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

FORM 10-K/AAmendment No. 1

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

For the fiscal year
ended: December 31, 2007

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

For the transition period from __________
to ____________

Commission File Number: 000-50883

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 Number)
|                                                                                                                                                                      
|Beihuan Zhong Road
    Junan County
    Shandong, Peoples Republic of China, 276600                                                                                  
|(Address of principal executive office and zip
    code)                                                                                                              
|                                                                                                                                                                      
|(86) 539-7318818                                                                                                                                                      
|(Registrants telephone number, including area
    code)
    MILLENNIUM QUEST, INC. 4089 Mount Olympus Way,
    Salt Lake City, Utah 84124                            
|(Former name, former address and former fiscal
    year, if changed since last report)                                                                                
|Securities registered pursuant to
    Section 12(b) of the Act: None
    Securities registered pursuant to Section 12(g) of the Act: Common Stock,
    Par Value 0.001

Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes£No Q

Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes£No Q

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

YesQNo £

Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.£

---



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

|Large accelerated filer
    £ | Accelerated filer
    £ | Non-accelerated filer
    £ | Smaller reporting company
    Q
|----------------------------- | ----------------------- | --------------------------- | -------------------------------

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

Yes£No Q

The number of shares and aggregate market value of
common stock held by non-affiliates as of the last business day of the
registrants most recently completed second fiscal quarter was 7,427, 109 and
$144,828, 626, respectively.

There were 24,923,185 shares of common stock
outstanding as of April 14, 2008.

DOCUMENTS INCORPORATED BY REFERENCE:

None.



2

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EXPLANATORY NOTE

American Lorain Corporation (the "Company") is
filing this Amendment No. 1 to Form 10-K (the "Amendment") to amend its annual
report for fiscal year ended December 31, 2007 (the "Original Filing") to, among
other things, correct certain amounts presented in the Companys financial
statement included in the Original Filing, as filed with the U.S. Securities and
Exchange Commission (the "SEC") on April 15, 2008.
This amendment changes the consolidated
statements of income for the periods ended December 31, 2007 (the "Original
Income Statements") by making adjustment in item "Weighted Average Shares
Outstanding" for both basic and diluted from the original filed share numbers of
24,923,178 and 24,923,178, to 22,554,210 and 23,177,268, respectively.
Accordingly, the value of the earnings per share has been changed from the
original $0.39 as basic and $0.39 as diluted, to $0.43 as basic and $0.42 as
diluted, respectively.
The above adjustment is due to clerical error
in preparing the financial statements. No other material information in the
Original Filing is amended hereby. This Form 10-K/A continues to describe
conditions as of the date of the Original Filing, and accordingly, the Company
has not updated the disclosures contained herein to reflect events that occurred
at a later date, except for disclosures of certain tax law updates in Note 10 to
Consolidated Financial Statement. Pursuant to Rule 12b-15 (the "Rule 12b-15)
under the Securities Exchange Act of 1934, as amended, this Amendment contains
the complete text of the items of the Original Filing that are being amended and
restated, in addition to the text of the unaffected items or exhibits.

As required by Rule 12b-15, the Companys principal executive
officer and principal financial officer are providing Rule 13a-14(a)
certifications in connection with this Form 10-K/A (but otherwise identical to
their prior certifications) and are also furnishing, but not filing, Rule
13a-14(b) certifications in connection with this Form 10-K/A (but otherwise
identical to their prior certifications).

PART IV.

Item 15. Exhibits And Financial Statement of Schedules

|Exhibit No. | Description                                                                                                                                           
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                       
|31.1        | Certification of Chief Executive Officer, pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                               
|31.2        | Certification of Chief Financial Officer, pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                               
|32.1        | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2        | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

3

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

|               |  | AMERICAN LORAIN CORPORATION
|-------------- |  | ---------------------------
|               |  |                            
|April 15, 2008 |  | By:/s/  Si Chen            
|(Date Signed)  |  | Si Chen, President         

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date indicated.

|Signature          |  | Capacity                                                                                   |  | Date          
|------------------ |  | ------------------------------------------------------------------------------------------ |  | --------------
|                   |  |                                                                                            |  |               
|                   |  |                                                                                            |  |               
|/s/ Si Chen        |  | President , Director and Chief
    Executive Officer (Principal Executive Officer)         |  | April 16, 2008
|Si Chen            |  |                                                                                           
|                   |  |                                                                                            |  |               
|                   |  |                                                                                            |  |               
|/s/ Jing Thomas Wu |  | Chief Financial Officer (Principal
    Financial Officer and Principal Accounting Officer) |  | April 16, 2008
|Jing Thomas Wu     |  |                                                                                           

4

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AMERICAN LORAIN CORPORATION

AUDITED FINANCIAL STATEMENTS

DECEMBER 31, 2007, 2006, AND 2005

(Stated in US Dollars)





---



AMERICAN LORAIN
CORPORATION

|                                                            |       
|----------------------------------------------------------- | ------
|CONTENTS                                                    | PAGES 
|                                                            |       
|                                                            |       
|REPORT OF INDEPENDENT REGISTERED
    PUBLIC ACCOUNTING FIRM | F1    
|                                                            |       
|CONSOLIDATED BALANCE SHEETS                                 | F2 F3
|                                                            |       
|CONSOLIDATED STATEMENTS OF INCOME                           | F4    
|                                                            |       
|CONSOLIDATED STATEMENTS OF
    STOCKHOLDERS EQUITY         | F5    
|                                                            |       
|CONSOLIDATED STATEMENTS OF CASH FLOWS                       | F6    
|                                                            |       
|NOTES TO FINANCIAL STATEMENTS                               | F7F24







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REPORT OF REGISTERED INDEPENDENT PUBLIC
ACCOUNTING FIRM

To:

The Board of Directors and Stockholders of 
American Lorain Corporation

We have audited the accompanying
consolidated balance sheets of American Lorain Corporation as of December 31,
2007, 2006, and 2005, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended.  These
consolidated financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of American Lorain Corporation as of December 31, 2007, 2006,
and 2005, and the results of its operations and its cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America.

