used in) investing activities | $                              
|Net cash provided by (used in) financing activities | $                              
|Net cash flow (outflow)                             | $                              

Operating Activities

Net cash provided by operating activities was $4.63 million for the nine months period ended September 30, 2008, which is an increase of $10.51 million from ($5.88) million for the same period of 2007. The increase of net cash provided by operating activities was primarily a result of a decrease in accounts and other receivables and an increase in net income of $4.58 million in the nine months ended September 30, 2008 of approximately $30.39 million as compared to the same period in 2007.  This increase was partially offset by a decrease in accounts and other payables of approximately $19.19 million and an increase in inventories of $5.67 million during the nine months ended September 30, 2008 as compared to the same period in 2007.

Investing Activities

Net cash used in investing activities for the nine months period ended September 30, 2008 was ($13.71) million, which was an increase of $8.31 million from net cash used in investing activities of ($5.4) million for the same period of 2007. The increase was primarily due to the construction, in the amount of approximately $0.8 million, of vegetable tents and approximately $5 million of comprehensive workshops for the processing of chestnut and other food products in the first nine months of 2008, as compared to the same period of 2007.

Financing Activities

Net cash provided by financing activities for the nine months period ended September 30, 2008 was $6.48 million, which is a decrease of $11.62 million from $18.1 million net cash provided by financing activities during the same period in 2007. The decrease of the net cash provided by financing activities was primarily a result of the fact that in 2007 we had additional paid-in capital of approximately $16.7 million in connection with a May 2007 private placement.  This increase was partially offset by increased bank borrowings of approximately $4.74 million and notes payable of approximately $1.74 million during the nine months ended September 30, 2008.

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Loan Facilities

As of September 30, 2008, the amounts and maturity dates for our bank loans were as follows:

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

|Banks                                       | Amounts  | Beginning  | Ending      | Interest Rate | Duration 
|------------------------------------------- | -------- | ---------- | ----------- | ------------- | ---------
|Bank of Beijing Co., Ltd.                   | 291.75   | 7/18/2007  | 7/18/2008   | 7.88%         | 12 months
|International Trust & Investment Co., Ltd.  | 1,458.77 | 6/13/2005  | 6/13/2008   | 7.84%         | 36 months
|Junan County Industrial and Commercial Bank | 204.23   | 1/23/2008  | 12/22/2008  | 9.71%         | 11 months
|Junan County Industrial and Commercial Bank | 73.53    | 5/08/2008  | 7/29/2008   | 8.54%         | 3 months 
|Junan County Industrial and Commercial Bank | 408.46   | 2/03/2008  | 11/01/2008  | 7.47%         | 9 months 
|Junan County Industrial and Commercial Bank | 583.51   | 2/03/2008  | 12/01/2008  | 7.47%         | 10 months
|Junan County Industrial and Commercial Bank | 393.87   | 5/15/2008  | 10/12/2008  | 8.54%         | 5 months 
|Junan County Industrial and Commercial Bank | 1,590.06 | 8/8/2008   | 11/27/2008  | 8.54%         | 4 months 
|Junan County Industrial and Commercial Bank | 233.40   | 8/22/2008  | 11/7/2008   | 8.54%         | 3 months 
|Junan County Industrial and Commercial Bank | 393.87   | 9/12/2008  | 3/4/2009    | 8.54%         | 4 months 
|Junan County Construction Bank              | 61.40    | 9/19/2008  | 9/18/2008   | 7.88%         | 3 months 
|Junan County Construction Bank              | 366.15   | 9/08/2008  | 9/07/2009   | 6.26%         | 12months 
|Junan County Construction Bank              | 437.63   | 8/31/2007  | 8/31/2009   | 6.26%         | 12 months
|Junan County Construction Bank              | 393.87   | 7/02/2007  | 10/02/2008  | 7.88%         | 3months  
|Junan County Construction Bank              | 787.74   | 7/14/2008  | 10/13./2008 | 7.88%         | 3 months 
|Junan County Construction Bank              | 350.10   | 8/08/2008  | 11/07/2008  | 7.45%         | 3 months 
|Junan County Construction Bank              | 72.94    | 8/18/2008  | 11/16/2008  | 7.88%         | 3 months 
|Junan County Construction Bank              | 115.24   | 9/09/2008  | 12/08/2008  | 7.88%         | 3 months 
|Junan County Construction Bank              | 269.87   | 9/25/2008  | 12/24/2008  | 7.45%         | 3 months 
|Junan County Construction Bank              | 102.11   | 9/25/2008  | 12/24/2008  | 7.45%         | 3 months 
|Junan County Agriculture Bank               | 437.63   | 10/31/2007 | 10/30/2008  | 12.39%        | 12 months
|Junan County Agriculture Bank               | 255.28   | 11/12/2007 | 11/11/2008  | 12.39%        | 12 months
|Junan County Agriculture Bank               | 218.82   | 11/15/2007 | 11/14/2008  | 12.39%        | 12 months
|Junan County Agriculture Bank               | 437.63   | 11/23/2007 | 11/22/2008  | 12.39%        | 12 months
|Junan County Agriculture Bank               | 306.34   | 11/30/2007 | 11/29/2008  | 12.39%        | 12 months
|Junan County Agriculture Bank               | 437.63   | 12/05/2007 | 12/04/2008  | 12.39%        | 12 months
|Junan County Agriculture Bank               | 437.63   | 12/14/2007 | 12/13/2008  | 12.39%        | 12 months

