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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,
D.C. 20549

FORM 10-K

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

For the fiscal year ended: December 31, 2010

[  ]  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)

|Nevada                                                               | 87-0430320                             
|-------------------------------------------------------------------- | ---------------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (I.R.S. Employer Identification Number)

Beihuan Zhong Road Junan CountyShandong,
Peoples Republic of China, 276600(Address of principal executive office
and zip code)

(86) 539-7318818(Registrants telephone number,
including area code)

Securities registered pursuant to Section 12(b) of the Act:

|Title of each class                      | Name of each exchange on which registered
|---------------------------------------- | -----------------------------------------
|Common Stock, par value $0.001 per share | NYSE AMEX                                

Common Stock, par value $0.001 per share

Securities registered pursuant to Section 12(g) of the Act:
None

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

Yes [  ]   No****[X]

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****[X]

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

Yes [X]   No[  ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website ,if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T(§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).

Yes [  ]   No[  ]

Indicate by check mark 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. [X]

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

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

Yes [_]   No  [X]

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 were 14,125,379 and $40,116,076,
respectively.

There were 34,419,709 shares of common stock outstanding as of
March 30, 2011.

DOCUMENTS INCORPORATED BY REFERENCE:

Information required by Part III will either be included in the
registrants definitive information statement filed with the Securities and
Exchange Commission or in an amendment to this Form 10-K no later than 120 days
after the end of the registrants fiscal year, to the extent required by the
Securities Exchange Act of 1934, as amended.

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PART I

Item 1. BUSINESS

Conventions

In this annual report on Form 10-K:

- We, us and our refer to the combined business of ALN, ILH and their
  direct and indirect Chinese operating subsidiaries.
- ALN refers to American Lorain Corporation, a Nevada corporation
  (formerly known as Millennium Quest, Inc.).
- ILH refers to International Lorain Holding, Inc., a Cayman Islands
  company that is wholly - owned by ALN.
- Junan Hongrun refers to Junan Hongrun Foodstuff Co., Ltd.
- Luotian Lorain refers to Luotian Green Foodstuff Co., Ltd.
- Beijing Lorain refers to Beijing Green Foodstuff Co., Ltd.
- Shandong Lorain refers to Shandong Green Foodstuff Co., Ltd.
- Dongguan Lorain refers to Dongguan Green Foodstuff Co., Ltd.
- Shandong Greenpia refers to Shandong Greenpia Foodstuff Co., Ltd.
- RMB refers to Renminbi, the legal currency of China.
- U.S. dollar, $ and US$ refer to the legal currency of the United
  States.
- China and PRC refer to the Peoples Republic of China.

Overview of Our Business

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

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

We conduct our production activities in China. Our products are
sold in 26 provinces and administrative regions in China and 42 foreign
countries. We derive most of our revenues from sales in China, Japan and South
Korea. In 2010, our primary strategy was to expand our brand equity in the
Chinese market for our convenience food products while maintaining the steady
growth and brand recognition for our chestnut products and frozen products,
which we will continue to execute in 2011. In addition, we are working to expand
our marketing efforts in Asia, Europe, the Middle East and North America. We
currently have limited sales and marketing activity in the United States,
although our long-term plan is to significantly expand our activities there.

Organizational Structure

ALN is a Nevada corporation that was incorporated on February
4, 1986 and was formerly known as Millennium Quest, Inc. Prior to May 3, 2007,
when ALN completed a recapitalization, or reverse merger, with ILH, ALN did not
engage in active business operations other than to search for a potential
acquisition target. Effective November 16, 2009, ALN reincorporated in Nevada
from Delaware.

ALN owns 100% of ILH. ILH wholly owns two Chinese operating
subsidiaries, Luotian Lorain and Junan Hongrun, directly. Junan Hongrun, in
turn, wholly owns Dongguan Lorain. In addition, together with Junan Hongrun, ILH
wholly owns Beijing Lorain, Shandong Greenpia, and owns approximately 80% of
Shandong Lorain (Shandong Economic Development Investment Co. Ltd. owns
approximately 20%). We sometimes refer to our six Chinese operating subsidiaries
throughout this annual report on Form 10-K as the Lorain Group Companies. Below
is an organizational chart of ALN, ILH and the Lorain Group Companies:

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Products

Our products are categorized into the following three segments:

- chestnut products,
- convenience food products, and
- frozen food products.

We produced 241 products in 2010, including 15 new products in
our chestnut and convenience foods segment. We also discontinued 4 products in
2010 in the convenience segment due to slow sales.

Our chestnut products and convenience foods were our main
profit centers in 2010. Our convenience foods segment has been the fastest
growing portion of our business and was one of the main catalysts of our growth
during 2010. Frozen food products accounted for a smaller portion of our
revenues in 2010 as compared with 2009 because we have been more focused on
generating revenues from higher margin chestnut and convenience food products.

Chestnut Products

We believe that we are the largest chestnut processor and
manufacturer in China. We have developed brand equity for our chestnut products
in China, Japan and South Korea over the past 10 to 15 years. We produced 57
high value-added processed chestnut products in 2010, including 5 new products
such as aerated chestnut with skin and chestnut paste. In 2010 and 2009, this
segment contributed 54.9% and 60.7% of our total revenues, respectively.

Our best selling products in 2010 included our aerated
open-bottom chestnuts, which are chestnuts packaged with nitrogen; sweetheart
chestnuts, which are sweet preserved chestnuts; chestnuts in syrup, which are
very popular in Japan and South Korea; and golden chestnut kernels. The majority
of our chestnut products are natural and do not contain chemical additives.

The chestnut, in contrast to many other tree nuts, contains
small quantities of oil and is very high in complex carbohydrates. This makes
them useful for a wider food range than other common nuts. Chestnuts are
commonly steamed, boiled, sugar stir-fried, roasted or added into dishes or
desserts as an ingredient.

China is the largest grower of chestnuts in the world, followed
by South Korea and Japan. In recent years, the chestnut production in South Korea and Japan has declined. This has been attributed to
the increasing labor costs and operational costs incurred in growing chestnuts.
Because of the declining domestic production, South Korean and Japanese
customers have grown to rely more on imported chestnut products. Our strategy is
to take advantage of these trends.

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We differentiate our chestnut products based on flavor, size
and method of packaging. For instance, some of our chestnut products that are
sold in Japan are packaged in plastic bags or tin cans, each considered a
different product. Similarly, some of our chestnut products are processed with
hot water or cold water, each considered a different product.

Chestnut season in China lasts from September to January. We
purchase and produce raw chestnuts during these months and store them in our
refrigerated storage facilities throughout the year. Once we obtain a purchase
order during the rest of the year, we remove the chestnuts from storage, process
them and ship them within one day of production.

Convenience Foods

Our convenience food products are characterized as follows:

- Ready-to-cook, or RTC, food products,
- Ready-to-eat, or RTE, food products and
- Meals ready-to-eat, or MRE, food products.

These products are intended to meet the current demands of our
customers for safe, wholesome and tasty foods that are easily prepared.

RTCs can be served after a few easy cooking procedures.
Typically, when preparing a RTC, customers need only to heat the food in a
microwave or boil it for several minutes before eating. Our best selling RTCs in
2010 were beef and lamb products.

RTEs can be served without any cooking. Our best selling RTEs
in 2010 were various bean products and pickle products.

MREs are meal kits with self-heating devices or microwavable
kits, such as microwavable rice boxes. Our self heating MREs are primarily for
military use since no cooking device or other ingredients are needed other than
water. We also introduced microwavable MREs for civilian uses such as camping,
traveling and other situations since only simple preparation and a cooking
device such as a microwave oven is required.

We produce various MREs based on Chinese cuisine, the best
sellers of which were our pork with garlic sauce over rice and kungpao chicken
with ricein 2010. Other MREs are based on other styles of food, such
as Italian cuisine. Many of our convenience products are natural and do not
contain chemical additives.

We produced 127 convenience food products in 2010, including 10
new products such as self-heating MRE rice products for civilian uses, which was
previously exclusively for the army. In 2010 and 2009, this segment contributed
30.8% and 23.6%, respectively, of our total revenues.

Our convenience foods segment has been the fastest growing
portion of our business and was one of the main catalysts of our growth during
2010. We expect our convenience foods segment to continue to be an important
area of growth for our business in the future.

Frozen Food Products

We produce a variety of frozen foods, including frozen
vegetables, frozen fruits, frozen fish, and frozen meats. We produced 61 frozen
food products in 2010. Our best selling frozen foods in 2010 were frozen
asparagus and frozen corn.

Our frozen food business allows us to mitigate the significant
production seasonality of chestnut products and to increase the utilization rate
of our production capacity. Historically, our frozen food division has been a
significant portion of our business. With the growth of our convenience food
segment, however, revenues and profits from our frozen food products as
percentage to total revenue have decreased. In 2010 and 2009, this segment
contributed 14.3% and 15.7%, respectively, of our total revenues. Gross margins
in this segment are lower than the margins for chestnut products and convenience
foods. We expect that the proportionate contribution of this business segment to
our total revenues will continue to decline.

Our Manufacturing Facilities

General

We currently manufacture our products in six facilities in
China, three of which are located in Junan County, Shandong Province, one in
Luotian County, Hubei Province, one in Miyun County, Beijing City and one leased
facility in Dongguan, Guandong Province. The following table indicates the year that operations commenced at
each of the facilities and the size of the facilities:

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|                  |                 |                
|----------------- | --------------- | ---------------
|                  | Year Operations | Facility Size  
|Facility          | Commenced       | (square meters)
|Junan Hongrun     | 2002            | 38,865         
|Shandong Lorain   | 1995            | 15,392         
|Beijing Lorain    | 2003            | 21,000         
|Luotian Lorain    | 2003            | 9,558          
|Dongguan          | 2008            | 9,250          
|Shandong Greenpia | 2010            | 9,179          

Production Lines

We currently manufacture our products using 26 production
lines. Each production line is used to produce between 10 and 50 products. We
currently run three types of product lines:

- deep-freezing lines, which are used to freeze raw materials for year-round
  production and to produce frozen food;
- canning lines, which are used to produce canned products, including
  chestnut products; and
- convenience food lines, which are used for producing RTCs, RTEs and MREs,
  all of which have nitrogen preservation capacity.

The production process for our chestnut products initially
involves sorting and cleaning the raw chestnuts purchased during the chestnut
season. We then store the raw chestnuts in our refrigerated storage facilities
throughout the year. Once we obtain a purchase order, we remove the chestnuts
from storage and process them by steaming, decladding and deep-freezing the
chestnuts, depending on the particular product. We then package and ship the
processed chestnuts within one day of production.

The production process of our convenience products generally
involves various steps, including soaking, boiling, coating, drying, deep
freezing, packing, sealing and sterilizing.

The following table shows the number and types of production
lines, the types of products produced and the production capacity at each
facility:

Facilities
    Production Lines
    Product Portfolio
    2010 CapacityJunan Hongrun
    1 Deep-freezing line 3 Convenience food lines 4
      Canning lines
    Chestnut products, frozen foods, beans, bean paste
    Multi-purpose production lines with 44,000 tons of
      production capacity and 11,400 tons of cold and frozen storageShandong Lorain
    1 Deep-freezing line 1 Convenience food
      line
    Chestnut products, convenience foods, frozen
      foods
    Multi-purpose production lines with 20,000 tons
      of production capacity and 3,500 tons of cold and frozen storageBeijing Lorain
    6 Convenience food lines 1 Deep-freezing line
    Chestnut products, frozen foods
    Multi-purpose production lines with 34,000 tons of
      production capacity and 4,650 tons of cold and frozen storageLuotian Lorain
    3 Convenience food lines 2 Deep-freezing
      lines
    Chestnut products, convenience foods, frozen
      foods
    Multi-purpose production lines with 24,000 tons
      of production capacity and 6,500 tons of cold and frozen storageDongguan factory
    2 Convenience food lines
    Convenience food
    Multi-purpose production lines with 3,000 tons of
      production capacity and 2,250 tons of cold and frozen storage


|Shandong Greenpia | 2 Convenience food lines | Chestnut products, convenience foods | Multi-purpose production lines with 9,000 tons of production
      capacity and 1,500 tons of cold and frozen storage
|----------------- | ------------------------ | ------------------------------------ | ---------------------------------------------------------------------------------------------------------------------

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Our production lines and facilities have all been designed to
meet the standards and requirements of our largest customers in Japan, which is
our largest export market. We employ advanced methods of quality control and
have obtained various certifications for many of our products, packages and
processes, including ISO 9000 or ISO 9001 certification for certain of our
chestnut and frozen vegetable products, BRC certification for certain of our
frozen fruit and vegetable products and HACCP certification for certain of our
frozen vegetable, fruit and chestnut products and our bottom-open chestnuts. We
believe that our quality controls and standards of products distinguish our
products both in domestic and international markets. The import approvals that
we have obtained from the Japanese government for our chestnuts and other
convenience foods have been helpful in advocating with the Chinese government
for domestic approvals to increase our product offerings.

With limited exception, we operate our production lines year
round. In the past, when our production was focused almost exclusively on
chestnuts, we experienced seasonal underutilization of our product lines.
However, our current facilities have a multiple-function design, allowing us to
use our production lines for our convenience and frozen products when we are not
producing chestnuts at full capacity. Consequently, as we have increased our
processed and convenience food offerings over the last several years, we have
generally been able to run our production lines at close to full capacity
throughout the year.

Previously, most of our processed and convenience foods were
produced at our Beijing Lorain plant. With the introduction of bean products in
2009, we expanded our facility in Junan Hongrun with the addition of three
convenience food production lines designed specifically for bean products with
current annual capacity of 13,500 metric tons.

We believe our facilities are adequate for our current levels
of production. We anticipate, however, that we will require additional
facilities and/or product lines as our business grows. We are exploring the
possibility of alliances with one or more OEM partners for the production, in
the short-term, of some of our convenience food products and frozen products
should our facilities be inadequate to meet increasing demand. We are also
exploring the possibility of leasing additional production lines to expand our
production capacity. In 2008, we leased two convenience foods production lines
in Dongguan, Guangdong Province, which increased production capacity by
approximately 3,000 metric tons per year to meet our short-term needs. Given the
relatively low cost to lease, we may continue to lease additional facilities in
2011, if needed. In the long-term, we plan to increase our own production
capacity by acquiring or building new facilities, subject to the availability of
adequate sources of funding.

Storage Capacity

Storage of our raw materials and inventory is a critical
element of our business. Our raw materials and partially finished products need
to be preserved in frozen storages (-18oC to -20oC) or constant temperature
storages (-5oC to 5oC). Storage is particularly critical for our chestnut
products because chestnuts are a seasonal fruit.

The following table illustrates on a facility by facility basis
the type and capacity of our storage resources:

|Facility          | Storage Type         | Number of     | Capacity     
|----------------- | -------------------- | ------------- | -------------
|                  |                      | Storage Units | (metric tons)
|Junan Hongrun     | Frozen Storage       | 13            | 6,600        
|                  | Constant Temperature | 8             | 4,800        
|Shandong Lorain   | Frozen Storage       | 5             | 2,000        
|                  | Constant Temperature | 3             | 1,500        
|Luotian Lorain    | Frozen Storage       | 8             | 4,500        
|                  | Constant Temperature | 4             | 2,000        
|Beijing Lorain    | Frozen Storage       | 6             | 2,850        
|                  | Constant Temperature | 3             | 1,800        
|Dongguan          | Frozen Storage       | 2             | 800          
|                  | Constant Temperature | 2             | 1,450        
|Shandong Greenpia | Constant Temperature | 4             | 1,500        
|TOTAL             |                      | 58            | 29,800       

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Agricultural Operations

We grow or set up agricultural co-ops with local farmers to
supply ourselves with a small portion of chestnut, fruit and vegetable products.
For the year ended December 31, 2009 and 2010, the supplies coming from
agricultural operations have been immaterial. We believe, however, that
development of agricultural facilities is a good strategy for the long-term. We
anticipate that self grown agricultural products will enable us to assure
adequacy of supply, promote quality and reduce cost, particularly for our high
margin offerings. For example, by growing Korean cultivar chestnuts
domestically, we expect to significantly reduce our supply costs for this
premium product, while ensuring superior quality.