South San Francisco, California
February 26, 2008

Samuel H. Wong & Co., LLP
Certified Public Accountants

F-1

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AMERICAN LORAIN CORPORATION

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2007, 2006, AND 2005 (Stated in US Dollars)

|                                         | Note |   | 2007        |   | 2006       |   | 2005      
|---------------------------------------- | ---- | - | ----------- | - | ---------- | - | ----------
|ASSETS                                   |      |   |             |   |            |   |           
|Current assets                           |      |   |             |   |            |   |           
|Cash and Cash equivalents                |      | $ | 6,769,973   | $ | 2,290,676  | $ | 7,429,038 
|Restricted Cash                          | 3    |   | 2,021,839   |   | 2,549,321  |   | 2,838,067 
|Short-term Investment                    |      |   | 7,246       |   | 26,620     |   | 16,476    
|Trade accounts receivable                | 4    |   | 32,859,688  |   | 11,805,231 |   | 7,992,923 
|Other receivables                        | 5    |   | 7,552,976   |   | 4,683,630  |   | 6,336,056 
|Inventory                                | 6    |   | 17,903,344  |   | 12,294,354 |   | 15,451,754
|Advance to Suppliers                     |      |   | 5,357,951   |   | 2,406,160  |   | 2,807,961 
|Prepaid Expenses and Taxes               |      |   | 916,774     |   | 38,375     |   | -         
|                                         |      |   |             |   |            |   |           
|Total current assets                     |      | $ | 73,389,790  | $ | 36,094,367 | $ | 42,872,275
|                                         |      |   |             |   |            |   |           
|Property, plant and equipment, net       | 7    |   | 24,022,181  |   | 13,517,908 |   | 10,289,333
|Land use rights, net                     | 8    |   | 3,047,021   |   | 2,777,475  |   | 1,331,751 
|                                         |      |   |             |   |            |   |           
|TOTAL ASSETS                             |      | $ | 100,458,992 | $ | 52,389,750 | $ | 54,493,359
|                                         |      |   |             |   |            |   |           
|LIABILITIES AND STOCKHOLDERS
    EQUITY |      |   |             |   |            |   |           
|Current liabilities                      |      |   |             |   |            |   |           
|Short-term bank loans                    | 9    | $ | 24,077,504  | $ | 23,137,648 | $ | 22,675,029
|Notes payable                            | 10   |   | 2,734,444   |   | 3,466,581  |   | 3,765,452 
|Accounts payable                         |      |   | 6,251,833   |   | 2,327,620  |   | 3,275,965 
|Income tax payable                       |      |   | 1,121,528   |   | 402,216    |   | 305,021   
|Current maturities of long term debts    | 12   |   | -           |   | 5,117      |   | -         
|Accrued liabilities and other payables   | 11   |   | 16,784,108  |   | 2,570,263  |   | 2,765,249 
|Customers deposits                       |      |   | 957,642     |   | 843,091    |   | 489,675   
|                                         |      |   |             |   |            |   |           
|Total current liabilities                |      | $ | 51,927,058  | $ | 32,752,536 | $ | 33,276,391
|                                         |      |   |             |   |            |   |           
|Long-term bank loans                     | 12   |   | 102,542     |   | 105,560    |   | -         
|                                         |      |   |             |   |            |   |           
|TOTAL LIABILITIES                        |      | $ | 52,029,600  | $ | 32,858,096 | $ | 33,276,391

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

F-2

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AMERICAN LORAIN CORPORATION

CONSOLIDATED BALANCE SHEETS (Continued)
AS OF DECEMBER 31, 2007, 2006, AND 2005 (Stated in US Dollars)

|                                                                                                                                                                       | Note |   | 2007        |   | 2006       |   | 2005      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ----------- | - | ---------- | - | ----------
|                                                                                                                                                                       |      |   |             |   |            |   |           
|Minority interests                                                                                                                                                     | 13   | $ | 3,887,021   | $ | 2,922,355  | $ | 2,500,186 
|                                                                                                                                                                       |      |   |             |   |            |   |           
|STOCKHOLDERS EQUITY                                                                                                                                                   |      |   |             |   |            |   |           
|Common Stock, $0.001 par value,
    200,000,000 shares authorized; 24,923,178 and 17,932,777 shares issued and
    outstanding as of December 31, 2007, 2006, and 2005 | 14   |   | 24,923      |   | 17,933     |   | 17,933    
|Additional paid-in-capital                                                                                                                                             |      |   | 24,187,268  |   | 6,846,620  |   | 11,820,441
|Statutory reserves                                                                                                                                                     |      |   | 4,497,647   |   | 4,439,604  |   | 2,787,212 
|Retained earnings                                                                                                                                                      |      |   | 13,985,824  |   | 4,298,947  |   | 3,593,433 
|Accumulated other comprehensive                                                                                                                                        |      |   |             |   |            |   |           
|Income                                                                                                                                                                 |      |   | 1,846,708   |   | 1,006,195  |   | 497,763   
|                                                                                                                                                                       |      |   |             |   |            |   |           
|                                                                                                                                                                       |      |   |             |   |            |   |           
|                                                                                                                                                                       |      | $ | 44,542,370  | $ | 16,609,299 | $ | 18,716,782
|                                                                                                                                                                       |      |   |             |   |            |   |           
|                                                                                                                                                                       |      |   |             |   |            |   |           
|TOTAL LIABILITIES AND STOCKHOLDERS
    EQUITY                                                                                                                         |      | $ | 100,458,992 | $ | 52,389,750 | $ | 54,493,359
|                                                                                                                                                                       |      |   |             |   |            |   |           