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|Banks                                          | Amounts  | Beginning  | Ending     | Interest Rate | Duration 
|---------------------------------------------- | -------- | ---------- | ---------- | ------------- | ---------
|Junan County Agriculture Bank                  | 58.35    | 1/05/2008  | 1/04/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 87.53    | 1/05/2008  | 1/04/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 58.35    | 1/05/2008  | 1/04/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 116.70   | 2/20/2008  | 2/01/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 58.35    | 3/21/2008  | 3/20/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 522.24   | 7/23/2008  | 10/22/2008 | 11.17%        | 3 months 
|Junan County Agriculture Bank                  | 437.63   | 7/23/2008  | 10/22/2008 | 11.17%        | 3 months 
|Junan County Agriculture Bank                  | 583.51   | 8/07/2008  | 8/06/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 860.67   | 8/14/2008  | 11/14/2008 | 11.17%        | 3 months 
|Junan County Agriculture Bank                  | 247.99   | 8/18/2008  | 12/18/2008 | 11.17%        | 4 months 
|Junan County Agriculture Bank                  | 656.45   | 8/22/2008  | 8/18/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 1,021.14 | 9/03/2008  | 12/03/2008 | 11.17%        | 3 months 
|Junan County Agriculture Bank                  | 364.69   | 9/03/2008  | 8/18/2009  | 12.70%        | 12 months
|Junan County Agriculture Bank                  | 145.88   | 9/03/2008  | 12/03/2008 | 11.17%        | 3 months 
|Junan County Agriculture Bank                  | 1,458.77 | 9/27/2008  | 3/27/2009  | 10.56%        | 6 months 
|Union Bank (China) Co., Ltd.                   | 1,047.40 | 1/28/2008  | 1/14/2009  | 5.49%         | 12 months
|Linyi Commercial Bank                          | 145.88   | 12/25/2007 | 12/25/2008 | 13.07%        | 12 months
|Linyi Commercial Bank                          | 685.62   | 2/01/2008  | 1/05/2009  | 13.07%        | 11 months
|Linyi Commercial Bank                          | 654.85   | 2/02/2008  | 1/12/2009  | 13.07%        | 11 months
|Linyi Commercial Bank                          | 1,008.25 | 9/28/2008  | 1/12/2009  | 8.58%         | 4 months 
|Linyi Commercial Bank                          | 116.70   | 9/28/2008  | 1/12/2009  | 8.58%         | 4 months 
|China Agricultural Bank, Luotian Square Branch | 816.91   | 9/08/2008  | 9/07/2009  | 7.47%         | 12 months
|China Agricultural Bank, Luotian Square Branch | 291.75   | 9/08/2008  | 9/07/2009  | 7.47%         | 12 months
|Bank of China, Junan Branch                    | 5.68     | 9/19/2006  | 5/19/2009  | 7.50%         | 36 months
|Shenzhen Development Bank                      | 1,458.77 | 5/15/2008  | 11/15/2008 | 7.47%         | 6 months 
|Credit union,Junan                             | 43.76    | 6/12/2008  | 10/12/2008 | 8.58%         | 4 months 
|Credit union,Junan                             | 43.76    | 8/07/2008  | 11/07/2008 | 8.58%         | 3 months 
|Credit union,Beijing                           | 2,771.66 | 9/29/2007  | 9/29/2008  | 10.94%        | 12 months

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|Banks                                      | Amounts   | Beginning  | Ending     | Interest Rate | Duration
|------------------------------------------ | --------- | ---------- | ---------- | ------------- | --------
|Jinan Merchants Bank                       | 1,458.77  | 4/3/2008   | 10/3/2008  | 15.00%        | 6 months
|Agricultural Development Lutian Government | 109.41    | 12/11/2006 | 12/11/2010 | 0.67%         | 4 years 
|Agricultural Development Lutian Government | 25.53     | 1/11/2008  | 12/11/2011 | 2.10%         | 4 years 
|Union Commercial Bank (China)              | 436.24    | 1/29/2008  | 1/14/2011  | 5.49%         | 3 years 
|Total                                      | 28,918.65 |            |            |               |         

As shown in the above table, we have $1.82 million in loans maturing on or before the end of September 30, 2008. Loans listed in the table above whose maturity dates are prior to September 30, 2008 have either been repaid or have been extended by the lending banks for either 6 months or 1 year.