Lands in which we grow our agricultural products for such
products are shown in the following table.

|                                                             | Area    | Location      
|------------------------------------------------------------ | ------- | --------------
|Harvest                                                      | (acres) | (PRC)         
|Chestnut (South Korean, Japanese,
      Australian cultivar) | 329     | Shandong      
|Chestnut (Japanese cultivar)                                 | 165     | Beijing       
|Sticky Corn                                                  | 342     | Beijing       
|Green Pea & Sweet Corn                                       | 165     | Beijing       
|Pumpkin                                                      | 197     | Heilongjiang  
|Organic Chestnut                                             | 165     | Beijing       
|Mixed Vegetables                                             | 650     | Hebei         
|Japanese Pumpkin                                             | 329     | Inner Mongolia
|Strawberry                                                   | 392     | Shandong      
|Broccoli                                                     | 165     | Beijing       
|Green Asparagus                                              | 591     | Beijing       
|White Asparagus                                              | 263     | Shandong      
|Peach                                                        | 329     | Beijing       
|Apricot                                                      | 411     | Beijing       
|Pear                                                         | 329     | Beijing       
|Blackberry                                                   | 165     | Beijing       

We began growing chestnuts in Shandong Province in 2003. Unlike
most vegetables and fruits, chestnut trees have a 3-5 year growing phase before
they can be harvested. Our current chestnut planting base has been
self-supplying limited quantities of chestnuts to our production since 2007.

We began growing strawberries in 2008 in Shandong and peaches,
apricots, pears and blackberries in 2009 in Beijing. We use these fruits in some
of our frozen fruit products. We plan to continue to expand our agricultural
operations over the next few years. Among other things, we plan to increase our
self-production in China of Korean cultivar chestnuts. We expect to obtain
funding for this expansion through a combination of commercial and government
loans, including loans under Chinese government programs to promote agricultural
industrialization. There is no assurance, however, that adequate funding for
these purposes will be available to us.

Raw Materials

In 2010 and 2009, approximately 93% and 94% of our procured raw
materials, respectively, consisted of agricultural products, including primarily
chestnuts and vegetables, approximately 4% and 3%, respectively, consisted of
packaging materials and approximately 3% consisted of condiments such as sugar,
salt and flour.

Our Supply Sources

Our business depends on obtaining a reliable supply of various
agricultural products, including chestnuts, vegetables, red meat, fish, eggs,
rice and flour. Because of the diversity of available sources of these raw
materials, we believe that our raw materials are currently in adequate supply
and will continue to be so in the future.

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We obtain our agricultural raw materials from three sources:
domestic procurement (excluding self-supply), overseas markets, and self-supply.
Domestic and overseas procurement accounted 97% and 2%, respectively, of our
total raw material costs in 2009, with self-supply accounted for the remaining
1%. We obtained substantially all of our agricultural raw materials from
domestic sources during 2010.

In 2010 and 2009, respectively, we procured approximately
55,200 and 69,364 metric tons of chestnuts and approximately 44,500 and 48,380
metric tons of vegetables and other raw materials from a number of third party
suppliers, domestic and overseas, and produced approximately 60 and 49 metric
tons of chestnuts from our own agricultural operations.

We select suppliers based on price and product quality. We
typically rely on numerous domestic and international suppliers, including some
with whom we have a long-term relationship. Our top 10 suppliers accounted for
17.4% and 21.3%, respectively, of the total procurement in 2010 and 2009 in
value terms. We purchase from suppliers and farmers pursuant to supply contracts
and underlying purchase orders. We have not entered into any long-term contracts
with any of our suppliers.

Our suppliers generally include wholesale agricultural product
companies, agricultural associations and distributors. Some raw materials must
be imported at higher costs, however. Occasionally, we also work directly with
farmers. For instance, we operate an initiative which involves a series of
cooperation and lease agreements between Shandong Lorain, Beijing Lorain and
local farmers. This initiative involves approximately 1,000 acres of land which
is used primarily to produce Japanese and Korean style chestnuts, sticky corn
and pumpkins for our operations.

Procurement Cost and Quality Control

To control procurement costs, we have located our facilities
near domestic sources of agricultural raw materials. For example, Junan Hongrun
and Shandong Lorain are located in Shandong Province, which is Chinas largest
supplier of fresh products by volume. Shandong Province is also a major chestnut
producing region. Likewise, all of our fish products are manufactured by Luotian
Lorain, because the Luotian region is an area that has an abundance of the fish
that we use as raw material. Local procurement reduces our costs, especially
transportation costs. It also gives us first-hand harvest and market
information, which provides us with an advantage in price negotiations with
suppliers.

Some raw materials must be imported at higher cost. As
discussed, we have begun to develop our agricultural capabilities in order to
control costs, particularly with respect to imported raw materials such as
Korean-style chestnuts.

Pricing for agricultural products reflects several external
factors, such as weather conditions and commodity market fluctuations, which are
beyond our control. We obtain contemporaneous information on local harvests and
collect daily reported price information on harvests in other markets from which
we procure our products. We also attempt to predict harvest yields in advance
based on our information gathering. We use this harvest information to negotiate
best pricing with our suppliers.

We impose strict standards on our suppliers. During the harvest
season, our internal procurement function may visit our sources of supply to
assure that the products we are purchasing comply with our standards.

Our Customers

We sell our products in 26 provinces and administrative regions
in China and 42 foreign countries globally. In 2010 and 2009, approximately
73.3% and 70.5%, respectively, of our sales were made domestically and
approximately 26.7% and 29.5%, respectively, were to international customers,
primarily Japan and South Korea.

Our top ten customers contributed 20.5% and 26.2% of our total
revenues in 2010 and 2009.  Approximately 11.2% in 2009 and 8.6% in 2010
were of our total sales were attributable to revenues from Shandong Lvan Import
& Export Co., Ltd., a food trading company in China.

Domestic

In China, we sell our products through our own sales team and
through third-party distributors. We have 36 sales offices in 21 provinces in
China. In 2010 and 2009, we sold approximately 89% and 82%, respectively, of our
products directly to our Chinese customers and approximately 11% and 18% through
third-party distributors.

We sell our products in all first-tier cities in China,
including Beijing, Shanghai, Tianjin and Guangzhou, through our own sales
efforts in order to capture the profit margin that would otherwise go to
intermediate wholesalers and to enhance our brand recognition. Our sales team
sells our products directly to supermarket chains, mass merchandisers, large
wholesalers and others in these markets. In second-tier and third-tier cities,
we currently sell our products to third-party distributors, such as food
companies or trading companies with established distribution channels in such
regions, rather than through our own sales team, in order to enable us to
penetrate such markets more quickly without spending significant capital. We
also sell to small customers through independent sales representatives.

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Generally, our direct sales customers are required to pay us on
30 to 60 day credit terms.Third-party distributors, however,
generally do not pay on credit, allowing us to obtain quicker payment terms and
thereby decrease our accounts receivables.

The terms of a typical sales contract between us and our
distributors provide that we are responsible for transportation costs and the
distributors are responsible for storage costs. Furthermore, the distributors
have the right to return products that fail to satisfy specified quality
standards, at our cost. The majority of such contracts require the distributors
to pay us in cash in full upon delivery, and the remaining contracts provide for
short-term credit, usually two to three weeks. In addition, we typically offer
distributors performance-based incentives, such as a cash bonus equal to 1% of
total revenues generated by such distributor which exceed previously established
sales targets.

We plan to gradually increase the portion of sales to third
party distributors in order to access new markets in China in a cost effective
manner and to improve our cash position. Such plans are subject to our ability
to restructure the sales force and manage the increased number of distributors
without compromising our profit margins.

International

Our export sales destinations include:

- Asia pacific, primarily Japan, South Korea and Malaysia, but also
  Singapore, Philippines, Indonesia and Australia;
- Europe, primarily Belgium and the United Kingdom, but also France,
  Germany, the Netherlands, Spain, Poland, and Denmark
- the Middle East, primarily Saudi Arabia, Kuwait and Israel;
- North America, including the United States and Canada

We generate most of our sales in Asia. In 2010 and 2009,
respectively, approximately 92.7% and 94.0% of our international sales were in
Asia and approximately 5.3% and 4.5% were in Europe.

We sell our products to international markets primarily through
export and trading agents and companies in China, as well as our own sales team
located in China. Our sales team sells directly to wholesalers, food processors
and mass merchandisers. Many of our customers are well known in their local food
market. We have established long-term relationships with many international
customers, especially in Japan and South Korea. We currently have no sales
offices outside of China and do not use alternative methods to sell our products
outside of China. We attend trade shows in Europe and other international
markets in order to promote our products.

In March 2011, the northern region of Japan experienced a
severe earthquake followed by a tsunami. These geological events caused
significant damage in that region and have adversely affected Japan's
infrastructure and economy. Several of our customers are located in Japan and
they may experience in the future shutdowns as a result of these events, and
their operations may be negatively impacted by these events. Japan accounted for
10.7% and 12.9% of our total revenue for the years ended December 31, 2010 and
2009, respectively. We do not expect the current crisis to harm our export sales
to Japan because most of our products are distributed to Tokyo, Osaka, Nagoya,
Kobe and Kyoto, which did not suffer direct damages in the earthquake or
tsunami. In addition, demand for chestnuts, as a substitute for certain staple
foods which may be of inadequate supply in certain regions in Japan, may
increase. Thus far, we have not seen any negative impact based on existing
export orders to Japan and do not foresee severe disruptions to our business.
However, should the situation in Japan worsen, our exports to Japan may be
negatively impacted.

Our Sales and Marketing Efforts

We seek to expand our customer base by:

- direct sales communications with our larger customers;
- sales through distributors to new customer bases;
- referrals from existing customers; and
- participation in domestic and international food exhibitions and trade
  conferences.

We have not spent a significant amount of capital on
advertising in the past, and our advertising budget continues to be limited. In
2010 our marketing and branding efforts included supermarket advertising,
internet advertising and contract with a local celebrity to promote certain
convenience food products. We intend to increase our advertising and branding
efforts given the consumer nature for many of our products. For the near future,
our marketing efforts will continue to focus primarily on the domestic Chinese
market for our chestnut and convenience food products.

Competition and Market Position

The overall food market is diverse, both globally and in China.
We do not have a significant market share in any of our business segments.

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Chestnut Products

We compete in the chestnut market primarily on the basis of the
uniqueness of our products, quality, price and brand recognition. We also
utilize our proprietary, patented and patent-pending technology in the
production of our chestnut products to our competitive advantage.

The world market for chestnut products is highly fragmented.
Our principal competitors in the chestnut product market are currently Hebei
Liyuan, a Chinese company, and Foodwell Corporation, a South Korean company.

Convenience Food Products

Convenience food products market competition is based mostly
upon quality and product variety. We attempt to use our modern food processing
technology, such as nitrogen preservation, to produce a wide variety of high
quality convenience foods.

The convenience food market in China is highly fragmented and
we do not face competitive pressure from any particular competitor or small
group of competitors.

Frozen Food Products

In the frozen food product market, competition is based
primarily upon quality, ability to provide a reliable product supply and
customer relationships.

Our strongest competitors in the frozen food products market
are currently Weifang Langdong Food Co. Ltd., Yuyao Hongji Food Co. Ltd. and
Yantai Pengshun Food Co. Ltd., all of which are located in China.

Competitive Advantages

We believe that we enjoy a number of competitive advantages,
both domestically and internationally.

We have developed brand equity for our chestnut products in
China, Japan and South Korea over the past 10 to 15 years. Our customers are
willing to pay a premium for some of our chestnut products because of our brand
equity. In addition, we believe that we have a strong distribution channel for
our products in the markets in which we currently operate.

We believe that we are able to provide our customers with
greater selection and a more reliable supply than many of our competitors, which
is especially important for our supermarket chain and large wholesaler
customers. We produced 52 chestnut products in 2010. We believe that we are the
sole provider of certain bottom-open chestnut and sweetheart chestnut products
in China.

Labor is a large portion of total operating costs for food
companies. We believe that we have a lower labor cost structure and a more
abundant labor supply than many of our international competitors.

We are focused on managing our costs in other ways as well. We
seek to locate our production facilities in close proximity to our main domestic
sources of raw materials supply to reduce transportation costs and give us
first-hand knowledge of market factors affecting our cost of raw material
supply. Our agricultural self-supply program, while modest at present, is
expected to grow and to become a significant element of our cost containment
efforts.

We use modern food processing technology and innovation in our
formulations and manufacturing processes to create high quality products.
Nitrogen preservation in particular, used in the production of convenience
foods, is an innovative technology which has not been widely applied in China.

In 2008, we submitted an application for patent protection in
the PRC for two of our technologies which support the production of our chestnut
and convenience food products, with one successful patent grant and one denial.
During 2009 and 2010, we submitted four additional patent applications, which
are currently under review. These applications are still pending approval. (See
Intellectual Property below.) We believe that our technology gives us an
advantage over our Chinese competitors, allowing us to produce chestnut and
convenience food products that are superior in quality and to offer more
products varieties.

We believe that our reputation for quality also contributes to
our competitiveness. We maintain high food safety standards, in order to satisfy
both domestic and international requirements. We regularly test our products for
quality and compliance with standards.

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Intellectual Property

Trademarks

We use the trademarks
and
on all of our products sold in China.

Patents

We have developed the following three proprietary technologies
to support our chestnut and convenience food production:

- The sweetheart chestnut is a premium product that is more expensive, and
  yields greater profit margins than our other chestnut products. Our
  proprietary technology relates to the process for evenly distributing
  throughout the chestnuts the syrup used to preserve the chestnuts. This
  technology enhances the texture of the chestnuts, preserves the natural form
  of the chestnuts and promotes the stability and uniformity of the chestnuts
  sweetness. In 2008, our patent application for this technology was approved by
  the State Intellectual Property Office of the PRC and is protected by PRC
  patent law for 20 years. We expect this technology to contribute to the growth
  of our sales of sweetheart chestnuts, which had been increasing at an annual
  rate of 25% to 30% over the past several years.
- Oden is a popular traditional Japanese dish, typically consisting of
  boiled eggs, daikon radish, konnyaku and processed fish cakes stewed in a
  light, soy-flavored dashi broth. Our technology relates to the process used to
  control the sterilization of the packaging for oden eggs. Our technology
  enables us to deliver convenience food products with unique freshness and
  authentic taste. This technology has been an important factor in expanding the
  market for our convenience foods products, particularly in Japan. Our patent
  application for this product was approved by the State Intellectual Property
  Office in February 2009.
- The pickle vegetable exhibition counter is ideal for shopping malls and
  supermarkets. It consists of the refrigerator cabinet which keeps the
  temperature low, and the exhibition cabinet, which sits above the refrigerator
  cabinet and with glass covers. The exhibition counter is intended for
  convenience observation and better preservation for the pickle vegetables. Our
  patent for this device was granted in April 2009.

We also have four patent applications pending with the State
Intellectual Property Office of the PRC, including the preparation of aerated
snack beans, frozen bottom open chestnuts, as well as the device and the
preparation procedure for chestnut roasting within a high pressure cylinder
device. The approval for patents typically takes 3 to 4 years.

We take reasonable steps to protect our proprietary information
and trade secrets, such as limiting disclosure of proprietary plans, methods and
the like on a need-to-know basis and requiring employees with access to our
proprietary technology to enter into confidentiality arrangements. We believe
that our proprietary technology and trade secrets are adequately protected.

Our Employees

As of December 31, 2010, we had a total of 2,050 full-time
employees and 467 part-time employees. 696 of our full-time employees are
directly employed by our subsidiary companies and the remaining employees are
employed by Linyi Zhifu Labor Service Company, an outside company that leases
employees to us to meet our staffing needs. As required by Chinese law, all
employees are party to a written employment contract. We compensate the
employees leased from Linyi Zhifu directly and pay Linyi Zhifu a service fee.
Linyi Zhifu is responsible for the pension and social insurance benefits of the
leased employees, as described below.

The following table sets forth the allocation of employees,
both direct and leased, by job function.

|Department               | Number of
|------------------------ | ---------
|                         | Employees
|                         |          
|Production               | 2,154    
|Quality Control          | 67       
|Domestic Sales           | 102      
|Human Resources          | 7        
|Research and Development | 40       
|International Sales      | 35       

|Finance            | 40   
|------------------ | -----
|Procurement        | 25   
|Administration     | 40   
|Strategic planning | 7    
|Total              | 2,517

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Our Shandong Lorain subsidiary has an employee relations
department for the purpose of advancing employee welfare, encouraging employee
participation in decision making and enhancing relations among employees and
between employees and our management team.