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

F-3

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AMERICAN LORAIN CORPORATION

CONSOLIDATED STATEMENTS OF INCOME 
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005 
(Stated in US Dollars)

|                                    | Note |   | 2007         |   | 2006         |   | 2005        
|----------------------------------- | ---- | - | ------------ | - | ------------ | - | ------------
|                                    |      |   |              |   |              |   |             
|Net revenues                        |      | $ | 82,094,963   | $ | 49,560,957   | $ | 30,195,144  
|Cost of revenues                    |      |   | (61,932,474) |   | (37,533,260) |   | (22,250,332)
|                                    |      |   |              |   |              |   |             
|                                    |      |   |              |   |              |   |             
|Gross profit                        |      | $ | 20,162,490   | $ | 12,027,697   | $ | 7,944,812   
|                                    |      |   |              |   |              |   |             
|Operating expenses                  |      |   |              |   |              |   |             
|Selling and marketing expenses      |      |   | (2,623,138)  |   | (1,440,941)  |   | (1,089,423) 
|General and administrative expenses |      |   | (2,864,813)  |   | (1,932,729)  |   | (1,197,962) 
|                                    |      |   |              |   |              |   |             
|                                    |      |   |              |   |              |   |             
|Operating Income                    |      | $ | 14,674,539   | $ | 8,654,027    | $ | 5,657,427   
|                                    |      |   |              |   |              |   |             
|Investment income                   |      |   | 4,769        |   | -            |   | -           
|Government subsidy income           |      |   | 1,373,280    |   | 481,403      |   | 319,530     
|Interest income                     |      |   | 209,010      |   | 165,648      |   | 122,077     
|Other income                        |      |   | 155,467      |   | -            |   | -           
|Other expenses                      |      |   | (1,445,780)  |   | (133,635)    |   | (18,344)    
|Interest Expense                    |      |   | (2,376,088)  |   | (1,834,246)  |   | (1,518,518) 
|                                    |      |   |              |   |              |   |             
|                                    |      |   |              |   |              |   |             
|Earnings before tax                 |      | $ | 12,595,196   | $ | 7,333,197    | $ | 4,562,172   
|Income tax                          | 15   |   | (2,134,916)  |   | (1,064,379)  |   | (324,580)   
|                                    |      |   |              |   |              |   |             
|                                    |      |   |              |   |              |   |             
|Income before minority interests    |      | $ | 10,460,279   | $ | 6,268,818    | $ | 4,237,592   
|Minority interests                  |      |   | (715,359)    |   | (340,328)    |   | (22,915)    
|Net income                          |      |   | 9,744,920    |   | 5,928,490    |   | 4,214,677   
|                                    |      |   |              |   |              |   |             
|                                    |      |   |              |   |              |   |             
|Earnings per share                  |      |   |              |   |              |   |             
|Basic                               |      | $ | 0.43         | $ | 0.33         | $ | 0.24        
|Diluted                             |      | $ | 0.42         | $ | 0.33         | $ | 0.24        
|                                    |      |   |              |   |              |   |             
|Weighted average shares outstanding |      |   |              |   |              |   |             
|Basic                               |      |   | 22,554,210   |   | 17,932,778   |   | 17,932,778  
|Diluted                             |      |   | 23,177,268   |   | 17,932,778   |   | 17,932,778  

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

F-4

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AMERICAN LORAIN CORPORATION

STATEMENT OF STOCKHOLDERS EQUITY 
FOR THE YEARS ENDED DECEMBER 31, 2007,
2006, AND 2005 (Stated in US Dollars)

|                                                                                                  |            |          |             |             |             | Accumulated   |             
|------------------------------------------------------------------------------------------------- | ---------- | -------- | ----------- | ----------- | ----------- | ------------- | ------------
|                                                                                                  | Number     |          | Additional  |             |             | Other         |             
|                                                                                                  | of         | Common   | Paid-in     | Statutory   | Retained    | Comprehensive |             
|                                                                                                  | Shares     | Stock    | Capital     | Reserves    | Earnings    | Income        | Total       
|Balance, January 1, 2005                                                                          | 17,932,777 | 17,933   | 2,938,639   | 2,416,659   | 8,874,915   | 55,942        | 14,304,088  
|Net Income                                                                                        |            | -        |             |             | 4,214,677   |               | 4,214,677   
|Increase in APIC from
    the increase in registered capital in the PRC, net of minority interest |            | -        | 8,881,802   |             |             |               | 8,881,802   
|Appropriations to
    Statutory Reserves                                                          |            | -        |             | 370,553     | (370,553)   |               | 0           
|Dividends                                                                                         |            | -        |             |             | (9,125,607) |               | (8,683,786) 
|Foreign Currency
    Translation Adjustment                                                       |            | -        |             |             |             | 441,821       | -           
|Balance, December 31,
    2005                                                                    | 17,932,777 | 17,933   | 11,820,441  | 2,787,212   | 3,593,433   | 497,763       | 18,716,781  
|                                                                                                  |            |          |             |             |             |               |             
|Balance, January 1, 2006                                                                          | 17,932,777 | 17,933   | 11,820,441  | 2,787,212   | 3,593,433   | 497,763       | 18,716,781  
|Net Income                                                                                        |            | -        |             |             | 5,928,490   |               | 5,928,490   
|Consolidation
    elimination of investments in subsidiaries against APIC                         |            | -        | (4,973,821) |             |             |               | (4,973,821) 
|Appropriations to
    Statutory Reserves                                                          |            | -        |             | 1,652,393   | (1,652,393) |               | -           
|Dividends                                                                                         |            | -        |             |             | (3,570,583) |               | (3,570,583) 
|Foreign Currency
    Translation Adjustment                                                       |            | -        |             |             |             | 508,432       | 508,431     
|Balance, December 31,
    2006                                                                    | 17,932,777 | $ 17,933 | $ 6,846,620 | $ 4,439,604 | $ 4,298,947 | $ 1,006,195   | $ 16,609,299
|                                                                                                  |            |          |             |             |             |               |             
|Balance, January 1, 2007                                                                          | 17,932,777 | $ 17,933 | $ 6,846,620 | $ 4,439,604 | $ 4,298,947 | $ 1,006,195   | $ 16,609,299
|Issuance of Common Stock
    for Cash                                                             | 6,990,401  | 6,990    | 17,340,648  |             |             |               | 17,347,638  
|Net Income                                                                                        |            |          |             |             | 9,744,920   |               | 9,744,920   
|Appropriations to
    Statutory Reserves                                                          |            |          |             | 58,043      | (58,043)    |               | -           
|Foreign Currency
    Translation Adjustment                                                       |            |          |             |             |             | 840,513       | 840,513     
|Balance, December 31,
    2007                                                                    | 24,923,178 | 24,923   | 24,187,268  | 4,497,647   | 13,985,824  | 1,846,708     | 44,542,370  

|                                            |               |  |               |  |               |  |           
|------------------------------------------- | ------------- |  | ------------- |  | ------------- |  | ----------
|                                            | Comprehensive |  | Comprehensive |  | Comprehensive |  |           
|                                            | Income        |  | Income        |  | Income        |  |           
|                                            | 2007          |  | 2006          |  | 2005          |  | Totals    
|Net Income                                  | 9,744,920     |  | 5,928,490     |  | 4,214,677     |  | 19,888,087
|Foreign Currency Translation
    Adjustment | 840,513       |  | 508,431       |  | 441,821       |  | 1,790,765 
|                                            | 10,585,433    |  | 6,436,921     |  | 4,656,498     |  | 21,678,852

The accompanying notes are an integral
part of this financial statements.