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 September 30, 2008.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported in the 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 the more significant judgments and estimates in the preparation of financial statements, including the following:

- Method of Accounting --We maintain our general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by us 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.
- Use of estimates --The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from those estimates.
- Principles of consolidation --The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its commonly controlled entity. All significant inter-company balances and transactions are eliminated in combination.
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As of September 30, 2008, the particulars of the commonly controlled entities are as follows:

|Name of company                    |  | Jurisdiction of
Incorporation |  | Attributable
equity
interest % |  | Registered 
capital
|---------------------------------- |  | ----------------------------- |  | ------------------------------ |  | -------------------
|Shandong Green Foodstuff Co., Ltd. |  | PRC                           |  | 80.2%                          |  | $ $12,901,823      
|Luotian Green Foodstuff Co., Ltd.  |  | PRC                           |  | 100%                           |  | 3,240,013          
|Junan Hongrun Foodstuff Co., Ltd.  |  | PRC                           |  | 100%                           |  | 16,245,603         
|Beijing Green Foodstuff Co., Ltd.  |  | PRC                           |  | 100%                           |  | 1,279,181          
|International Lorain Holding, Inc. |  | BVI                           |  | 100%                           |  | 26,234,857         

- 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 years, 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, we have no other significant obligations 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 (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.



Recent accounting pronouncements

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

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

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

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

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

Seasonality

Our operating results and operating cash flows historically have been subject to seasonal variations. Our raw materials are mostly fresh agricultural products. Therefore, we are subject to production seasonality by product, though we are able to maintain overall year-round production. Specifically, the main processing season for chestnut products is from the latter half of August to the next January. During the busy season, our chestnut production lines are running with full capacity. Other than this period, we still maintain a small amount of chestnut production by using frozen chestnuts. However, this pattern may change, as a result of new market opportunities or new product introductions.

Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

ITEM
3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to interest rate risk primarily with respect to our short-term bank loans. Although the interest rates are fixed for the terms of the loans, the terms are typically 12 months and interest rates are subject to change upon renewal. Since December 2007, China Peoples Bank has increased the interest rate of RMB bank loans with a term of 1 year by 0.18%. The new interest rates are 7.47% for RMB bank loans with a term of 1 year. The change in interest rates impacts our bank loans. A hypothetical 1.0% increase in the annual interest rates for all of our credit facilities at December 31, 2007 would decrease net income before provision for income taxes by approximately $125,000 for the nine months ended September 30, 2008. Management monitors the banks interest rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

Foreign Exchange Risk

While our reporting currency is the U.S. Dollar, all of our consolidated revenues and consolidated costs and expenses are denominated in Renminbi. All of our assets are denominated in RMB. As a result, we are exposed to foreign exchange risk as our revenues and results of operations may be affected by fluctuations in the exchange rate between U.S. Dollars and RMB. If the RMB depreciates against the U.S. Dollar, the value of our RMB revenues, earnings and assets as expressed in our U.S. Dollar financial statements will decline. We have not entered into any hedging transactions in an effort to reduce our exposure to foreign exchange risk.

Inflation

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues, if the selling prices of our products do not increase with these increased costs.

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ITEM
4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act 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 and Rule 15d-15 promulgated under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2008.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2008, our disclosure controls and procedures were effective to satisfy the objectives for which they are intended.

Changes in Internal Control Over Financial Reporting.

No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act) during the fiscal quarter ended September 30, 2008 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

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, that we expect to have a material adverse effect on our financial condition.

ITEM 1A.

RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A Risk Factors of Part 1 included in our Annual Report on Form 10-K for the year ended December 31, 2007.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of equity securities during the quarter ended September 30, 2008.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities in the quarter ended September 30, 2008.

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our security holders during the quarter ended September 30, 2008.

ITEM 5.

OTHER INFORMATION

None.

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ITEM 6.

EXHIBITS

EXHIBITS.

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









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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 hereunto duly authorized.

| | AMERICAN LORAIN CORPORATION      
| | ---------------------------------
| |                                  
| | Date:  November 14, 2008         
| |                                  
| |                                  
| | By:  /s/ Si Chen                 
| | Si Chen
  Chief Executive Officer









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EXHIBIT INDEX

|Exhibit | 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.













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