We compensate our production line employees by unit produced
(piece work) and compensate other employees with a base salary and bonus based
on performance. We also provide training for our staff from time to time to
enhance their technical and product knowledge, including knowledge of industry
quality standards.

Our employees in China participate in a state pension scheme
organized by Chinese municipal and provincial governments. We were required to
contribute to the scheme on behalf of our direct employees at a rate of 24% of
the average monthly salary for the years ended December 31, 2010 and 2009. In
addition, we are required by Chinese law to cover our employees with various
types of social insurance. We made contributions to the social insurance scheme
on behalf of our direct employees at a rate of 4% of the average monthly salary
for each employee for the years ended December 31, 2010, 2009, and 2008. As
indicated above, Linyi Zhifu is responsible for contributions on behalf of the
leased employees.

Our Research and Development Activities

Our research and development efforts are focused on three
objectives:

- Superior product safety and quality;
- Reduction of operating costs; and
- Sustaining growth through the development of new products.

We have research and development staff at each of our
facilities. In total, 40 employees are dedicated to research and development.

We rely heavily on customer feedback to assist us in the
modification and development of our products. We also utilize customer feedback
to assist us in the development of new products. Over the past several years, on
average, we added 10 to 20 new varieties to our product portfolio each year. In
2010, we added 15 new products, most in our chestnut and convenience foods
segment. In 2010, we discontinued 4 products,in the convenience food segment
primarily due to slow sales..

The amount we spent on research and development activities
during the years ended December 31, 2010 and 2009 was not a material portion of
our total expenses for those years.

Government Regulation

As a manufacturer and distributor of food products, we are
subject to regulations of Chinas Agricultural Ministry. This regulatory scheme
governs the manufacture (including composition and ingredients), labeling,
packaging and safety of food. It also regulates manufacturing practices,
including quality assurance programs, for foods through its current goods
manufacturing practices regulations, and specifies the standards of identity for
certain foods, including the products sold by us, and prescribes the format and
content of many of the products sold by us, the format and content of certain
nutritional information required to appear on food products labels and approves
and regulates claims of health benefits of food products.

We have obtained approvals from Chinese authorities for the
production of certain categories of products, including chestnuts, frozen
vegetables and fruits, fish, and canned products. Production of new products
that do not fall into approved categories of products would require separate
approval from the appropriate Chinese authorities. We have consistently obtained
such approvals for our newly developed products in the past and do not
anticipate any difficulties in obtaining new approvals in the future if needed.

In addition, we are required to obtain governmental approval,
and to register with the State Administration for Industry and Commerce, in
order to open a new facility in China. We have consistently obtained such
approvals, and made such registrations, for our new facilities in the past and
do not anticipate any difficulties in filing new registrations and obtaining new
approvals in the future if needed.

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Under the relevant Provisions of the PRC on Sanitation of Food
for Export (for Trial Implementation), unless an exporters products are
exempted from inspection, products must be inspected in accordance with the Law
of the PRC on Import and Export Commodity Inspection. We have not been exempted
from inspection. In the past, we were authorized by the relevant authorities to
conduct self-inspection of certain of our export products. However, currently,
the relevant authorities have imposed tighter food safety control in China, and
as a result, all of our exported food products must be inspected by qualifying
government agencies. We believe that all of our exported products are currently
in compliance with such requirements and we do not anticipate any difficulties
in complying with such rules in the future.

In addition, we are required to obtain a license from the local
branch of the Entry-Exit Inspection and Quarantine Bureau of China for our
exported products. We have consistently obtained such licenses in the past and
we do not anticipate any difficulties in obtaining such licenses in the future.

Item 1A. RISK FACTORS

RISK FACTORS

From time to time, information provided by us, including but
not limited to statements in this report, or other statements made by or on our
behalf, may contain forward-looking information within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements involve a
number of risks, uncertainties, and contingencies, many of which are beyond our
control, which may cause actual results, performance, or achievements to differ
materially from those anticipated. Set forth below are important factors that
could cause our results, performance, or achievements to differ materially from
those in any forward-looking statements made by us or on our behalf.

Business Risks

We may not be able to obtain an adequate supply of high
quality raw materials.

Our business depends on obtaining a reliable supply of various
agricultural products, including chestnuts, vegetables, fruits, red meat, fish,
eggs, rice, flour and packaging products. During 2010, the cost of our raw
materials increased from $81,501,168 to $102,751,348 for an increase of
approximately 26.1% . We may have to increase the number of our suppliers of raw
materials and expand our own agricultural operations in the future to meet
growing production demands. Despite our efforts to control our supply of raw
materials and maintain good relationships with our suppliers, we could lose one
or more of our suppliers at any time. The loss of several suppliers may be
difficult to replace and could increase our reliance on higher cost or lower
quality suppliers, which could negatively affect our profitability. In addition,
if we have to increase the number of our suppliers of raw materials in the
future to meet growing production demands, we may not be able to locate new
suppliers who could provide us with sufficient materials to meet our needs. Any
interruptions to, or decline in, the amount or quality of our raw materials
supply could materially disrupt our production and adversely affect our business
and financial condition and financial prospects.

The prices that we have paid for our raw materials
recently have experienced significant fluctuation. If these price fluctuations
continue, our profit margins may be materially adversely affected.

The average price that we paid for chestnuts in 2010 and 2009
was approximately $1,286 per metric ton and $868 per metric ton, respectively,
excluding value added taxes. We do not currently hedge against changes in our
raw material prices. Consequently, if the costs of our raw materials increase
further, and we are unable to offset these increases by raising the prices of
our products, our profit margins and financial condition could be adversely
affected.

Price inflation in China could affect our results of
operation if we are unable to pass along raw material price increases to our
customers.

Inflation in China has recently increased. Reports indicate
that inflation in China increased to a 28-month high in November 2010. Because
we purchase raw materials from suppliers in China, price inflation has recently
caused an increase in the cost of our raw materials. Price inflation could
affect our results of operation if we are unable to pass along raw material
price increases to customers. In addition, if inflationary trends continue in
China, China could lose its competitive advantage as a low-cost manufacturing
venue, which could in turn lessen some of the competitive advantages of our
being based in China. Accordingly, inflation in China may weaken our
competitiveness domestically or in international markets.

Our sales and reputation may be affected by product
liability claims, litigation or, product recalls in relation to our products.

The sale of products for human consumption involves an inherent
risk of injury to consumers. We face risks associated with product liability
claims, litigation, or product recalls, if our products cause injury or become
adulterated or misbranded. Our products are subject to product tampering and contamination, such as mold,
bacteria, insects, shell fragments and off-flavor contamination, during any of
the procurement, production, transportation and storage processes. If any of our
products were to be tampered with, or become tainted in any of these respects,
and we were unable to detect this, our products could be subject to product
liability claims or product recalls. Our ability to sell products could be
reduced if certain pesticides, herbicides or other chemicals used by growers
have left harmful residues on portions of our raw materials or if our raw
materials have been contaminated by other agents.

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We have never had a product recall in the past but we have
experienced product liability claims that were made by our customers. The
amounts of such claims were immaterial. However, claims of product defect or
product liability for material amounts, individually or in the aggregate, may be
made in the future.

We have not procured a product liability or general liability
insurance policy for our business, as the insurance industry in China is still
in an early stage of development. To the extent that we suffer a loss of a type
which would normally be covered by product liability or general liability
insurance in the United States, we would incur significant expenses in defending
any action against us and in paying any claims that result from a settlement or
judgment against us. Product liability claims and product recalls could have a
material adverse effect on the demand for our products and on our business
goodwill and reputation. Adverse publicity could result in a loss of consumer
confidence in our products.

We may be unable to manage future rapid growth.

We have grown rapidly over the last few years. Our sales
increased from $27,735,833 in 2004 to $184,176,567 in 2010. The number of
product types we sold increased from approximately 100 in 2004 to approximately
241 in 2010. We intend to continue to expand the volume and variety of products
we offer, as well as the geographical scope of our sales and production
facilities. Our business growth could place a significant strain on our
managerial, operational and financial resources. Our ability to manage future
growth will depend on our ability to continue to implement and improve
operational, financial and management information systems on a timely basis and
to expand, train, motivate and manage our workforce. Our personnel, systems,
procedures and controls may not be adequate to support our future growth.
Failure to effectively manage our expansion may lead to increased costs, a
decline in sales and reduced profitability.

Our expansion strategy may not prove successful and could
adversely affect our existing business.

Our growth strategy includes the expansion of our manufacturing
operations, including new production lines and agricultural operations. We plan
to expand our sales in China and internationally. We will need to engage in
various forms of promotional and marketing activities in order to further
develop the branding of our products and to increase our market share in new and
existing markets. The implementation of this strategy may involve large
transactions and present financial, managerial and operational challenges. We
could also experience financial or other setbacks if any of our growth
strategies incur problems of which we are not presently aware. If we fail to
generate sufficient sales in new markets or increase our sales in existing
markets, we may not be able to recover the production, distribution, promotional
and marketing expenses, as well as administrative costs we have incurred in
developing such markets.

Our results of operations could be affected by natural
events in the locations in which our customers operate.

Several of our customers have operations in locations that are
subject to natural disasters, such as severe weather and geological events,
which could disrupt the operations of those customers and suppliers as well as
our operations. For example, in March 2011, the northern region of Japan
experienced a severe earthquake followed by a tsunami. These geological events
caused significant damage in that region and have adversely affected Japan's
infrastructure and economy. Several of our customers are located in Japan and
they may experience in the future shutdowns as a result of these events, and
their operations may be negatively impacted by these events. As a result, some
or all of those customers may reduce their orders for our products, which could
adversely affect our revenue and results of operations. In addition to the
negative direct economic effects of recent events on the Japanese economy and on
our customers and suppliers located in Japan, economic conditions in Japan could
also adversely affect regional and global economic conditions. The degree to
which these events, as well as future events, in Japan will adversely affect
regional and global economies remains uncertain at this time. However, if these
events cause a decrease in demand for our products, our financial condition and
operations could be adversely affected.

The acquisition of other businesses could pose risks to
our profitability.

We may try to grow through acquisitions in the future. Any
proposed acquisition could result in accounting charges, potentially dilutive
issuances of equity securities, and increased debt and contingent liabilities,
any of which could have a material adverse effect on our existing business and
the market price of our common stock. Acquisitions, in general, entail many
risks, including risks relating to the failed integration of the acquired
operations, diversion of managements attention, and the potential loss of key
employees of the acquired organizations. We may be unable to successfully
integrate businesses or the personnel of any business that might be acquired in
the future, and our failure to do so could have a material adverse effect on our
business and on the market price of our common stock.

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We are subject to risks of doing business
internationally. If the international market does not grow as we expect, our
business and financial condition may be adversely affected.

We conduct a substantial amount of business internationally.
Our export sales destinations include countries in Asia, Europe, the Middle East
and North America. Our international operations are subject to a number of
inherent risks, including:

- chestnut products may not be widely recognized internationally, especially
  in Western countries;
- local economic and political conditions, including disruptions in trading
  markets;
- restrictive foreign governmental actions, including restrictions on
  transfers of funds and trade;
- protection measures, including export duties and quotas and customs
  tariffs;
- currency exchange rate fluctuations;
- earthquakes, tsunamis, floods or other major disasters may limit the
  imported food products; and
- unexpected incidents related to food safety.

Any of the foregoing risks could have a material and adverse
effect on our operating results.

A significant amount of our revenues is dependent on a
limited number of customers and the loss of any one of our major customers could
materially and adversely affect our growth and our revenues.

A significant portion of our revenues has historically been
derived from a limited number of customers, particularly in our chestnut
products segment. Sales to our five largest customers accounted for
approximately 21% and 16% of our total revenues in 2009 and 2010, respectively.
The loss of any one of these customers, or a material decrease in purchases by
any one of these customers, could adversely impact our revenues.

We rely primarily on distributors to sell our products.
Any delays in delivery or poor handling by our distributors or third-party
transport operators may affect our sales and damage our reputation.

In 2010, we sold our products through over 100 distribution
service providers. The services provided could be suspended and could cause
interruption to the supply of our products to domestic or overseas customers.
Delivery disruptions may occur for various reasons beyond our control, including
poor handling by service providers or third party transport operators,
transportation bottlenecks, natural disasters and labor strikes, and could lead
to delayed, damaged or lost deliveries. If our products are not delivered in a
timely manner, our reputation could be harmed. If our products are damaged in
the process of being delivered, we may be liable to pay for such damages
incurred.

Failure of the market to accept our new products, or
failure to obtain regulatory approval for our new products, may cause us to lose
our competitive position in the food industry.

We introduced 19 new products in 2009 and 15 new products in
2010. We plan to introduce approximately 10 to 20 new products in 2011. The
success of the new products we introduce depends on our ability to anticipate
the tastes and dietary habits of consumers and to offer products that appeal to
their preferences. We intend to introduce new products as well as alternative
flavors, sizes and packaging for our existing products. We may not be able to
gain market acceptance for our new products. Consumer preferences change, and
any new products that we introduce may fail to meet the particular tastes or
requirements of consumers, or may be unable to replace their existing
preferences. Our failure to anticipate, identify or react to these particular
tastes or changes could result in reduced demand for our products, which could
in turn cause us to be unable to recover our development, production and
marketing costs.

We are dependent on certain key personnel and loss of
these key personnel could have a material adverse effect on our research and
development, operations and revenue.

The Lorain Group Companies were founded in 1995 by Si Chen, our
Chairman and Chief Executive Officer. Mr. Chen, together with other senior
management, has been a key driver of our strategy and has been fundamental to
our achievements to date. The successful management of our business is, to a
considerable extent, dependent on the services of Mr. Chen and other senior
management. We compete for qualified personnel with other food processing
companies, food retailers and research institutions. Consequently, we may either
lose key employees to our competitors or we may need to significantly increase
the compensation of such employees in order to retain them. The loss of the
services of any key management employee or failure to recruit a suitable or
comparable replacement could have a significant impact upon our ability to
manage our business effectively, and our business and future growth may be
adversely affected.

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We face increasing competition from domestic and foreign
companies.

The food industry in China is fragmented. Our ability to
compete against other national and international enterprises is, to a
significant extent, dependent on our ability to distinguish our products from
those of our competitors by providing large volumes of high quality products
that appeal to consumers tastes and preferences at reasonable prices. Some of
our competitors have been in business longer than we have and are more
established. Our competitors may provide products comparable or superior to
those we provide or adapt more quickly than we do to evolving industry trends or
changing market requirements. Increased competition may result in price
reductions, higher raw materials prices, reduced margins and loss of market
share, any of which could materially adversely affect our profit margins.

An increase in the cost of energy could affect our
profitability.

Recently, we have experienced significant increases in energy
costs, and energy costs could continue to rise, which would result in higher
distribution, freight and other operating costs. Our future operating expenses
and margins will be dependent on our ability to manage the impact of cost
increases.

Our products are subject to counterfeiting or imitation,
which could impact our reputation.

To date, we have experienced limited counterfeiting and
imitation of our products. However, counterfeiting or imitation of our products
may occur in the future and we may not be able to detect it and deal with it
effectively. Any occurrence of counterfeiting or imitation could impact
negatively upon our reputation, particularly if the counterfeit or imitation
products cause sickness, or injury to consumers. In addition, counterfeit or
imitation products could result in our need to incur costs with respect to the
detection or prosecution of such activities.

We rely on an outside contractor to provide a majority of
our labor.

We have hired Linyi Zhifu Labor Service Company to provide
employees to our production facilities. Should Linyi Zhifu Labor Service Company
be unable to continue to provide the number of employees we need, our production
could be disrupted. In addition, Linyi Zhifu Labor Service Company could raise
their service fees or terminate their relationship with us in the future, which
may result in increased production costs.

Regulatory Risks

We are subject to extensive regulations by the Chinese
government.