F-5

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AMERICAN LORAIN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 2007, 2006, AND 2005(Stated in US Dollars)

|                                                        |   | 2007         |   | 2006         |   | 2005        
|------------------------------------------------------- | - | ------------ | - | ------------ | - | ------------
|Cash flows from operating activities                    |   |              |   |              |   |             
|Net income                                              | $ | 9,744,920    | $ | 5,928,490    | $ | 4,214,677   
|Minority
    interest                                   |   | 964,666      |   | 340,328      |   | 22,914      
|Fire Loss                                               |   | 1,392,379    |   | -            |   | -           
|Depreciation                                            |   | 802,927      |   | 579,736      |   | 515,495     
|Amortization                                            |   | 17,798       |   | 48,038       |   | 33,468      
|(Increase)/decrease in accounts
    & other receivables |   | (23,809,252) |   | (1,840,469)  |   | (13,270,141)
|(Increase)/decrease in
    inventories                  |   | (8,560,781)  |   | 3,587,757    |   | (786,131)   
|Increase/(decrease) in accounts
    and other payables  |   | 15,862,094   |   | (673,977)    |   | 8,829,105   
|                                                        |   |              |   |              |   |             
|Net cash (used in)/provided by
    operating            |   |              |   |              |   |             
|activities                                              | $ | (3,585,249)  | $ | 7,969,903    | $ | (440,613)   
|                                                        |   |              |   |              |   |             
|Cash flows from investing activities                    |   |              |   |              |   |             
|Purchase of plant and equipment                         |   | (7,657,346)  |   | (3,421,639)  |   | (1,791,731) 
|Purchase of biological assets                           |   | (2,784,136)  |   | -            |   | -           
|Increase of construction in
    progress                |   | (2,258,097)  |   | -            |   | -           
|(Increase)/decrease in
    restricted cash              |   | 527,482      |   | 373,788      |   | (1,210,599) 
|Payment of land use rights                              |   | (287,344)    |   | (1,421,291)  |   | (6,492)     
|Investments in securities                               |   | 19,374       |   | (7,857,172)  |   | (6,461)     
|                                                        |   |              |   |              |   |             
|Net cash used in investing activities                   | $ | (12,440,067) | $ | (12,326,314) | $ | (3,015,283) 
|                                                        |   |              |   |              |   |             
|Cash flows from financing activities                    |   |              |   |              |   |             
|Issue of common stock                                   |   | 17,347,638   |   | 2,855,765    |   | 11,501,969  
|Dividend paid                                           |   | -            |   | (3,575,032)  |   | (9,125,596) 
|Bank borrowings                                         |   | 25,645,795   |   | 24,744,115   |   | 22,460,266  
|Bank repayment                                          |   | (23,329,333) |   | (24,946,473) |   | (18,903,904)
|                                                        |   |              |   |              |   |             
|Net cash provided by/(used in)
    financing            |   |              |   |              |   |             
|Activities                                              | $ | 19,664,100   | $ | (921,625)    | $ | 5,932,735   
|Net in cash and cash equivalents                        |   |              |   |              |   |             
|(used)/sourced                                          |   | 3,638,784    |   | (5,278,036)  |   | 2,476,839   
|                                                        |   |              |   |              |   |             
|Effect of foreign currency translation
    on cash      |   |              |   |              |   |             
|and cash equivalents                                    |   | 840,513      |   | 139,674      |   | 200,061     
|                                                        |   |              |   |              |   |             
|Cash and cash equivalentsbeginning of
    year         |   | 2,290,676    |   | 7,429,038    |   | 4,752,138   
|                                                        |   |              |   |              |   |             
|Cash and cash equivalentsend of year                   | $ | 6,769,973    | $ | 2,290,676    | $ | 7,429,038   
|                                                        |   |              |   |              |   |             
|Supplementary cash flow information:                    |   |              |   |              |   |             
|Interest received                                       | $ | 209,010      | $ | 165,648      | $ | 122,077     
|Interest paid                                           |   | 2,293,442    |   | 1,791,272    |   | 1,559,400   
|Taxes Paid                                              |   | 740,943      |   | -            |   | -           

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

F-6

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

1.

ORGANIZATION, BASIS OF PRESENTATION, AND PRINCIPAL ACTIVITIES

(a)

Organization history of American Lorain Corporation (formerly
known as Millennium Quest, Inc.)

American Lorain Corporation (the Company or ALC) is a
Delaware corporation incorporated on February 4, 1986.  From inception through
May 3, 2007, the Company did not engage in any active business operations other
than in search and evaluation of potential business opportunity to become an
acquiree of a reverse-merger deal.

(b)

Organization History of International
Lorain Holding Inc. and its subsidiaries

International Lorain Holding Inc. (ILH) is a Cayman Islands
company incorporated on August 4, 2006 and was until May 3, 2007 wholly-owned by
Mr. Hisashi Akazawa.  Through restructuring and acquisition in 2006, the Company
presently has two direct wholly-owned subsidiaries, Junan Hongrun and Luotian
Lorain, and one indirectly wholly-owned subsidiary through Junan Hongrun, which
is Beijing Lorain.

In addition, the Company directly and
indirectly has 80.2% ownership of Shandong Lorain.  The rest of the 19.8%, which
is owned by the State under the name of Shandong Economic Development Investment
Co. Ltd., is not included as a part of the Group.

(c)

Reverse-Merger

On May 3, 2007, the Company entered into a share exchange
agreement with International Lorain Holding Inc. (ILH) whereby the Company
consummated its acquisition of ILH by issuance of 697,663 Series B voting
convertible preferred shares to the shareholders of ILH in exchange of 5,099,503
ILH shares.  Concurrently on May 3, 2007, the Company also entered into a
securities purchase agreement with certain investors and Mr. Hisashi Akazawa and
Mr. Si Chen (each a beneficial owner) whereby the Company issued 319,913
(after reverse-split at 32.84 from 10,508,643) common shares to its shareholders
as consideration of the Companys reverse-merger with Lorain.

The share exchange transaction is referred to hereafter as the
reverse-merger transaction.  The share exchange transaction has been accounted
for as a recapitalization of ALC where the Company (the legal acquirer) is
considered the accounting acquiree and ILH (the acquiree) is considered the
accounting acquirer.  As a result of this transaction, the Company is deemed to
be a continuation of the business of ILH.

Accordingly, the accompanying consolidated financial statements
are those of the accounting acquirer, ILH.  The historical stockholders equity
of the accounting acquirer prior to the share exchange has been retroactively
restated as if the share exchange transaction occurred as of the beginning of
the first period presented.  See also Note 14 Capitalization.

F-7

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

(d)

Business Activities

The Company develops, manufactures, and sells convenience foods
(such as cut fruit and premixed salads, which are known as lightly processed;
ready-to-cook (or RTC) meals; ready-to-eat (or RTE) meals and meals ready-to-eat
(or MRE); chestnut products; and frozen, canned, and bulk foods, in hundreds of
varieties.  The Company operates through indirect Chinese subsidiaries.  The
products are sold in 19 provinces and administrative regions in China and 23
foreign countries.  Food products are categorized into three types: (1) chestnut
products, (2) convenience food, and (3) frozen, canned, and bulk food.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

(a)

Method of Accounting

The Company maintains its general ledger and journals with the
accrual method accounting for financial reporting purposes.  The financial
statements and notes are representations of management.  Accounting policies
adopted by the Company conform to generally accepted accounting principles in
the United States of America and have been consistently applied in the
presentation of financial statements, which are compiled on the accrual basis of
accounting.

(b)

Principles of consolidation

The consolidated financial statements which include the Company
and its subsidiaries are compiled in accordance with generally accepted
accounting principles in the United States of America.  All significant
inter-company accounts and transactions have been eliminated.  The consolidated
financial statements include 100% of assets, liabilities, and net income or loss
of those wholly-owned subsidiaries; ownership interests of minority investors
are recorded as minority interests.

As of December 31, 2006, the detailed identities of the
consolidating subsidiaries are as follows:

Name of Company
      Place of incorporation
      Attributable equity 
      interest %
      Registered 
      capitalShandong Green Foodstuff Co., Ltd
      PRC
      80.2
      $12,901,823
      (RMB 100,860,000)Luotian Green Foodstuff Co., Ltd
      PRC
      100
      $1,279,181
      (RMB 10,000,000)Junan Hongrun Foodstuff Co., Ltd
      PRC
      100
      $2,430,445
      (RMB 19,000,000)Beijing Green Foodstuff Co., Ltd
      PRC
      100
      $1,279,181
      (RMB 10,000,000)


(c)

Use of estimates

The preparation of the financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and

F-8

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)

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.

(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.

F-9

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

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.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)

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.

F-10

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTD)

(k)

Trade receivables

Trade receivables are recognized and carried at the original
invoice amount less allowance for any uncollectible amounts.  An estimate for
doubtful accounts is made when collection of the full amount is no longer
probable.  Bad debts are written off as incurred.

(l)

Customer deposits

Customer deposits were received from customers in connection with
orders of products to be delivered in future periods.

(m)

Cash and cash equivalents

The Company considers all highly liquid investments purchased
with original maturities of three months or less to be cash equivalents.

(n)

Advertising

All advertising costs are expensed as incurred.

(o)

Shipping and handling

All shipping and handling are expensed as incurred.

(p)

Research and development

All research and development costs are expensed as incurred.

(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.

F-11

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTD)

(s)

Statutory reserves

Statutory reserves are referring to the amount appropriated from
the net income in accordance with laws or regulations, which can be used to
recover losses and increase capital, as approved, and are to be used to expand
production or operations.

(t)

Foreign currency translation

The accompanying financial statements are presented in United
States dollars. The functional currency of the Company is the Renminbi (RMB).
 The financial statements are translated into United States dollars from RMB at
year-end exchange rates as to assets and liabilities and average exchange rates
as to revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.

2007
      
      2006
      
      2005Year end RMB : US$ exchange rate
      7.3141
      
      7.81750
      
      8.07340Average yearly RMB : US$ exchange
      rate
      7.6172
      
      7.98189
      
      8.20329


The RMB is not freely convertible into foreign currency and all
foreign exchange transactions must take place through authorized institutions.
 No representation is made that the RMB amounts could have been, or could be,
converted into US$ at the rates used in translation.

(u)

Revenue recognition

The Company's revenue recognition policies are in compliance with
Staff accounting bulletin (SAB) 104. Sales revenue is recognized at the date of
shipment to customers when a formal arrangement exists, the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.

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

(v)

Earnings per share

Basic earnings per share is computed by dividing net income by
the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share is computed by dividing net income by the sum of the
weighted average number of ordinary shares outstanding and dilutive potential
ordinary shares during the years.  During the years ended 2007, 2006, and 2006,
no dilutive potential ordinary shares were issued.

F-12

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTD)

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 September 2006, the FASB issued SFAS 157, Fair Value
Measurements, which defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures
about fair value measurements. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements, where fair value
is the relevant measurement attribute. The standard does not require any new
fair value measurements. SFAS 157 is effective for financial statements issued
for fiscal year beginning after November 15, 2007, and interim periods within
those fiscal years.