The food industry is subject to extensive regulations by
Chinese government agencies. Among other things, these regulations govern the
manufacturing, importation, processing, packaging, storage, exportation,
distribution and labeling of our products. New or amended statutes and
regulations, increased production at our existing facilities, and our expansion
into new operations and jurisdictions may require us to obtain new licenses and
permits and could require us to change our methods of operations at costs that
could be substantial.

Our failure to comply with PRC environmental laws may
require us to incur significant costs.

We carry on our business in an industry that is subject to PRC
environmental protection laws and regulations. These laws and regulations
require enterprises engaged in manufacturing and construction that may cause
environmental waste to adopt effective measures to control such waste. In
addition, such enterprises are required to pay fines, or to cease operations
entirely under extreme circumstances, should they discharge waste substances.
The Chinese government may also change the existing laws or regulations or
impose additional or stricter laws or regulations, compliance with which may
cause us to incur significant capital expenditures, which we may be unable to
pass on to our customers through higher prices for our products.

Our failure to comply with PRC hygiene laws may require
us to incur significant costs.

Manufacturers in the Chinese food industry are subject to
compliance with PRC food hygiene laws and regulations. These food hygiene laws
require all enterprises engaged in the production of chestnuts and various
vegetables and fruits to obtain a hygiene license for each of their production
facilities. Such laws also require manufacturers to comply with regulations with
respect to food, food additives, packaging, and food production sites,
facilities and equipment. Failure to comply with PRC food hygiene laws may
result in fines, suspension of operations, loss of hygiene licenses and, in more
extreme cases, criminal proceedings against an enterprise and its management.
The Chinese government may also change the existing laws or regulations or
impose additional or stricter laws or regulations, compliance with which may
cause us to incur significant capital expenditures, which we may be unable to pass on to our customers through higher prices for our
products.

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Financial Risks

Our operations are cash intensive, and our business could
be adversely affected if we fail to maintain sufficient levels of working
capital.

We spend a significant amount of cash on our operations,
principally to procure raw materials for our products. Many of our suppliers,
including chestnut, vegetable and fruit farmers, and suppliers of packaging
materials, do not allow us to pay on credit. However, some of the suppliers with
whom we have a long-standing business relationship allow us to pay on credit. We
fund the majority of our working capital requirements out of cash flow generated
from operations. If we fail to generate sufficient sales, or if our suppliers
stop offering us credit terms, we may not have sufficient liquidity to fund our
operating costs and our business could be adversely affected.

We also fund approximately 37% of our working capital
requirements from the proceeds of short-term loans from Chinese banks. We expect
to continue to do so in the future. Such loans are generally secured by our
fixed assets, receivables and/or guarantees by third parties. Our average loan
balance from short-term bank loans in 2009 was approximately $32.7 million. The
term of almost all such loans is one year or less. Historically, we have rolled
over such loans on an annual basis. However, we may not have sufficient funds
available to pay all of our borrowings upon maturity. Failure to roll over our
short-term borrowings at maturity or to service our debt could result in the
imposition of penalties, including increases in rates of interest, legal actions
against us by our creditors, or even insolvency. In addition, in 2007, 2008 and
2009, we funded approximately $8.8 million, in the aggregate, of our working
capital requirements from the proceeds of two private placement transactions
conducted in May 2007 and October 2009. We can provide no assurances that we
will be able to enter into any future financing or refinancing agreements on
terms favorable to us, especially considering the current instability of the
capital markets.

Management anticipates that our existing capital resources and
cash flows from operations and current and expected short-term bank loans will
be adequate to satisfy our liquidity requirements through 2010. However, if
available liquidity is not sufficient to meet our operating and loan obligations
as they come due, our plans include considering pursuing alternative financing
arrangements or further reducing expenditures as necessary to meet our cash
requirements. However, there is no assurance that, if required, we will be able
to raise additional capital or reduce discretionary spending to provide the
required liquidity. Currently, the capital markets for small capitalization
companies are difficult and banking institutions have become stringent in their
lending requirements. Accordingly, we cannot be sure of the availability or
terms of any third party financing.

We are subject to credit risk in respect of account
receivables.

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

The discontinuation of any preferential tax treatment or
other incentives currently available to us in the PRC could materially and
adversely affect our business, financial condition and results of operations.

Our subsidiaries are entitled to certain special or
preferential tax treatments regarding foreign enterprise income tax in
accordance with the Income Tax Law of the PRC for Enterprises with Foreign
Investment and Foreign Enterprises and related rules.

Accordingly, we have been entitled to tax concessions whereby
the profit for the first two financial years beginning with the first
profit-making year (after setting off tax losses carried forward from prior
years) is exempt from income tax in the PRC and the profit for each of the
subsequent three financial years is taxed at 50% of the prevailing tax rates set
by the relevant tax authorities. However, on March 16, 2007, the PRCs National
Peoples Congress passed a new corporate income tax law, which became effective
on January 1, 2008. This new corporate income tax unifies the corporate income
tax rate, cost deduction and tax incentive policies for both domestic and
foreign-invested enterprises. According to the new corporate income tax law, the
applicable corporate income tax rate of our operating subsidiaries has been
increased to a rate of 25% over a five-year grandfather period. This tax rate
increase applies across the board, for all enterprises whether domestic or
foreign. The PRC government has established a set of transition rules to allow
enterprises that already started tax holidays before January 1, 2008, to
continue utilizing the tax holidays until fully utilized. The discontinuation of
any such special or preferential tax treatment or other incentives could have an
adverse affect on our business, financial condition and results of operations.

In addition, under current PRC tax law, regulations and
rulings, dividends from our operations in China paid to us are not currently subject to PRC income tax. If these distributions become
subject to tax in the future, our net income would be adversely affected.

- 18 -

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We may enter into additional financing agreements which
may have a dilutive effect to our earnings per share and the rights of certain
stockholders.

Additional financings could result in significant dilution to
our earnings per share or the issuance of securities with rights superior to our
current outstanding securities. For instance, we may grant registration rights
to investors purchasing our equity or debt securities in the future.

We may be unable to raise additional capital.

If we are unable to raise additional financing when needed, we
may be unable to implement our long-term business plan, develop or enhance our
products and services, take advantage of future opportunities or respond to
competitive pressures on a timely basis, if at all. In addition, a lack of
additional financing could force us to substantially curtail or cease
operations.

We may be exposed to potential risks relating to our
internal control over financial reporting and our ability to have such controls
attested to by our independent auditors.

The SEC, under Section 404 of the Sarbanes-Oxley Act of 2002,
adopted rules requiring public companies to provide in their annual reports on
Form 10-K a report by management with respect to the companys disclosure
controls and procedures and internal control over financial reporting. We are
currently required to comply with this requirement. In addition, such rules
require the independent registered public accounting firm auditing a companys
financial statements to attest to the operating effectiveness of such companys
internal controls. However, we are not subject to the requirements of SOX 404(b)
until our fiscal year ended December 31, 2010. We can provide no assurance that
we will comply with all of the requirements imposed thereby. Further, we cannot
assure that we will receive a positive attestation from our independent
auditors. Investors and others may lose confidence in the reliability of our
financial statements in the event we identify significant deficiencies or
material weaknesses in our internal controls that we cannot remediate in a
timely manner or if we are unable to receive a positive attestation from our
independent auditors with respect to our internal controls.

Risks Related To Doing Business In China

Changes in Chinas political or economic situation could
harm us and our operating results.

Economic reforms adopted by the Chinese government have had a
positive effect on the economic development of the country. However, the Chinese
government could change these economic reforms at any time. Such changes could
negatively impact our operations and profitability.

The structure of the Chinese economy may inhibit our
ability to expand our business.

The Chinese economy differs from the economies of most
countries belonging to the Organization for Economic Cooperation and
Development, or OECD, in several ways. For example, state-owned enterprises
constitute a large portion of the Chinese economy. In addition, weak corporate
governance practices and the lack of flexible currency exchange policies
continue to persist. As a result of these differences, we may not develop in the
same way or at the same rate as might be expected if the Chinese economy were
similar to those of the OECD member countries.

Our business is largely subject to the uncertain legal
environment in China.

The Chinese legal system is a civil law system based on written
statutes. Unlike common law systems, it is a system in which precedents set in
earlier legal cases are not generally used. Laws, regulations and legal
requirements relating to foreign investments in China are still evolving, and
their interpretation and enforcement involve uncertainties. These uncertainties
could limit the legal protections available to foreign investors, such as the
right of foreign enterprises to hold required business licenses and permits.

It may be difficult for our stockholders to affect
service of process against our subsidiaries or our officers and directors.

Our operating subsidiaries were organized under the laws of
China and substantially all of their assets are located outside the U.S. In
addition, our executive officers and directors are residents of China and
substantially all of their assets are located outside the U.S. As a result, it
could be difficult for our stockholders to affect service of process in the
U.S., or to enforce a judgment obtained in the U.S., against our officers and
directors.

- 19 -

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Restrictions on currency exchange may limit our ability
to receive and use our revenues effectively.

The majority of our revenues are settled in Renminbi and U.S.
dollars, and any future restrictions on currency exchanges may limit our ability
to use revenue generated in Renminbi to fund any future business activities
outside China or to make dividends or other payments in U.S. dollars. Although
the Chinese government introduced regulations in 1996 to allow greater
convertibility of the Renminbi for current account transactions, significant
restrictions still remain. For instance, foreign enterprises may only buy, sell
or remit foreign currencies after providing valid commercial documents at banks
in China authorized to conduct foreign exchange business. In addition,
conversion of Renminbi for capital account items, including direct investment
and loans, is subject to governmental approval in China, and companies are
required to open and maintain separate foreign exchange accounts for capital
account items. The Chinese regulatory authorities may impose more stringent
restrictions on the convertibility of the Renminbi in the future.

Failure to comply with PRC regulations relating to the
establishment of offshore special purpose companies by PRC residents may have
negative effects on our company.

In October 2005, the PRC State Administration of Foreign
Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange
Control over Financing and Return Investment Through Special Purpose Companies
by Residents Inside China, generally referred to as Circular 75, which required
PRC residents to register with the local SAFE branch before establishing or
acquiring control over an offshore special purpose company, or SPV, for the
purpose of engaging in an equity financing outside of China on the strength of
domestic PRC assets originally held by those residents. Internal implementing
guidelines issued by SAFE, which became public in June 2007 (known as Notice
106), further expanded the reach of Circular 75.

ILH acquired certain interests in the Lorain Group Companies
controlled by Si Chen, our Chairman and Chief Executive Officer. Pursuant to
Notice No. 75 and Notice 106, if a PRC resident has completed a round-trip
investment through its established SPV but has not yet completed the required
procedures of SAFE registration for offshore investment of the SPV, he must
retroactively register the SPV with SAFE.

In order to avoid such SAFE registration requirements, a
Japanese individual, Hisashi Akazawa, was designated as a nominee holder of ILH
when ILH was established. Mr. Akazawa granted an option to our Chairman and
Chief Executive Officer, Mr. Chen, allowing Mr. Chen to buy 90% of Mr. Akazawas
interest in the Company at a fixed price at a future time in accordance with the
terms of an option agreement between the two parties. On December 22, 2008, Mr.
Chen exercised this option. In addition, on that date, Mr. Chen acquired all of
the remaining shares of our company held by Mr. Akazawa. As a result, Mr. Chen
is the beneficiary of ILH and may be required to register with and obtain
approvals from SAFE or its agency in connection with respect to the direct
offshore investment activities related to the acquisition of the Lorain Group
Companies.

If the failure to identify and characterize Mr. Chen as a
beneficial owner of ILH is determined by the PRC authorities to be a serious
violation of the requirements of the PRC Company Law and the PRC Regulation of
Registration of Companies, the Lorain Group Companies may be ordered by the
company registration authority in the PRC to make corrections on its filed
registration, to be fined an amount no less than RMB 5,000 and no more than RMB
50,000 or, in the worse scenario, to have its company registration certificate
revoked or its business licenses canceled.

Moreover, because of uncertainty over how Circular 75 will be
interpreted and implemented, and how or whether SAFE will apply it to us, we
cannot predict how it will affect our business operations or future strategies,
such as our present and prospective PRC subsidiaries ability to conduct foreign
exchange activities including the remittance of dividends and foreign
currency-denominated borrowings. In addition, our PRC resident beneficial
holders may be subject to compliance with Circular 75. Such holders may not be
able to complete the necessary registration procedures required by Circular 75.

Our financial condition is affected by the foreign
exchange rate between the U.S. dollar and the Renminbi.

Our financial condition is affected by the foreign exchange
rates, primarily the rate between the U.S. dollar and the Renminbi. In the event
that the Renminbi appreciates against the U.S. dollar, our costs will increase.

Risks Related To the Market For Our Stock

Certain of our stockholders have the ability to delay or
prevent adoption of important business decisions based on their ownership of a
significant percentage of our outstanding voting securities.

Mr. Chen is the record owner of approximately 47% of our
outstanding voting securities. As a result, he possesses significant influence
over our business. For instance, Mr. Chen may elect our board of directors,
authorize significant corporate transactions or prevent a future change in
control of our company.

- 20 -

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Certain provisions of our Certificate of Incorporation
may make it more difficult for a third party to effect a change- in-control.

Our Certificate of Incorporation authorizes our board of
directors to issue up to 5,000,000 shares of preferred stock without stockholder
approval. The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the board of directors
without further action by the stockholders. These terms may contain voting
rights, including the right to vote as a series on particular matters,
preferences as to dividends and liquidation, conversion rights and redemption
rights provisions. The issuance of any preferred stock could diminish the rights
of holders of our common stock, and therefore could reduce the value of such
common stock. In addition, specific rights granted to future holders of
preferred stock could be used to restrict our ability to merge with, or sell
assets to, a third party. The ability of our board of directors to issue
preferred stock could make it more difficult to acquire our company and could
negatively affect the market price of our common stock.

The exercise of outstanding warrants issuable for shares
of our common stock may cause dilution to existing shareholders.

There are currently warrants outstanding to purchase up to an
aggregate of 2,336,179 shares of our common stock. The term of 1,753,909 of
these warrants expire in April 2015, the term of 501,115 of these warrants
expire in October 2012, and the term of 81,155 of these warrants expire in
January 2014. The exercise prices of these warrants range from $2.81 to $4.25
per share, subject to adjustment. If holders of these warrants exercise the
warrants in exchange for shares of our common stock, such issuances may have a
dilutive effect on the stock ownership of existing shareholders and may harm the
market price of our stock. Furthermore, if we were to attempt to obtain
additional financing during the term of these warrants, the terms on which we
obtain such financing may be adversely affected by the existence of these
warrants.

We do not expect to pay dividends in the future, and any
return on your investment may be limited to the value of the shares you acquire.

Other than a special cash dividend which we paid to holders of
our common stock as of April 16, 2007, we have never declared or paid cash
dividends. We do not anticipate paying any cash dividends on our common stock in
the foreseeable future and any return on your investment may be limited to the
value of the shares of our common stock that you acquire. We currently intend to
retain and use any future earnings for the development and expansion of our
business.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

Our primary facilities, which are owned except where otherwise
indicated, are as follows:

|Facility          | Location                                      | Approximate Size | Owned or Leased
|----------------- | --------------------------------------------- | ---------------- | ---------------
|                  |                                               | (Square Meters)  |                
|                  |                                               |                  |                
|Junan Hongrun     | Junan County,
      Shandong Province, PRC    | 171,931          | Owned          
|Shandong Lorain   | Junan County, Shandong
      Province, PRC    | 31,459           | Owned          
|Beijing Lorain    | Miyun County,
      Beijing Province, PRC     | 22,677           | Owned          
|Luotian Lorain    | Luotian County, Hubei
      Province, PRC     | 54,251           | Owned          
|Dongguan Lorain   | Dongguan County,
      Guandong Province, PRC | 5,472            | Leased         
|Shandong Greenpia | Junan County, Shandong
      Province, PRC    | 33,332           | Owned          

We also own or lease space for additional facilities, including
refrigerated storage facilities, and smaller offices, including sales offices,
located in China.

In the aggregate, we currently have land use rights to, or
lease, 73 properties with approximately 319,122 square meters in the aggregate,
consisting of manufacturing facilities, office buildings and land reserved for
future expansion. We believe our current facilities provide adequate capacity
for our current and projected needs.