F-13

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTD)

In February 2007, the FASB issued SFAS No. 159, The Fair Value
Option for Financial Assets and Financial Liabilities  Including an Amendment
of SFAS 115 (SFAS No. 159), which allows for the option to measure financial
instruments and certain other items at fair value.  Unrealized gains and losses
on items for which the fair value option has been elected are reported in
earnings.  The objective of SFAS 159 is to provide opportunities to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply hedge accounting provisions.  SFAS
159 also establishes presentation and disclosure requirements designed to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities.  This statement is
effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The Company is currently evaluating the impact of SFAS No.
159 on our consolidated financial statements.

In December 2007, the FASB issued SFAS 141 (revised 2007),
Business Combinations, (SFAS 141(R)). SFAS 141(R) retains the fundamental
requirements of the original pronouncement requiring that the purchase method be
used for all business combinations, but also provides revised guidance for
recognizing and measuring identifiable assets and goodwill acquired and
liabilities assumed arising from contingencies, the capitalization of in-process
research and development at fair value, and the expensing of acquisition-related
costs as incurred. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008. In the event that the Company completes acquisitions
subsequent to its adoption of SFAS 141 (R), the application of its provisions
will likely have a material impact on the Companys results of operations,
although the Company is not currently able to estimate that impact.

In December 2007, the FASB issued SFAS 160, Noncontrolling
Interests in Consolidated Financial Statements − an amendment of ARB No. 51.
SFAS 160 requires that ownership interests in subsidiaries held by parties other
than the parent (previously referred to as minority interests), and the amount
of consolidated net income, be clearly identified, labeled and presented in the
consolidated financial statements. It also requires once a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value. Sufficient disclosures are
required to clearly identify and distinguish between the interests of the parent
and the interests of the noncontrolling owners as components of equity. It is
effective for fiscal years beginning after December 15, 2008, and requires
retroactive adoption of the presentation and disclosure requirements for
existing minority interests. All other requirements are applied prospectively.
The Company does not expect the adoption of SFAS 160 to have a material impact
on its financial condition or results of operations.

F-14

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

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

2007
      
      2006
      
      2005Trade accounts receivable
      $
      33,031,997
      $
      12,032,112
      $
      8,057,885Less: Allowance for
      doubtful accounts
      
      (172,309)
      
      (226,881)
      
      (64,962)$
      32,859,688
      $
      11,805,231
      $
      7,992,923Allowance for Bad Debt:
      
      2007
      
      2006
      
      2005Beginning Balance
      $
      226,881
      $
      64,962
      $
      27,349Additions to Allowance
      
      -
      
      161,919
      
      37,613Less: bad debt
      written off
      
      (54,572)
      
      -
      
      -$
      172,309
      $
      226,881
      $
      64,962


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.

OTHER RECEIVABLES

Other
receivables at December 31st consisted of the following: -

2007
      
      2006
      
      2005Advances to suppliers
      $
      2,858,351
      $
      175,203
      $
      2,909,092Advances to Employees for job/travel
      disbursements
      
      3,027,007
      
      2,780,025
      
      -Amount due by a non-related
      enterprise
      
      1,063,932
      
      1,083,467
      
      -Other non-related receivables
      
      451,183
      
      644,935
      
      -Business taxes prepayment
      
      21,876
      
      -
      
      29,866Purchase disbursement advances
      
      -
      
      -
      
      3,388,579Sundry deposits
      
      130,627
      
      -
      
      8,519$
      7,552,976
      $
      4,683,630
      $
      6,336,056


F-15

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

6.

INVENTORIES

Inventories consisted of the following as
December 31:

2007
      
      2006
      
      2005Raw materials
      $
      5,278,484
      $
      7,785,927
      $
      5,584,556Work in Process
      
      4,828,790
      
      -
      
      -Finished goods
      
      7,796,070
      
      4,508,427
      
      9,867,198$
      17,903,344
      $
      12,294,354
      $
      15,451,754


7.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment at December
31, consisted of the following:

2007
      
      2006
      
      2005At cost:Buildings
      $
      15,547,205
      $
      8,967,534
      $
      7,204,365Landscaping, plant, and tree
      
      2,784,136
      
      1,005,878
      
      216,513Machinery and equipment
      
      5,732,776
      
      4,362,645
      
      3,939,192Office equipment
      
      28,520
      
      213,527
      
      70,883Motor vehicles
      
      658,547
      
      320,932
      
      380,767$
      24,751,184
      $
      14,870,516
      $
      11,811,720Less: accumulated
      depreciationBuildings
      
      (698,732)
      
      (508,358)
      
      (322,632)Machinery and equipment
      
      (1,954,257)
      
      (1,435,020)
      
      (1,033,940)Office equipment
      
      (15,643)
      
      (116,625)
      
      (18,936)Motor vehicles
      
      (318,468)
      
      (124,170)
      
      (146,879)(2,987,100)
      
      (2,184,173)
      
      (1,522,387)Construction in Progress
      
      2,258,097
      
      831,565
      
      -$
      24,022,181
      $
      13,517,908
      $
      10,289,333


F-16

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

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

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

8.

LAND USE RIGHTS, NET

Land use rights at June 30, 2007 and
December 31st consisted of the following: -

2007
      
      2006
      
      2005Land use rights, at cost
      $
      3,173,931
      $
      2,886,587
      $
      1,388,065Less: Accumulated
      amortization
      
      (126,910)
      
      (109,112)
      
      (56,314)$
      3,047,021
      $
      2,777,475
      $
      1,331,751


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.

9.