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All land in China is owned by the State. Individuals and
companies are permitted to acquire rights to use land or land use rights for
specific purposes. In the case of land used for industrial purposes, the land
use rights are granted for a period of up to 50 years. This period may be
renewed at the expiration of the initial and any subsequent terms. Granted land
use rights are transferable and may be used as security for borrowings and other
obligations.

Item 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits
and legal proceedings which arise in the ordinary course of business. However,
litigation is subject to inherent uncertainties, and an adverse result in these
or other matters may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will
have a material adverse affect on our business, financial condition or operating
results.

Item 4. (REMOVED AND RESERVED)

Not applicable.

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES.

Market for our Common Stock

Our common stock is quoted on the NYSE AMEX under the symbol
ALN. As of March 30, 2011 the closing price for our common stock was $2.51 per
share.

The following table sets forth, for the periods indicated, the
high and low sales prices of our common stock. These prices reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.

|                                    |   | Common Stock  | 
|----------------------------------- | - | ------------- | 
|                                    |   | Market Prices | 
|                                    |   | High          | 
|Fiscal Year Ended December 31, 2010 |   |               | 
|First Quarter                       | $ | 4.02          | 
|Second Quarter                      | $ | 3.60          | 
|Third Quarter                       | $ | 3.39          | 
|Fourth Quarter                      | $ | 3.13          | 
|                                    |   |               | 
|Fiscal Year Ended December 31, 2009 |   |               | 
|First Quarter                       | $ | 1.06          | 
|Second Quarter                      |   | 2.52          | 
|Third Quarter                       |   | 2.95          | 
|Fourth Quarter                      |   | 3.34          | 

Approximate Number of Holders of Our Common
Stock

On December 31, 2010, there were 298 stockholders of record of
our common stock.

Dividend Policy

We have not declared or paid cash dividends other than the
payment of a dividend in April 2007 in connection with our reverse merger. Any
future decisions regarding dividends will be made by our board of directors. We
currently intend to retain and use any future earnings for the development and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.

Issuances of Unregistered Securities

On January 5, 2010, we issued warrants to three service
providers. These warrants are exercisable into an aggregate of 81,155 shares of
our common stock and the warrants expire in January 2014. Based upon certain
representations made by the grantees of these warrants, as set forth in the
warrants, the warrants were issued pursuant to an exemption from registration
under Section 4(2) of the Securities Act.

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EQUITY COMPENSATION PLAN INFORMATION

Information for our equity compensation plans in effect as of
the end of fiscal year 2010 is as follows:

|                                                             |  | (a)           |  |  | (b)               |  |  | (c)           | 
|------------------------------------------------------------ |  | ------------- |  |  | ----------------- |  |  | ------------- | 
|                                                             |  | Number of     |  |  | Weighted-average  |  |  | Number of     | 
|                                                             |  | securities to |  |  | exercise price of |  |  | securities    | 
|                                                             |  | be issued     |  |  | outstanding       |  |  | remaining     | 
|                                                             |  | upon          |  |  | options, warrants |  |  | available for | 
|                                                             |  | exercise of   |  |  | and rights        |  |  | future        | 
|                                                             |  | outstanding   |  |  |                   |  |  | issuance      | 
|                                                             |  | options,      |  |  |                   |  |  | under equity  | 
|                                                             |  | warrants      |  |  |                   |  |  | compensation  | 
|                                                             |  | and rights    |  |  |                   |  |  | plans         | 
|                                                             |  |               |  |  |                   |  |  | (excluding    | 
|                                                             |  |               |  |  |                   |  |  | securities    | 
|                                                             |  |               |  |  |                   |  |  | reflected in  | 
|                                                             |  |               |  |  |                   |  |  | column (a))   | 
|Plan category                                                |  |               |  |  |                   |  |  |               | 
|Equity compensation plans approved by
      security holders |  | 1,334,573     |  |  | 1.58              |  |  | 1,165,427     | 
|Equity compensation plans not approved by security holders   |  | 0             |  |  | N/A               |  |  | 0             | 
|Total                                                        |  | 1,334,573     |  |  | 1.58              |  |  | 1,165,427     | 

|Item 6. SELECTED FINANCIAL DATA                                                                                                                                              
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                             
|Not applicable.                                                                                                                                                              
|                                                                                                                                                                             
|Item 7. MANAGEMENTS DISCUSSION AND
      ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                                          
|                                                                                                                                                                             
|Overview                                                                                                                                                                     
|                                                                                                                                                                             
|We are an integrated food manufacturing company
      headquartered in Shandong Province, China. We develop, manufacture and
      sell the following types of food products:

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

We conduct our production activities in China. Our products are
sold in 26 provinces and administrative regions in China and 42 foreign
countries. We believe that we are the largest chestnut processor and
manufacturer in China. We have developed brand equity for our chestnut products
in China, Japan and South Korea over the past 10 to 15 years. We produced 57
high value-added processed chestnut products in 2010. We derive most of our
revenues from sales in China, Japan and South Korea. In 2010, our primary
strategy was to expand our brand equity in the Chinese market for our
convenience food products while maintaining the steady growth and brand
recognition for our chestnut products and frozen products, we will continue to
execute in 2011. In addition, we are working to expand our marketing efforts in
Asia, Europe and the Middle East. We currently have limited sales and marketing
activity in the United States, although our long-term plan is to significantly
expand our activities there.

Production Factors that Affect our Financial and
Operational Condition

Our business depends on obtaining a reliable supply of various
agricultural products, including chestnuts, vegetables, fruits, red meat, fish,
eggs, rice, flour and packaging products. During 2010, the cost of our raw
materials increased from $81,501,168 to $102,751,348, for an increase of
approximately 26.1% . We may have to increase the number of our suppliers of raw
materials and expand our own agricultural operations in the future to meet
growing production demands. Despite our efforts to control our supply of raw
materials and maintain good relationships with our suppliers, we could lose one
or more of our suppliers at any time. The loss of several suppliers may be
difficult to replace and could increase our reliance on higher cost or lower
quality suppliers, which could negatively affect our profitability. In addition,
if we have to increase the number of our suppliers of raw materials in the
future to meet growing production demands, we may not be able to locate new
suppliers who could provide us with sufficient materials to meet our needs. Any
interruptions to, or decline in, the amount or quality of our raw materials
supply could materially disrupt our production and adversely affect our business
and financial condition and financial prospects.

The average price that we paid for chestnuts in 2010 and 2009
was approximately $1,286 per metric ton and $868 per metric ton, respectively,
excluding value added taxes. In past few years and most notably last year,
increasing inflation pressures weighed on the Chinese economy, as well as on
agricultural products. We do not have effective means and do not currently hedge
against changes in our raw material prices. Consequently, if the costs of our
raw materials increase further and we are unable to offset these increases by
raising the prices of our products, our profit margins and financial condition
could be adversely affected.

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Uncertainties that Affect our Financial Condition

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

We also funded approximately 43.9% and 71.2% of our working
capital requirements in 2010 and 2009, respectively, from the proceeds of
short-term loans from Chinese banks. We expect to continue to do so in the
future. Such loans are generally secured by our fixed assets, receivables and/or
guarantees by third parties. Our average loan balance from short-term bank loans
in 2010 and 2009 were approximately $36.3 million and $32.8 million,
respectively. The term of almost all such loans is one year or less.
Historically, we have rolled over such loans on an annual basis. However,
commencing 2010, the Chinese government is implementing more stringent credit
policies to curb inflation and soaring property prices, which could negatively
impact our ability to obtain or roll over these short term loans, and hence not
having sufficient funds available to pay all of our borrowings upon maturity.
Failure to roll over our short-term borrowings at maturity or to service our
debt could result in the imposition of penalties, including increases in rates
of interest, legal actions against us by our creditors, or even insolvency. In
addition, we completed two private placement financings in September 2010 and
October 2009 with net proceeds of $9.0 million and $10.9 million, respectively,
the proceeds of which were primarily used as working capital. We can provide no
assurances that we will be able to enter into any future financing or
refinancing agreements on terms favorable to us, especially considering the
current instability of the capital markets.

We anticipate that our existing capital resources, cash flows
from operations, current and expected short-term bank loans, as well as
remaining proceeds from the September 2010 private placement and the loan from
DEG will be adequate to satisfy our liquidity requirements through 2011.
However, if available liquidity is not sufficient to meet our operating and loan
obligations as they come due, our plans include considering pursuing alternative
financing arrangements or further reducing expenditures as necessary to meet our
cash requirements. However, there is no assurance that, if required, we will be
able to raise additional capital or reduce discretionary spending to provide the
required liquidity. Currently, the capital markets for small capitalization
companies are difficult and banking institutions have become stringent in their
lending requirements. Accordingly, we cannot be sure of the availability or
terms of any third party financing.

The crisis of the financial and credit markets worldwide in the
second half of 2008 has led to a severe economic recession worldwide.
Furthermore, the European countries experienced severe debt crisis during 2010
which further weighed on the global economic conditions as well as the financial
market. The outlook for 2011 is still uncertain, but continuation or worsening
of unfavorable economic conditions, including the ongoing global economy and
capital markets disruptions, could have an adverse impact on our business,
operating results or financial condition in a number of ways. For example, we
may experience declines in revenues, profitability and cash flows as a result of
reduced orders, delays in receiving orders, delays or defaults in payment or
other factors caused by the economic problems of our customers and prospective
customers. We may experience supply chain delays, disruptions or other problems
associated with financial constraints faced by our suppliers and subcontractors.
In addition, changes and volatility in the equity, credit and foreign exchange
markets and in the competitive landscape make it increasingly difficult for us
to predict our revenues and earnings into the future.

In 2010 and 2009, some of our customers, including some of our
large supermarket customers, delayed their payments for up to 60 to 90 days
beyond their term. Our cash flow suffered while waiting for such payments.
Consequently, at times we had to delay payments to our suppliers and to postpone
business expansion as a result of these delayed payments. Starting from 2008, we
gradually shortened credit terms for many of our international and domestic
customers from between 30 and 180 days to between 30 and 60 days. Our large
customers may fail to meet these shortened credit terms, in which case we may
not have sufficient cash flow to fund our operating costs and our business could
be adversely affected.

Results of Operations

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

- 24 -

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|                               |  | 2010     |   |  | 2009     |   |  | Increase / Decrease |   |  | Increase / Decrease | 
|------------------------------ |  | -------- | - |  | -------- | - |  | ------------------- | - |  | ------------------- | 
|(in thousands of U.S. dollars) |  |          |   |  |          |   |  | ($)                 |   |  | (%)                 | 
|Revenue                        |  | 184,177  |   |  | 146,772  |   |  | 37,405              |   |  | 25.5%               | 
|Cost of Revenue                |  | (142,293 | ) |  | (114,064 | ) |  | (28,229             | ) |  | 24.7%               | 

|Gross profit               |  | 41,884 |   |  | 32,708 |   |  | 9,176  |   |  | 28.1%  | 
|-------------------------- |  | ------ | - |  | ------ | - |  | ------ | - |  | ------ | 
|                           |  |        |   |  |        |   |  |        |   |  |        | 
|Operating Expenses:        |  |        |   |  |        |   |  |        |   |  |        | 
|Selling and Marketing      |  | (8,559 | ) |  | (6,455 | ) |  | (2,104 | ) |  | 32.6%  | 
|General and administrative |  | (5,807 | ) |  | (3,647 | ) |  | (2,160 | ) |  | 59.2%  | 
|Operating Income           |  |        |   |  |        |   |  |        |   |  |        | 
|                           |  |        |   |  |        |   |  |        |   |  |        | 
|Income from continuing     |  | 27,518 |   |  | 22,606 |   |  | 4,912  |   |  | 21.7%  | 
|operations                 |  |        |   |  |        |   |  |        |   |  |        | 
|                           |  |        |   |  |        |   |  |        |   |  |        | 
|Non-operating Income       |  |        |   |  |        |   |  |        |   |  |        | 
|(Expenses):                |  |        |   |  |        |   |  |        |   |  |        | 
|Government grant           |  | 1,271  |   |  | 356    |   |  | 915    |   |  | 257.0% | 
|Interest income            |  | 10     |   |  | 73     |   |  | (63    | ) |  | -85.8% | 
|Other income               |  | 1,047  |   |  | 175    |   |  | 872    |   |  | 498.0% | 
|Other expense              |  | (416   | ) |  | (327   | ) |  | (89    | ) |  | 27.2%  | 
|Interest Expense           |  | (4,352 | ) |  | (3,352 | ) |  | (1,000 | ) |  | 29.8%  | 
|                           |  |        |   |  |        |   |  |        |   |  |        | 
|Income before taxes        |  | 25,079 |   |  | 19,531 |   |  | 5,548  |   |  | 28.4%  | 
|Income Taxes               |  | (5,830 | ) |  | (4,223 | ) |  | (1,607 | ) |  | 38.1%  | 
|Income before Minority     |  | 19,248 |   |  | 15,308 |   |  | 3,940  |   |  | 25.7%  | 
|Interest                   |  |        |   |  |        |   |  |        |   |  |        | 
|Minority Interest          |  | (1,409 | ) |  | (900   | ) |  | (509   | ) |  | 56.5%  | 
|                           |  |        |   |  |        |   |  |        |   |  |        | 
|Net Income                 |  | 17,839 |   |  | 14,408 |   |  | 3,431  |   |  | 23.8%  | 

Year Ended December 31, 2010 Compared to Year Ended December
31, 2009

Revenue

Net Revenues. Net revenues increased by $37.4 million,
or approximately 25.5%, to $184.2 million in 2010 from $146.8 million in 2009.
This increase was attributable to the increased revenues generated from sales of
each of our product segments, as reflected in the following table:

|(in thousands        |  | 2010     |  |  | 2009     |  |  | Increase / |  |  | Increase / | 
|-------------------- |  | -------- |  |  | -------- |  |  | ---------- |  |  | ---------- | 
|of U.S. **dollars)** |  | Revenues |  |  | Revenues |  |  | Decrease   |  |  | Decrease   | 
|                     |  | ($)      |  |  | ($)      |  |  | ($)        |  |  | (%)        | 
|Chestnut Products    |  | 101,165  |  |  | 89,117   |  |  | 12,009     |  |  | 13.5%      | 
|Convenience Products |  | 56,752   |  |  | 34,624   |  |  | 22,128     |  |  | 63.9%      | 
|Frozen Products      |  | 26,259   |  |  | 23,031   |  |  | 3,228      |  |  | 14.0%      | 
|Total                |  | 184,177  |  |  | 146,772  |  |  | 37,405     |  |  | 25.5%      | 

The greatest increase in volume sold in 2010, as compared to
2009, was in the domestic PRC market. Revenues from sales in the Chinese
domestic market increased by approximately $31.5 million, or approximately
30.5%, in 2010. As a percentage of total revenues, revenues from sales in the
domestic PRC market increased to approximately 73.3% from approximately 70.5% in
2009.

- 25 -

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In addition, in 2010, revenues from sales to Malaysia,
Netherlands, United Kingdom, and United States as well as other countries
increased, in the aggregate, approximately $11.1 million, or 48.3%, compared to
2009, partially offset by a decrease of an aggregate of $5.2 million, or 25.4%,
of sales to Belgium, Saudi Arabia, Singapore, South Korea as well as other
countries compared to 2009. See Note 16 to the financial statements contained
elsewhere in this report for more information on the breakdown of our sales per
geographic region.

Cost of Revenues. Our cost of revenues increased $28.2
million, or approximately 24.7%, to $142.3 million in 2010 from $114.1 million
in 2009. This increase was attributable to the following factors, by percentage:

|Category                                                        |  | Allocation of | 
|--------------------------------------------------------------- |  | ------------- | 
|                                                                |  | Increase in   | 
|                                                                |  | Cost          | 
|                                                                |  | of Revenues   | 
|                                                                |  | (%)           | 
|Raw Materials                                                   |  | 26.1          | 
|Other Allocated Overhead                                        |  | 11.3          | 
|(depreciation, utilities, freight,
      equipment consumables) |  |               | 
|Wages                                                           |  | 5.5           | 

Raw material costs increased to $102,751,348, or approximately
26.1%, in 2010 from $81,501,168 in 2009, primarily reflecting our increase
operation and sales. Overhead expenses increased primarily due to increased
depreciation expenses related to our new production lines in Junan Hongrun as
well as the new storage facility in Dongguan Lorain. Wages increased due to
increased employee base.