SHORT-TERM DEBTS

Short-term debts are as follows: -

2007
      
      2006
      
      2005Loans from Junan County
      Construction Bank,
      Interest rate at 6.264% per annum
      due 8/31/2007
      $
      410.167
      $
      -
      $
      -
      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 6.264% per annum
      
      -
      
      3,652,576
      
      -Due between 1/10/2007 and 9/7/2007
      Interest rate at 6.264% per annum
      
      -
      
      -
      
      7,053,765Due between 1/16/2006 and 4/22/2006Loan 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
      
      -
      
      -


F-17

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2007
      
      2006
      
      2005
      Interest rate at            % 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
      
      410,167
      
      -
      
      -
      Interest rate at 12.393% per annum
      due 11/11/2008
      
      239,264
      
      -
      
      -
      Interest rate at 12.393% per annum
      due 11/14/2008
      
      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
      
      410,167
      
      -
      
      -
      Interest rate at 12.393% per annum
      due 11/29/2008
      
      287,117
      
      -
      
      -
      Interest rate at 12.393% per annum
      due 12/4/2008
      
      410,167
      
      -
      
      -
      Interest rate at 12.393% per annum
      due 12/13/2008
      
      410,167
      
      -
      
      -
      Interest rate at 7.65% to 10.404%
      per annum
      
      -
      
      6,269,636
      
      -Due between 1/10/2007 and 12/5/2007
      Interest rate at 7.65% to 10.404%
      per annum
      
      -
      
      -
      
      6,160,848Due between 1/3/2006 and 12/12/2006Loan from Junan County Industrial
      and CommercialBank,
      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          % 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          % per
      annum due 6/30/2008
      
      706,766
      
      -
      
      -
      Interest rate at 7.290% per annum
      due 6/30/2008
      
      232,428
      
      -
      
      -
      Interest rate at 3.5% to 6.12% per
      annum
      
      -
      
      4,699,925
      
      -Due between 1/11/2007 and 12/10/2007
      Interest rate at 3.5% to 6.12% per
      annum
      
      -
      
      -
      
      3,987,565Due between 2/23/2006 and 12/19/2006Loan from Junan County Merchants
      Bank,
      
      1,367,222
      
      -
      
      -
      Interest rate at 6.210% per annum
      due 3/13/2008Loan from Junan County
      Agricultural FinancialInstitution,
      Interest rate at 9.750% per annum
      due 5/20/2008
      
      25,977
      
      -
      
      -
      Interest rate at 12.420% per annum
      due 6/20/2008
      
      68,361
      
      -
      
      -
      Interest rate at            % per
      annum due 10/1/2008
      
      2,597,722
      
      -
      
      -


F-18

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AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2007
      
      2006
      
      2005
      Interest rate at 9.765% per annum
      
      -
      
      181,644
      
      -Due between 1/13/2007 and 5/22/2007
      Interest rate at 9.765% per annum
      
      -
      
      -
      
      505,923Due between 1/13/2007 and 5/22/2007Loan from Linyi Commercial Bank,
      Interest rate at 10.71% per annum
      due 2/6/2008
      
      615,250
      
      -
      
      -
      Interest rate at 10.71% per annum
      due 2/9/2008
      
      497,221
      
      -
      
      -
      Interest rate at          % per
      annum due
      
      136,722
      
      -
      
      -
      Interest rate at 9.765% to 10.4715%
      per annum
      
      -
      
      1,688,520
      
      -Due between 1/9/2007 and 11/29/2007
      Interest rate at 9.765% to 10.4715%
      per annum
      
      -
      
      -
      
      1,374,885Due between 1/9/2006 and 4/21/2006Loan from Junan Agricultural
      Development Bank,
      Interest rate at 7.290% per annum
      due 9/26/2008
      
      1,367,222
      
      -
      
      -
      Interest rates at 5.3625% to 6.435%
      per annum
      
      -
      
      1,279,182
      
      -Due between 7/19/2007 and 9/4/2007Loan from Beijing Miyun County
      Shilipu RuralFinancial Institution,
      Interest rates at 7.56% to 9.18% per
      annum
      
      -
      
      2,539,174
      
      -Due between 3/30/2007 and 5/27/2007
      Interest rates at 7.56% to 9.18% per
      annum
      
      -
      
      -
      
      2,477,271Due between 3/30/2006 and 5/30/2006Loan from China Agricultural
      Bank, Miyun
      Interest rate at 7.02% per annum due
      7/18/2007
      
      -
      
      575,632
      
      -Loan from China Agricultural
      Bank, LuotianBranch
      Interest rate at 7.722% per annum
      due 8/30/2008
      
      1,039,089
      
      -
      
      -
      Interest rates at 7.605% to 7.95%
      per
      
      -
      
      972,178
      
      -Due 6/30/2007 and 9/5/2007
      Interest rates at 7.605% to 7.95%
      per
      
      -
      
      -
      
      1,114,772Due 9/5/2006Bank of China, Junan Branch,
      Interest rate at 7.500% per annum
      due 5/19/2009
      
      9,815
      
      -
      
      -International Trust Co., Ltd.,
      Interest rate at 7.839% per annum
      due 5/19/2009
      
      1,367,222
      
      -
      
      -


F-19

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

2007
      
      2006
      
      2005International Trust and Investment
      Co., Ltd.
      Interest rate at 0.67% per annum due
      6/13/2008
      
      
      
      1,279,181$
      24,077,504
      $
      23,137,648
      $
      22,675,029


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

All overdue loans were extended by its
financial institution.

10.

NOTES PAYABLE

Notes payable at December 31st
consisted of the following: -

2007
      
      2006
      
      2005Notes to Industrial and Commercial
      Bank,
      Bank commission charge at 3.99% due
      December 20, 2007
      $
      546,889
      $
      -
      $
      -
      Bank commission charge at 3.99%
        due December 12, 2007
      
      1,093,778
      
      -
      
      -
      Bank commission charge at 3.99% due
      December 18, 2007
      
      1,093,778
      
      -
      
      -
      Bank commission charge at 3.744% due
      June 1, 2007
      
      -
      
      3,274,704
      
      -Notes to Linyi Commercial Bank,
      Bank commission charge at 2.85%, due
      May 20, 2007
      
      -
      
      191,877
      
      -Notes to Junan County Agriculture
      Bank,
      Bank commission charge at 0.05%, due
      3/29/2006
      
      -
      
      -
      
      1,238,636
      Bank commission charge at 0.05%, due
      between 3/22/06 and 3/30/06
      
      -
      
      -
      
      1,238,635
      Bank commission charge at 0.05%, due
      between 4/30/06 and 5/26/05
      
      -
      
      -
      
      990,908Loan from Junan County Agricultural
      Financial Institution,
      Bank charge commission charge at
      0.05%, due 11/25/06
      
      -
      
      -
      
      297,273$
      2,734,444
      $
      3,466,581
      $
      3,765,452


All overdue notes were extended by its
financial institution.

F-20

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

11.

ACCRUED EXPENSES AND OTHER PAYABLE

Accrued expenses and other payables at
December 31st consisted of the following: -

2007
      
      2006
      
      2005Accrued salaries and wages
      $
      302,356
      $
      346,738
      $
      117,082Accrued utility expenses
      
      515,092
      
      114,857
      
      218,103Accrued interest expenses
      
      -
      
      11,178
      
      304,232Accrued transportation expenses
      
      371,839
      
      100,089
      
      6,504Other accruals
      
      2,848,985
      
      90,000
      
      61,278Business and other taxes
      
      -
      
      734,492
      
      402,451Purchases disbursements payables
      
      12,359,109
      
      1,100,559
      
      1,603,273Interest Payable
      
      180,696
      
      -
      
      23,455Accrued staff welfare
      
      206,031
      
      72,350
      
      28,871$
      16,784,108
      $
      2,570,263
      $
      2,765,249


12.

LONG-TERM DEBTS

Long-term debts are as follow: -2007
      
      2006
      
      2005Loan from Bank of China, Junan
      Branch,
      Interest rates at 0.67% per annum
      due 5/19/2009
      
      -
      
      14,738
      
      -Loan from Agricultural Development
      Luotian Government,
      Interest rates at 0.67% per annum
      due 12/11/2010
      
      102,542
      
      95,939
      
      --Less: Current maturities of
      long-term debts
      
      -
      
      (5,117)
      
      -102,542
      
      105,560
      
      -


Interest expenses for the loans were $2,293,442 for the year December 31, 2007.

F-21

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

13.

MINORITY INTERESTS

This represents the 19.8% equity of
Shangdong Lorain held by a state-owned interest, Shandong Economic Development
Investment Corporation.

14.

CAPITALIZATION

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 December 31, 2007 as
depicted in the following table:

Name of Shareholder
      
      Number of Share
      
      Common Stock Capital
      
      Additional Paid-in 
      CapitalShareholders of International Lorain
      HoldingInc. (697,663 Series B preferred
      sharesconverted to common shares at one
      for 23.375Split
      
      16,307,872
      $
      16,308
      
      -Halter Financial Investments LP and
      other(100,000 Series A preferred shares
      convertedto common shares:100,000 x 428.56 = 42,856,000 /
      32.84)Reversed-split
      
      1,304,992
      
      1,305
      
      -Original Shareholders of Millenium
      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


F-22

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

15.

INCOME TAXES

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

2007
      
      2006
      
      2005Income before tax
      $
      12,595,196
      $
      7,333,197
      $
      4,562,172Tax at the income tax rate
      
      3,778,559
      
      2,419,955
      
      1,505,517Effect of tax exemption granted
      
      (1,643,643)
      
      (1,355,576)
      
      (1,180,937)Income tax
      $
      2,134,916
      $
      1,064,379
      $
      324,580Per Share Effect of Tax
      Exemption2007
      
      2006
      
      2005Effect of tax exemption granted
      $
      1,643,643
      $
      1,378,960
      $
      1,180,937Weighted-Average Shares Outstanding
      
      24,923,178
      
      17,932,777
      
      17,932,777Per share effect
      $
      0.0659
      $
      0.0769
      $
      0.0659


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

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.

F-23

---



AMERICAN LORAIN CORPORATION

NOTES TO FINANCIAL STATEMENTS -
DECEMBER 31, 2007, 2006 AND 2005
(Stated in US Dollars)

Income Tax Rate
      2007
      2008
      2009Junan Hongran
      15%
      12.5%
      25%Luotian Lorain
      0%
      12.5%
      12.5%Beijing Lorain
      0%
      0%
      12.5%Shangdong Lorain
      30%
      25%
      25%


16.

SALES BY PRODUCT TYPE

Sales by categories of product at December
31, as follow: -

Category
      
      2007
      
      2006
      
      2005Chestnut
      $
      45,799,404
      $
      29,725,421
      $
      20,055,697Meat
      
      2,518,968
      
      3,830,986
      
      475,703Vegetable
      
      32,824,386
      
      14,787,914
      
      8,136,133Others
      
      952,205
      
      1,216,636
      
      1,527,611Total
      $
      82,094,963
      $
      49,560,957
      $
      30,195,144


Revenue by geography at December 31, as follow:

Country*
      
      2007
      
      2006
      
      2005Australia
      $
      18,710
      $
      -
      $
      -Belgium
      
      2,040,636
      
      1,682,906
      
      1,042,364Canada
      
      14,112
      
      366,581
      
      965,566China
      
      48,566,474
      
      23,423,978
      
      14,831,818France
      
      284,101
      
      -
      
      -Germany
      
      44,527
      
      246,030
      
      -Holland
      
      586,379
      
      -
      
      -Hong Kong
      
      71,860
      
      -
      
      -Japan
      
      17,077,937
      
      13,791,034
      
      11,360,356Kuwait
      
      364,893
      
      3,930,546
      
      112,849Malaysia
      
      1,569,794
      
      -
      
      -Mexico
      
      -
      
      1,425,203
      
      282,621Saudi Arabia
      
      684,321
      
      415,426
      
      335,410Singapore
      
      2,442,038
      
      246,388
      
      86,779South Korea
      
      5,174,079
      
      2,409,855
      
      358,494Taiwan
      
      57,819
      
      -
      
      -United Arab Emirates
      
      239,565United Kingdom
      
      1,793,707
      
      -
      
      -United States of America
      
      1,064,011
      
      -
      
      -Other
      
      -
      
      1,623,010
      
      818,887Total
      $
      82,094,963
      $
      49,560,957
      $
      30,195,144


*The
regions listed above are for direct sale only but not including the regions
where our products would be re-sold by our customers.

F-24

---



Exhibit Index

|Exhibit No. | Description                                                                                                                                           
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|            |                                                                                                                                                       
|31.1        | Certification of Chief Executive Officer, pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                               
|31.2        | Certification of Chief Financial Officer, pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                               
|32.1        | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2        | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section
    1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002







---