The following table reflects the changes in our cost of
revenues in 2010 as compared to 2009 among our different segments:

|(thousands of U.S. dollars) |  | 2010 Cost of |  |  | 2009 Cost of |  |  | Increase/  | 
|--------------------------- |  | ------------ |  |  | ------------ |  |  | ---------- | 
|                            |  | Revenues     |  |  | Revenues     |  |  | (Decrease) | 
|                            |  | ($)          |  |  | ($)          |  |  | (%)        | 
|Chestnut Products           |  | 77,136       |  |  | 68,263       |  |  | 13.0       | 
|Convenience Products        |  | 44,117       |  |  | 26,947       |  |  | 63.7       | 
|Frozen Products             |  | 21,040       |  |  | 18,854       |  |  | 11.6       | 
|Total                       |  | 142, 293     |  |  | 114,064      |  |  | 24.7       | 

Gross Profit. Our gross profit increased $9.2 million,
or 28.1%, to $41.9 million in 2010 from $32.7 million in 2009 as a result of
higher net revenues, partially offset by higher cost of revenues, for the
reasons indicated above.

Operating Expenses

Selling and Marketing Expenses. Our selling and
marketing expenses increased approximately $2.1 million, or 32.6%, to $8.6
million in 2010 from $6.5 million in fiscal year 2009. The following table
reflects the main factors that contributed to this increase as well as the
dollar amount that each factor contributed to this increase:

|(in U.S. dollars)       |  | Increase in   | 
|----------------------- |  | ------------- | 
|                        |  | costs in 2010 | 
|                        |  | over 2009     | 
|Wages (sales personnel) |  | 539,736       | 
|Transportation          |  | 1,285,529     | 
|Advertising             |  | 143,324       | 
|Customer Entertainment  |  | 137,198       | 
|Port Fee                |  | 232,478       | 

The increases listed in the table above were partially offset
by an aggregate of $624,925 decreases of other factors, including utility,
commission and sea transportation.

General and Administrative Expenses. Our general and
administrative expenses increased approximately $2.2 million, or 59.2%, to $5.8
million in 2010 from $3.6 million in 2009. The following table reflects the main
factors that contributed to this increase as well as the dollar amount that each
factor contributed to this increase:

- 26 -

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|                         | Increase in costs in 2010 over 2009
|------------------------ | -----------------------------------
|Wage and Social Security | 540,983                            
|Employee Welfare         | 236,924                            
|Appraisal Expenses       | 48,588                             
|Stock Option Expense     | 837,512                            

Government Subsidy Income

Government subsidy income increased from approximately $0.4
million in 2009 to approximately $1.3 million in 2010, representing grants
received from the Hubei government, Junan County government and Miyun County
government to assist us in our research and business development.

Income Before Taxation and Minority Interest

Income before taxation and minority interest increased $5.5
million, or 28.4%, to $25.1 million in 2010 from $19.5 million in 2009 as a
result of higher revenues, partially offset by higher costs of revenues and
operating expenses, for the reasons indicated above.

Income Taxes

Income taxes increased $1.6 million, or 38.1%, to $5.8 million
in 2010, as compared to $4.2 million in 2009. This increase was attributable to
the higher income earned in 2010 as compared to 2009. Effective January 1, 2008,
the PRC government implemented a new 25% tax rate across the board for all
enterprises, without any tax holiday. However, the PRC government has
established a set of transition rules to allow enterprises that already started
tax holidays before January 1, 2008 to continue utilizing such tax holidays
until they are fully utilized. The income tax rates applicable to our Chinese
operating subsidiaries in 2009, 2010, and 2011 are depicted in the following
table:

|                  |  | 2009 |  |  | 2010 |  |  | 2011 | 
|----------------- |  | ---- |  |  | ---- |  |  | ---- | 
|Income Tax        |  |      |  |  |      |  |  |      | 
|Junan Hongrun     |  | 25%  |  |  | 25%  |  |  | 25%  | 
|Luotian Lorain    |  | 15%  |  |  | 15%  |  |  | 25%  | 
|Beijing Lorain    |  | 15%  |  |  | 15%  |  |  | 15%  | 
|Shangdong Lorain  |  | 25%  |  |  | 25%  |  |  | 25%  | 
|Dongguan Lorain   |  | -    |  |  | 25%  |  |  | 25%  | 
|Shandong Greenpia |  | -    |  |  | 25%  |  |  | 25%  | 

Minority Interest.

Shandong Economic Development Investment holds 19.8% of the
equity of our subsidiary Shandong Lorain, which is reflected in the minority
interest of $1.4 million in 2010 and $0.9 million in 2009.

Net Income.

Net income increased $3.4 million, or 23.8%, to $17.8 million
in 2010 from $14.4 million in fiscal year 2009, as a result of the factors
described above.

Liquidity and Capital Resources

General

Our primary capital needs have been to fund the working capital
requirements necessitated by our sales growth, adding new products and expanding
our facilities. In the past, our primary sources of financing have been cash
generated from operations and short-term loans from banks in China. In October
2009 and September 2010, we obtained approximately $11 million and 9 million,
respectively, from two private placement transactions. We also secured a $15
million loan from Deutsche Investitions- und Entwicklungsgesellshaft (DEG) in
May 2010 which we have drawn down $5 million as of December 2010. Proceeds from
the private placement transactions and cash drawn down from the DEG loan,
together with cash generated from operations and short-term bank loans, have
been primarily used to fund our working capital needs, as well as addition to
our construction in progress and purchase of fixed assets. At December 31, 2010
and 2009, cash and cash equivalents (including restricted cash) were $15.0
million $13.4 million, respectively.

We expect to continue to finance our operations and working
capital needs in 2011 from cash generated from operations and short-term bank
loans. In addition, we currently plan to finance or refinance approximately $8.8
million in the form of short-term bank loans in 2011. We expect that anticipated
cash flows from operations and short-term bank loans will be sufficient to fund
our operations through at least the next twelve months.

- 27 -

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If available liquidity is not sufficient to meet our operating
and loan obligations as they come due, our plans include pursuing alternative
financing arrangements or reducing expenditures as necessary to meet our cash
requirements. However, there is no assurance that we will be able to raise
additional capital or reduce discretionary spending to provide liquidity, if
needed. Currently, the capital markets for small capitalization companies are
difficult. Accordingly, we cannot be sure of the availability or terms of any
alternative financing arrangements.

The following table provides detailed information about our net
cash flow for all financial statements periods presented in this report.

|Cash Flows Data:                                                |  |                             |   |  |         |  
|--------------------------------------------------------------- |  | --------------------------- | - |  | ------- | -
|(in thousands of U.S. dollars)                                  |  | For year ended December 31, |  
|                                                                |  | 2010                        |   |  | 2009    |  
|Net cash flows provided by (used in)
      operating activities |  | 24,429                      |   |  | (10,843 | )
|Net cash flows provided by (used in) investing activities       |  | (35,649                     | ) |  | (7,280  | )
|Net cash flows provided by (used in)
      financing activities |  | 7,837                       |   |  | 26,503  | )

Operating Activities

Net cash provided by operating activities for 2010 was $24.4
million and net cash used in operating activities for 2009 was $10.8 million.
The increase of approximately $35.3 million in net cash flows provided in
operating activities resulted primarily from an increase in net income of $3.9
million, an additional decrease in prepayments of $25.9 million, and a lower
decrease in accounts and other payables of $6.2 million, partially offset by
additional increase in inventory of $1.2 million.

Investing Activities

During 2010, our uses of cash for investment activities are
primarily purchase of plant and equipment as well as addition to constructions
in progress related to the production lines and employee dormitory in Junan
Hongrun as well as the storage facility in Dongguan Lorain. Net cash used in
investing activities for 2010 and 2009 were $35.6 million and $7.3 million,
respectively, with the increase of approximately $28.4 million resulted
primarily from an increase of $15.7 million for the purchase of plant and
equipment and an increase of $10.7 million for payments of construction in
progress.

Financing Activities

Net cash provided by financing activities for 2010 and 2009
were $7.8 million and $26.5 million, respectively. The decrease of approximately
$18.7 million in net cash provided by financing activities resulted primarily
from an increase of $38.1 million for repayment of bank borrowings, partially
offset by an increase of approximately $11.9 million in proceeds from bank
borrowings and $9.5 million additional increase in bank note financings.

Loan Facilities

As of December 31, 2010 and 2009, we carried $25.2 million and
$35.5 million short term bank loans from Chinese domestic banks. Please refer to
Note 9 of the consolidated financial statements for details.

Critical Accounting Policies

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

- 28 -

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The use of estimates is critical to carrying value of asset
accounts such as accounts receivable, inventory, fixed assets, and intangible
assets. We use estimates to account for the related bad debt allowance,
inventory impairment charges, depreciation and amortization of our assets. In
the food processing industry these accounts have a significant impact on the
valuation of our balance sheet and the results of our operations.

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.

As of December 31, 2010, the particulars of the commonly
controlled entities are as follows:

|                                    |  | Place of       |  |  | Attributable equity |  |   | Registered | 
|----------------------------------- |  | -------------- |  |  | ------------------- |  | - | ---------- | 
|Name of Company                     |  | incorporation  |  |  | interest %          |  |   | capital    | 
|Shandong Lorain Co., Ltd            |  | PRC            |  |  | 80.2                |  | $ | 12,234,145 | 
|Luotian Lorain Co., Ltd             |  | PRC            |  |  | 100                 |  |   | 3,830,848  | 
|Junan Hongrun Foodstuff Co., Ltd    |  | PRC            |  |  | 100                 |  |   | 42,252,427 | 
|Beijing Lorain Co., Ltd             |  | PRC            |  |  | 100                 |  |   | 1,512,447  | 
|Shandong Greenpia Foodstuff Co.,Ltd |  | PRC            |  |  | 100                 |  |   | 2,323,119  | 
|Dongguan Lorain Co,,Ltd             |  | PRC            |  |  | 100                 |  |   | 151,245    | 
|International Lorain Holding Inc.   |  | Cayman Islands |  |  | 100                 |  |   | 47,065,474 | 

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.

We believe that when custody and title of goods has been passed
to our customers, or third party transporters revenue is recognized. Our
industry does not call for revenue recognition under multiple deliverable
arrangements.

Financial Instruments

Our financial instruments are cash and cash equivalents,
accounts receivable, other receivable, advances to suppliers, advances to
employees, bank loans and notes, accounts payable, other payable, accrued
liabilities, and long-term liabilities. The recorded values of cash and cash
equivalents, accounts receivable, other receivable, advances to suppliers,
advances to employees, bank loans and notes, accounts payable, other payable,
and accrued liabilities approximate their fair values based on their short-term
nature. The recorded values of long-term liabilities approximate their fair
values, as interest approximates market rates.

We have the accounting policy regarding financial instruments
for our financial statements in 2009 and 2010. We consider it critical because
our business is becoming more global in nature and the use of fair value for
financial instruments has been widely adopted by accounting bodies around the
globe. With financial statements that are widely accepted and comparable in many
jurisdictions we will have greater access to capital locally.

- 29 -

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Recent accounting pronouncements

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

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

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

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

In April 2010, the FASB issued an Accounting Standard Update
(ASU) No.2010-13,Compensation-Stock Compensation (Topic 718): Effect of
Denominating the Exercise Price of a Share-Based Payment Award in the Currency
of the Market in Which the Underlying Equity Security Trades, which address the
classification of a share-based payment award with an exercise price denominated
in the currency of a market in which the underlying equity security trades.
Topic 718 is amended to clarify that a share-based payment award with an
exercise price denominated in the currency of a market in which a substantial
portion of the entitys equity securities trades shall not be considered to
contain a market, performance, or service condition. Therefore, such an award is
not to be classified as a liability if it otherwise qualifies as equity
classification. The amendments in this update should be applied by recording a
cumulative-effect adjustment to the opening balance of retained earnings. The
cumulative-effect adjustment should be calculated for all awards outstanding as
of the beginning of the fiscal year in which the amendments are initially
applied, as if the amendments had been applied consistently since the inception
of the award. ASU 2010-13 is effective for interim and annual periods beginning
on or after December 15, 2010 and is not expected to have a material impact on
the Companys consolidated financial position or results of the operations.

- 30 -

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Off-Balance Sheet Arrangements

We do not have any off-balance arrangements.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK

Not applicable.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL
DATA

The full text of our audited consolidated financial statements
as of December 31, 2010 begins on page F-2 of this Annual Report on Form 10-K.

Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

Item 9A CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

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

As required by Rule 13a-15 under the Exchange Act, our
management, including our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2010. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that as of
December 31, 2010, and as of the date that the evaluation of the effectiveness
of our disclosure controls and procedures was completed, our disclosure controls
and procedures were effective to satisfy the objectives for which they are
intended.

Internal Controls Over Financial Reporting

Managements Annual Report on Internal Control over
Financial Reporting.

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term is defined in
Rule 13a-15(f) of the Exchange Act. Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief
Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting based upon the framework in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Based on that evaluation, our management
concluded that our internal control over financial reporting is effective, as of
December 31, 2010.

Changes in Internal Controls over Financial Reporting.

During the fiscal year ended December 31, 2010, there were no
changes in our internal control over financial reporting identified in
connection with the evaluation performed during the fiscal year covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

Attestation Report

This annual report does not include an attestation report of
our independent registered public accounting firm regarding internal control
over financial reporting. Managements report was not subject to attestation by
our registered public accounting firm pursuant to rules of the Securities and
Exchange Commission.

Item 9B OTHER INFORMATION.

The final voting results of each of the matters submitted to a
vote of security holders during the Companys annual meeting of shareholders
held on December 29, 2010 were as follows:

- 31 -

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1. Election of Directors:

For
    WithheldSi
      Chen
    21,636,685
    17,419Yundong Lu
    21,636,389
    17,715Maoquan Wei
    21,630,795
    23,309Dekai Yin
    21,630,795
    23,309Yongjun Li
    21,631,295
    22,809Tad M. Ballantyne
    21,636,835
    17,269


2. Ratification of Samuel H. Wong & Co., LLP as registered
pubic accountants:

For
    Against
    Abstain
    Broker
      Non-Votes26,920,190
    399,402
    38,587
    -


3. Ratification and approval of the transfer of shares by Mr.
Si Chen to certain purchasers:

For
    Against
    Abstain
    Broker
      Non-Votes21,584,152
    46,750
    23,202
    5,704,075


- 32 -

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PART III

Item 10. DIRECTORS, EXECUTIVE OFFICERS OF AND CORPORATE
GOVERNANCE

Information required under this Item will be contained in our
definitive information statement or in an amendment to this Annual Report on
Form 10-K, which will be filed within 120 days of December 31, 2009, our most
recent fiscal year end, and is incorporated herein by reference.

Item 11 EXECUTIVE COMPENSATION

Information required under this Item will be contained in our
definitive information statement or in an amendment to this Annual Report on
Form 10-K, which will be filed within 120 days of December 31, 2009, our most
recent fiscal year end, and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information required under this Item will be contained in our
definitive information statement or in an amendment to this Annual Report on
Form 10-K, which will be filed within 120 days of December 31, 2009, our most
recent fiscal year end, and is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.

Information required under this Item will be contained in our
definitive information statement or in an amendment to this Annual Report on
Form 10-K, which will be filed within 120 days of December 31, 2009, our most
recent fiscal year end, and is incorporated herein by reference.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Information required under this Item will be contained in our
definitive information statement or in an amendment to this Annual Report on
Form 10-K, which will be filed within 120 days of December 31, 2009, our most
recent fiscal year end, and is incorporated herein by reference.

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The financial statements contained in the Audited Financial
Statements beginning on page F-2 of this Annual Report on Form 10-K.

(b) Exhibits

- 33 -

---



|**Exhibit No.** | **Description**                                                                                                                                                                                                                                                                                                                         
|--------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1             | Restated Certificate of Incorporation of the registrant
      as filed with the Secretary of State of Delaware. Incorporated by
      reference to Exhibit 3.1 to the registrants current report on Form 8-K
      filed on May 9, 2007.                                                                                               
|3.2             | Bylaws of the registrant, adopted on March 31, 2000.
      Incorporated by reference to Exhibit 3.2 to the registrants registration
      statement on Form 10SB12G filed on October 19, 2001.                                                                                                                                         
|4.1             | Certificate of Designation of Series A Voting Convertible
      Preferred Stock of the registrant as filed with the Secretary of State of
      Delaware on April 9, 2007. Incorporated by reference to Exhibit 4.1 to the
      registrants current report on Form 8- K filed on May 9, 2007 in
      commission file number 0- 31619.
|4.2             | Certificate of Designation of Series B Voting Convertible
      Preferred Stock of registrant as filed with the Secretary of State of
      Delaware on April 30, 2007. Incorporated by reference to Exhibit 4.2 to
      the registrants current report on Form 8-K filed on May 9, 2007.                                             
|4.3             | Form of Series A Warrant. Incorporated by reference to
      Exhibit 4.1 to the registrants current report on Form 8-K filed on
      October 29, 2009.                                                                                                                                                                                
|4.4             | Form of Series B Warrant. Incorporated by reference to
      Exhibit 4.2 to the registrants current report on Form 8-K filed on
      October 29, 2009.                                                                                                                                                                                
|4.5             | Registration Rights Agreement, dated as of October 28,
      2009. Incorporated by reference to Exhibit 4.3 to the registrants current
      report on Form 8-K filed on October 29, 2009.                                                                                                                                             
|4.6             | Registration Rights Agreement, dated as of September 9,
      2010, by and among American Lorain Corporation and the purchasers named
      therein. Incorporated by reference to Exhibit 99.3 to the registrants
      current report on Form 8-K filed on September 13, 2010.                                                        
|4.7             | Stockholder Agreement, dated as of September 9, 2010, by
      and among American Lorain Corporation, the purchasers named therein and Si
      Chen. Incorporated by reference to Exhibit 99.4 to the registrants
      current report on Form 8-K filed on September 13, 2010.                                                       
|10.1            | Securities Purchase Agreement dated as of October 28,
      2009, by and between American Loan Corporation and the purchasers named
      therein. Incorporated by reference to Exhibit 10.1 to the registrants
      current report on Form 8-K filed on October 29, 2009.                                                            
|10.2            | Securities Purchase Agreement dated as of September 9,
      2010, by and among American Loan Corporation, Si Chen and the purchasers
      named therein. Incorporated by reference to Exhibit 99.1 to the
      registrants current report on Form 8-K filed on September 13, 2010.                                                  
|10.3            | Make Good Escrow Agreement, dated as of September 9,
      2010, by and among American Lorain Corporation, the purchasers named
      therein, Si Chen and the collateral agent named therein. Incorporated by
      reference to Exhibit 99.2 to the registrants current report on Form 8-K
      filed on September 13, 2010.        
|10.4            | Loan Agreement, dated May 31, 2010, between Junan Hongrun
      Foodstuff Co. Ltd. and DEG-Deutsche Investitions Und
      Entwicklungsgesellschaft MBH. Incorporated by reference to Exhibit 10.12
      to the registrants quarterly report on Form 10-Q filed on August 11,
      2010.                                             
|10.5            | Employment Agreement by and between American
      Lorain Corporation and David She, dated October 22, 2010*                                                                                                                                                                                                                            
|14              | Business Ethics Policy and Code of Conduct, adopted on
      April 30, 2007. Incorporated by reference to Exhibit 14 to the
      registrants current report on Form 8-K filed on May 9, 2007.                                                                                                                                         
|21              | List of subsidiaries of the registrant. *                                                                                                                                                                                                                                                                                               
|23.1            | Consent of Samuel H. Wong & Co., LLP *                                                                                                                                                                                                                                                                                                  
|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 Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002 *                                                                                                                                                                              

* Filed herewith

- 34 -

---

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            
|-------------- |  | ---------------------------------------
|               |  |                                        
|               |  | By:/s/ Si Chen                         
|March 31, 2011 |  | Si Chen                                
|(Date Signed)  |  | President, Director and Chief Executive
|               |  | Officer                                

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

|Signature                   |  | Title                                                                                        |  | Date          
|--------------------------- |  | -------------------------------------------------------------------------------------------- |  | --------------
|                            |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/ Si Chen                 |  | President , Director and Chief
      Executive Officer (Principal Executive Officer)         |  | March 31, 2011
|Si Chen                     |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/ David She               |  | Chief Financial Officer
      (Principal Financial Officer and Principal Accounting Officer) |  | March 31, 2011
|David She                   |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/
      Yundong Lu        |  | Chief Operating Officer and
      Director                                                   |  | March 31, 2011
|Yundong Lu                  |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/
      Dekai Yin         |  | Director                                                                                     |  | March 31, 2011
|Dekai Yin                   |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/
      Yongjun Li        |  | Director                                                                                     |  | March 31, 2011
|Yongjun Li                  |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/
      Maoquan Wei       |  | Director                                                                                     |  | March 31, 2011
|Maoquan Wei                 |  |                                                                                              |  |               
|                            |  |                                                                                              |  |               
|/s/
      Tad M. Ballantyne |  | Director                                                                                     |  | March 31, 2011
|Tad M. Ballantyne           |  |                                                                                              |  |               

- 35 -

---



AMERICAN LORAIN CORPORATION

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010 AND 2009

(Stated in US Dollars)



---

AMERICAN LORAIN CORPORATION

|CONTENTS                                                      | PAGES      
|------------------------------------------------------------- | -----------
|REPORT OF INDEPENDENT REGISTERED PUBLIC
      ACCOUNTING FIRM | F-1        
|CONSOLIDATED BALANCE SHEETS                                   | F-2  F-3  
|CONSOLIDATED STATEMENTS OF INCOME                             | F-4        
|CONSOLIDATED STATEMENTS OF CASH FLOWS                         | F-5  F-6  
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS
      EQUITY         | F-7  F-8  
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                    | F- 9  F-30

---

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, 2010 and 2009 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, 2010 and 2009 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.

|San Mateo, California | Samuel H. Wong & Co., LLP   
|--------------------- | ----------------------------
|March 21, 2011        | Certified Public Accountants

F-1

---

|AMERICAN LORAIN CORPORATION  
|-----------------------------
|CONSOLIDATED BALANCE SHEETS  
|AT DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)       

|                                       |  | Note |  |   | At December 31, |  |   | At December 31, | 
|-------------------------------------- |  | ---- |  | - | --------------- |  | - | --------------- | 
|ASSETS                                 |  |      |  |   | 2010            |  |   | 2009            | 
|Current assets                         |  |      |  |   |                 |  |   |                 | 
|Cash and cash equivalents              |  | 2(d) |  | $ | 12,730,626      |  | $ | 12,111,532      | 
|Restricted cash                        |  | 3    |  |   | 2,308,898       |  |   | 1,299,889       | 
|Short-term investment                  |  |      |  |   | 9,447,585       |  |   | 7,320,248       | 
|Trade accounts receivable              |  | 4    |  |   | 33,226,612      |  |   | 23,025,772      | 
|Other receivables                      |  | 5    |  |   | 1,492,850       |  |   | 8,440,791       | 
|Inventory                              |  | 6    |  |   | 29,807,198      |  |   | 26,400,117      | 
|Advance to suppliers                   |  |      |  |   | 7,744,976       |  |   | 16,938,872      | 
|Prepaid expenses and taxes             |  |      |  |   | 434,061         |  |   | 905,266         | 
|Deferred tax asset                     |  |      |  |   | 103,713         |  |   | 199,867         | 
|Security deposits and other Assets     |  |      |  |   | 693,858         |  |   | -               | 
|Total current assets                   |  |      |  | $ | 97,990,377      |  | $ | 96,642,354      | 
|                                       |  |      |  |   |                 |  |   |                 | 
|Non-current assets                     |  |      |  |   |                 |  |   |                 | 
|Property, plant and equipment, net     |  | 7    |  |   | 72,095,007      |  |   | 41,280,407      | 
|Land use rights, net                   |  | 8    |  |   | 4,877,438       |  |   | 3,871,547       | 
|Deposit                                |  |      |  |   | 20,297          |  |   | 16,088          | 
|TOTAL ASSETS                           |  |      |  | $ | 174,983,119     |  | $ | 141,810,396     | 
|                                       |  |      |  |   |                 |  |   |                 | 
|LIABILITIES AND STOCKHOLDERS EQUITY   |  |      |  |   |                 |  |   |                 | 
|Current liabilities                    |  |      |  |   |                 |  |   |                 | 
|Short-term bank loans                  |  | 9    |  | $ | 25,164,469      |  | $ | 35,488,212      | 
|Long-term debt  current portion       |  | 13   |  |   | 218,935         |  |   | -               | 
|Notes payable                          |  | 10   |  |   | 4,249,977       |  |   | -               | 
|Accounts payable                       |  |      |  |   | 6,284,532       |  |   | 2,614,515       | 
|Taxes payable                          |  | 11   |  |   | 3,266,502       |  |   | 2,235,341       | 
|Accrued liabilities and other payables |  | 12   |  |   | 1,335,947       |  |   | 6,422,492       | 
|Customers deposits                     |  |      |  |   | 89,370          |  |   | 13,842          | 
|Total current liabilities              |  |      |  | $ | 40,609,733      |  | $ | 46,774,402      | 
|                                       |  |      |  |   |                 |  |   |                 | 
|Long-term liabilities                  |  |      |  |   |                 |  |   |                 | 
|Long-term bank loans                   |  | 13   |  |   | 5,030,930       |  |   | 294,873         | 
|                                       |  |      |  |   |                 |  |   |                 | 
|TOTAL LIABILITIES                      |  |      |  | $ | 45,640,663      |  | $ | 47,069,275      | 

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

F-2

---

|AMERICAN LORAIN CORPORATION  
|-----------------------------
|CONSOLIDATED BALANCE SHEETS  
|AT DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)       

|                                                                                                                                                                                  |  |      |  |   | At December 31, |  |   | At December 31, | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | - | --------------- |  | - | --------------- | 
|                                                                                                                                                                                  |  | Note |  |   | **2010**        |  |   | **2009**        | 
|STOCKHOLDERS EQUITY                                                                                                                                                              |  |      |  |   |                 |  |   |                 | 
|Preferred Stock, $.001 par value, 5,000,000
      shares authorized; 0 shares issued and outstanding at December 31, 2010
      and 2009, respectively                            |  |      |  |   | -               |  |   | -               | 
|                                                                                                                                                                                  |  |      |  |   |                 |  |   |                 | 
|Common stock, $0.001 par value, 200,000,000
      shares authorized; 34,419,709 and 30,240,202 shares issued and outstanding
      as of December 31, 2010 and 2009, respectively |  | 14   |  |   | 34,420          |  |   | 30,240          | 
|Additional paid-in capital                                                                                                                                                        |  | 14   |  |   | 52,371,481      |  |   | 35,268,603      | 
|Statutory reserves                                                                                                                                                                |  | 2(r) |  |   | 11,340,739      |  |   | 8,895,477       | 
|Retained earnings                                                                                                                                                                 |  |      |  |   | 48,688,375      |  |   | 38,455,349      | 
|Accumulated other comprehensive income                                                                                                                                            |  |      |  |   | 9,475,745       |  |   | 6,068,569       | 
|Non-controlling interests                                                                                                                                                         |  | 15   |  |   | 7,431,697       |  |   | 6,022,883       | 
|                                                                                                                                                                                  |  |      |  |   |                 |  |   |                 | 
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                        |  |      |  | $ | 129,342,457     |  | $ | 94,741,121      | 
|                                                                                                                                                                                  |  |      |  |   |                 |  |   |                 | 
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                        |  |      |  | $ | 174,983,119     |  | $ | 141,810,396     | 

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

F-3

---

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

|                                    |  |          |  |   | December 31,        |   |   | December 31, |  
|----------------------------------- |  | -------- |  | - | ------------------- | - | - | ------------ | -
|                                    |  | Note     |  |   | 2010                |   |   | 2009         |  
|                                    |  |          |  |   |                     |   |   |              |  
|Net revenues                        |  | 2(t),16  |  | $ | 184,176,567         |   | $ | 146,772,442  |  
|Cost of revenues                    |  |          |  |   | (142,
      292,716 | ) |   | (114,064,067 | )
|Gross profit                        |  |          |  | $ | 41,883,851          |   | $ | 32,708,375   |  
|                                    |  |          |  |   |                     |   |   |              |  
|Operating expenses                  |  |          |  |   |                     |   |   |              |  
|Selling and marketing expenses      |  |          |  |   | (8,559,003          | ) |   | (6,454,953   | )
|General and administrative expenses |  |          |  |   | (5,807,074          | ) |   | (3,646,815   | )
|                                    |  |          |  |   | (14,366,077         | ) |   | (10,101,768  | )
|                                    |  |          |  |   |                     |   |   |              |  
|Operating income                    |  |          |  | $ | 27,517,774          |   | $ | 22,606,607   |  
|                                    |  |          |  |   |                     |   |   |              |  
|Government subsidy income           |  |          |  |   | 1,270,957           |   |   | 355,656      |  
|Interest income                     |  |          |  |   | 10,375              |   |   | 73,186       |  
|Other income                        |  |          |  |   | 1,047,234           |   |   | 175,117      |  
|Other expenses                      |  |          |  |   | (415,877            | ) |   | (327,281     | )
|Interest expense                    |  |          |  |   | (4,351,714          | ) |   | (3,351,606   | )
|                                    |  |          |  |   |                     |   |   |              |  
|Earnings before tax                 |  |          |  | $ | 25,078,749          |   | $ | 19,531,679   |  
|                                    |  |          |  |   |                     |   |   |              |  
|Income tax                          |  | 2(q),17  |  |   | (5,830,472          | ) |   | (4,222,705   | )
|                                    |  |          |  |   |                     |   |   |              |  
|Net income                          |  |          |  | $ | 19,248,277          |   | $ | 15,308,974   |  
|Net income attributable to:         |  |          |  |   |                     |   |   |              |  
|                                    |  |          |  |   |                     |   |   |              |  
|-Common stockholders                |  |          |  | $ | 17,839,463          |   | $ | 14,408,112   |  
|-Non-controlling interest           |  |          |  |   | 1,408,814           |   |   | 900,862      |  
|                                    |  |          |  | $ | 19,248,277          |   | $ | 15,308,974   |  
|                                    |  |          |  |   |                     |   |   |              |  
|                                    |  |          |  |   |                     |   |   |              |  
|Earnings per share                  |  | 2(u), 18 |  |   |                     |   |   |              |  
|- Basic                             |  |          |  | $ | 0.57                |   | $ | 0.55         |  
|- Diluted                           |  |          |  | $ | 0.55                |   | $ | 0.55         |  
|                                    |  |          |  |   |                     |   |   |              |  
|Weighted average shares outstanding |  |          |  |   |                     |   |   |              |  
|- Basic                             |  |          |  |   | 31,507,044          |   |   | 26,075,413   |  
|- Diluted                           |  |          |  |   | 32,204,555          |   |   | 26,264,794   |  

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

F-4

---

|AMERICAN LORAIN CORPORATION               
|------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOW      
|FOR YEARS ENDED DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)                    

|                                                                                             |   | December 31, |   |   | December 31, |  
|-------------------------------------------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                                                             |   | 2010         |   |   | 2009         |  
|Cash flows from operating activities                                                         |   |              |   |   |              |  
|Net income                                                                                   | $ | 19,248,277   |   | $ | 15,308,974   |  
|Stock and share based compensation                                                           |   | 890,210      |   |   | 166,398      |  
|Depreciation of fixed assets                                                                 |   | 1,360,134    |   |   | 1,270,783    |  
|Amortization of intangible assets                                                            |   | 144,611      |   |   | 202,539      |  
|Write down of short-term investments                                                         |   | 587,117      |   |   | -            |  
|Gain on acquisition of subsidiary                                                            |   | (383,482     | ) |   | -            |  
|Change in assets and liabilities net of effects from
      acquisition of Shandong Greenpia: |   |              |   |   |              |  
|(Increase)/decrease in accounts & other
      receivables                                    |   | (2,549,494   | ) |   | (1,800,407   | )
|(Increase)/decrease in inventories                                                           |   | (2,812,750   | ) |   | (1,572,195   | )
|Decrease/(increase) in prepayment                                                            |   | 9,665,103    |   |   | (16,200,484  | )
|Decrease/(increase) in deferred tax asset                                                    |   | 96,155       |   |   | (199,867     | )
|Increase/(decrease) in accounts and other
      payables                                     |   | (1,816,937   | ) |   | (8,018,565   | )
|Net cash (used in)/provided by operating activities                                          |   | 24,428,943   |   |   | (10,842,825  | )
|                                                                                             |   |              |   |   |              |  
|Cash flows from investing activities                                                         |   |              |   |   |              |  
|Shandong Greenpia acquisition net of cash
      acquired                                     |   | (1,695,315   | ) |   | -            |  
|Purchase of plant and equipment                                                              |   | (17,566,907  | ) |   | (1,868,300   | )
|Payment of construction in progress                                                          |   | (11,188,400  | ) |   | (481,203     | )
|Sales (investment) in short term investment fund                                             |   | -            |   |   | 105,756      |  
|(Increase)/decrease in restricted cash                                                       |   | (1,009,009   | ) |   | 2,416,109    |  
|Payments for the purchase of land use rights                                                 |   | (190,109     | ) |   | (123,157     | )
|Payments for security deposits                                                               |   | (698,067     | ) |   | (16,088      | )
|Purchase of land for short-term investment                                                   |   | (3,301,571   | ) |   | (7,312,935   | )
|Net cash used in investing activities                                                        |   | (35,649,378  | ) |   | (7,279,819   | )
|                                                                                             |   |              |   |   |              |  
|Cash flows from financing activities                                                         |   |              |   |   |              |  
|Issuance of common stock                                                                     |   | 8,955,673    |   |   | 10,920,254   |  
|Repayment of notes                                                                           |   | -            |   |   | (5,208,485   | )
|Proceeds from issuance of notes                                                              |   | 4,249,977    |   |   | -            |  
|Proceeds from bank borrowings                                                                |   | 85,074,357   |   |   | 73,132,782   |  
|Repayment of bank borrowings                                                                 |   | (90,443,107  | ) |   | (52,341,668  | )
|Net cash provided by/(used in) financing activities                                          | $ | 7,836,900    |   | $ | 26,502,883   |  
|                                                                                             |   |              |   |   |              |  
|Net Increase/(decrease) of Cash and Cash Equivalents                                         |   | (3,383,535   | ) |   | 8,380,239    |  
|Effect of foreign currency translation on
      cash and cash equivalents                    |   | 3,994,293    |   |   | 889,953      |  
|                                                                                             |   |              |   |   |              |  
|Cash and cash equivalentsbeginning of year                                                  |   | 12,111,532   |   |   | 2,841,339    |  
|Cash and cash equivalentsend of year                                                        | $ | 12,722, 290  |   | $ | 12,111,532   |  

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

F-5

---

|AMERICAN LORAIN CORPORATION               
|------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOW      
|FOR YEARS ENDED DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)                    

|Supplementary cash flow
      information: |   |           |  |   |           | 
|------------------------------------------ | - | --------- |  | - | --------- | 
|Interest received                          | $ | 10,375    |  | $ | 73,186    | 
|Interest paid                              | $ | 4,457,597 |  | $ | 3,351,606 | 
|Income taxes paid                          | $ | 5,157,436 |  | $ | 4,174,385 | 

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

F-6

---

|AMERICAN LORAIN CORPORATION                    
|-----------------------------------------------
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|FOR YEARS ENDED DECEMBER 31, 2010 AND 2009     
|(STATED IN US DOLLARS)                         

|                                                   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   | Accumulated   |   |   |             |  |   |             |  
|-------------------------------------------------- |  | ---------- |  | - | ------ |  | - | ---------- | - | - | ---------- |  | - | ---------- | - | - | ------------- | - | - | ----------- |  | - | ----------- | -
|                                                   |  | Number     |  |   |        |  |   | Additional |   |   |            |  |   |            |   |   | Other         |   |   | Non-        |  |   |             |  
|                                                   |  | Of         |  |   | Common |  |   | Paid-in    |   |   | Statutory  |  |   | Retained   |   |   | Comprehensive |   |   | Controlling |  |   |             |  
|                                                   |  | Shares     |  |   | Stock  |  |   | Capital    |   |   | Reserves   |  |   | Earnings   |   |   | Income        |   |   | Interests   |  |   | Total       |  
|Balance, January 1, 2009                           |  | 25,172,640 |  | $ | 25,172 |  | $ | 24,187,019 |   | $ | 5,438,723  |  | $ | 27,503,991 |   | $ | 5,178,616     |   | $ | 5,122,021   |  | $ | 67,455,542  |  
|Issuance of share based compensation               |  | 56,393     |  |   | 57     |  |   | 166,341    |   |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | 166,398     |  
|Issuance of common stock for cash                  |  | 5,011,169  |  |   | 5,011  |  |   | 12,002,150 |   |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | 12,007,161  |  
|Issuance cost of common stock                      |  |            |  |   |        |  |   | (1,086,907 | ) |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | (1,086,907  | )
|Net income                                         |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | 15,308,974 |   |   | -             |   |   | -           |  |   | 15,308,974  |  
|Appropriations to statutory reserves               |  | -          |  |   | -      |  |   | -          |   |   | 3,456,754  |  |   | (3,456,754 | ) |   | -             |   |   | -           |  |   | -           |  
|Allocation to non-controlling interests            |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | (900,862   | ) |   | -             |   |   | 900,862     |  |   | -           |  
|Foreign currency translation adjustment            |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | -          |   |   | 889,953       |   |   | -           |  |   | 889,953     |  
|Balance, December 31, 2009                         |  | 30,240,202 |  | $ | 30,240 |  | $ | 35,268,603 |   | $ | 8,895,477  |  | $ | 38,455,349 |   | $ | 6,068,569     |   | $ | 6,022,883   |  | $ | 94,741,121  |  
|                                                   |  |            |  |   |        |  |   |            |   |   |            |  |   |            |   |   |               |   |   |             |  |   |             |  
|Balance, January 1, 2010                           |  | 30,240,202 |  | $ | 30,240 |  | $ | 35,268,603 |   | $ | 8,895,477  |  | $ | 38,455,349 |   | $ | 6,068,569     |   | $ | 6,022,883   |  | $ | 94,741,121  |  
|Issuance of share based compensation               |  | 7,000      |  |   | 7      |  |   | 890,203    |   |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | 890,210     |  
|Issuance of common stock for cash                  |  | 3,440,800  |  |   | 3,441  |  |   | 9,630,800  |   |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | 9,634,241   |  
|Issuance cost of common stock                      |  | -          |  |   | -      |  |   | (678,567   | ) |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | (678,567    | )
|Appropriations to additional paid in
      capital |  | -          |  |   | -      |  |   | 5,161,175  |   |   | -          |  |   | (5,161,175 | ) |   | -             |   |   | -           |  |   | -           |  
|Acquisition of Shandong Greenpia                   |  | 731,707    |  |   | 732    |  |   | 2,099,267  |   |   | -          |  |   | -          |   |   | -             |   |   | -           |  |   | 2,099,999   |  
|Net income                                         |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | 19,248,277 |   |   | -             |   |   | -           |  |   | 19,248,277  |  
|Appropriations to statutory reserves               |  | -          |  |   | -      |  |   | -          |   |   | 2,445,262  |  |   | (2,445,262 | ) |   | -             |   |   | -           |  |   | -           |  
|Allocation to non-controlling interests            |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | (1,408,814 | ) |   | -             |   |   | 1,408,814   |  |   | -           |  
|Unrealized gain (loss) on investment               |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | -          |   |   | (587,117      | ) |   | -           |  |   | (587,117    | )
|Foreign currency translation adjustment            |  | -          |  |   | -      |  |   | -          |   |   | -          |  |   | -          |   |   | 3,994,293     |   |   | -           |  |   | 3,994,293   |  
|Balance, December 31, 2010                         |  | 34,419,709 |  | $ | 34,420 |  | $ | 52,371,481 |   | $ | 11,340,739 |  | $ | 48,688,375 |   | $ | 9,475,745     |   | $ | 7,431,697   |  | $ | 129,342,457 |  

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

F-7

---

|AMERICAN LORAIN CORPORATION                    
|-----------------------------------------------
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
|FOR YEARS ENDED DECEMBER 31, 2010 AND 2009     
|(STATED IN US DOLLARS)                         

|                                        |   | December 31, |  |   | December 31, | 
|--------------------------------------- | - | ------------ |  | - | ------------ | 
|                                        |   | 2010         |  |   | 2009         | 
|                                        |   |              |  |   |              | 
|Comprehensive Income                    |   |              |  |   |              | 
|Net Income                              | $ | 19,248,277   |  | $ | 15,308,974   | 
|Other Comprehensive Income              |   |              |  |   |              | 
|Foreign Currency Translation Adjustment |   | 3,994,293    |  |   | 889,953      | 
|Total Comprehensive Income              | $ | 23,242,570   |  | $ | 16,198,927   | 

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

F-8

---

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

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

| | (a) | Organization history of American Lorain Corporation
      (formerly known as Millennium Quest, Inc.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | American Lorain Corporation (the Company or ALN) was
      originally 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. On May 3, 2007, the Company entered into
      a share exchange agreement as described under Reverse-Merger below. On
      November 12, 2009, the Company filed a statement of merger in the state of
      Nevada to transfer the Companys jurisdiction from Delaware to Nevada.                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (b) | Organization History of International Lorain Holding
      Inc. and its subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | ALN owns 100% of the equity of International Lorain
      Holding Inc. (ILH). ILH is a Cayman Islands company incorporated on
      August 4, 2006 and was wholly-owned by Mr. Hisashi Akazawa until May 3,
      2007. ILH presently has two direct wholly-owned subsidiaries, Junan
      Hongrun and Luotian Lorain, and three indirectly wholly-owned subsidiaries
      through Junan Hongrun, which are Beijing Lorain, Dongguan Lorain, and
      Shandong Greenpia Foodstuff Co., Ltd. (Shandong Greenpia).                                                                                                                                                                                                                                                                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | In addition, the Company directly and indirectly has
      80.2% ownership of Shandong Lorain. The rest of the 19.8%, which is owned
      by the State under the name of Shandong Economic Development Investment
      Co. Ltd., is not included as a part of the Group.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | On April 9, 2009, the Company, through its Junan Hongrun
      subsidiary, invested cash to establish Dongguan Lorain. Dongguan Lorain is
      indirectly 100% beneficially owned by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | On June 28, 2010, the Company signed an equity transfer
      agreement with Shandong Greenpia. Shandong Greenpia was originally
      directly owned by Taebong Inc. and Shandong Luan Trade Company. The
      Company paid $2,100,000 to Korean Taebong Inc. for 50% equity of Shandong
      Greenpia on September 20, 2010. On September 23, 2010, the Company issued
      731,707 shares of restricted stock at an agreed price of $2.87 per share
      to the owner of Shandong Luan Trade Company, Mr. Ji Zhenwei, for the
      remaining 50% equity of Shandong Greenpia. Since September 23, 2010,
      Shandong Greenpia was directly owned by both Junan Hongrun and ILH. As a
      result, Shandong Greenpia is 100% owned by the Company. Accordingly, the
      Company booked a gain of $383,482 which is included in the statement of
      income as other income.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (c) | Reverse-Merger                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | On May 3, 2007, the Company entered into a share exchange
      agreement with 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 sometimes referred to
      hereafter as the reverse-merger transaction. The share exchange
      transaction has been accounted for as a recapitalization of ALN 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-9

---

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

| | (d) | Business Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company develops, manufactures, and sells convenience
      foods (including ready-to-cook (or RTC) foods; ready-to-eat (or RTE) foods
      and meals ready-to-eat (or MRE); chestnut products; and frozen foods, in
      hundreds of varieties. The Company operates through indirect Chinese
      subsidiaries. The products are sold in 26 provinces and administrative
      regions in China and 42 foreign countries. Food products are categorized
      into three types: (1) chestnut products, (2) convenience food, and (3)
      frozen food.

|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.                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Company regrouped certain accounts in its
      presentation of changes in assets and liabilities in the statement of cash
      flows for the year ended December 31, 2010 in order to be consistent with
      the presentation provided for the year ended December 31, 2009. There was
      no impact in earnings for the regrouping.                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (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, 2010, the detailed identities of the
      consolidating subsidiaries are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                            

| |                                     |  | Place of       |  |  | Attributable equity |  |   | Registered | 
| | ----------------------------------- |  | -------------- |  |  | ------------------- |  | - | ---------- | 
| | Name of Company                     |  | incorporation  |  |  | interest %          |  |   | capital    | 
| | Shandong Lorain Co., Ltd            |  | PRC            |  |  | 80.2                |  | $ | 12,234,145 | 
| | Luotian Lorain Co., Ltd             |  | PRC            |  |  | 100                 |  |   | 3,830,848  | 
| | Junan Hongrun Foodstuff Co., Ltd    |  | PRC            |  |  | 100                 |  |   | 42,252,427 | 
| | Beijing Lorain Co., Ltd             |  | PRC            |  |  | 100                 |  |   | 1,512,447  | 
| | Shandong Greenpia Foodstuff Co.,Ltd |  | PRC            |  |  | 100                 |  |   | 2,323,119  | 
| | Dongguan Lorain Co,,Ltd             |  | PRC            |  |  | 100                 |  |   | 151,245    | 
| | International Lorain Holding Inc.   |  | Cayman Islands |  |  | 100                 |  |   | 47,065,474 | 

| | (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) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-10

---

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

| |       | The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (e)   | Investment securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | The Company classifies securities it holds for investment
      purposes 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (f)   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (g)   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (h)   | Customer deposits and advances to suppliers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | Customer deposits were received from customers in
      connection with orders of products to be delivered in future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |       | Advance to suppliers is a good faith deposit paid to the
      supplier for the purpose of committing the supplier to provide product
      promptly upon delivery of the Companys purchase order for raw materials,
      supplies, equipment, building materials etc. Pursuant to the Companys
      arrangements with its suppliers, this deposit is generally 20% of the
      total amount contracted for. This type of transaction is classified as a
      prepayment category under the account name Advance to Suppliers until
      such time as the Companys purchase order is delivered, at which point
      this account is reduced by reclassification of the applicable amount to
      the appropriate asset account such as inventory or fixed assets or
      construction in progress.                                                                                                        
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | *(i)* | *Property, plant and equipment*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-11

---

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

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

| | Buildings                   |  | 40 years | 
| | --------------------------- |  | -------- | 
| | Landscaping, plant and tree |  | 30 years | 
| | Machinery and equipment     |  | 10 years | 
| | Motor vehicles              |  | 10 years | 
| | Office equipment            |  | 5 years  | 

| |     | The cost and related accumulated depreciation of assets
      sold or otherwise retired are eliminated from the accounts and any gain or
      loss is included in the statement of income. The cost of maintenance and
      repairs is charged to income as incurred, whereas significant renewals and
      betterments are capitalized.                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (j) | Construction in progress                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Construction in progress represents direct and indirect
      construction or acquisition costs. 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 the asset is completed and ready for
      intended use.                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (k) | Land Use Rights                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Land use rights are carried at cost and amortized on a
      straight-line basis over a specified period.                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (l) | Accounting for the Impairment of Long-Lived Assets                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | The long-lived assets held 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. An impairment is present if carrying amount of
      an asset is less than its undiscounted cash flows to be generated.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | If an asset is considered impaired, a loss is recognized
      based on the amount by which the carrying amount exceeds the fair market
      value of the asset. Assets to be disposed of are reported at the lower of
      the carrying amount or fair value less costs to sell. The Company believes
      no impairment has occurred to its assets during 2010.                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (m) | Advertising                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | All advertising costs are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (n) | Shipping and handling                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | All shipping and handling are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (o) | Research and development                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | All research and development costs are expensed as
      incurred.                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (p) | Retirement benefits                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     | Retirement benefits in the form of contributions under
      defined contribution retirement plans to the relevant authorities are
      charged to the consolidated statement of income as incurred.                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (q) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-12

---

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

The Company accounts for income tax
using an asset and liability approach and allows for recognition of deferred tax
benefits in future years. Under the asset and liability approach, deferred taxes
are provided for the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. A valuation allowance is provided for
deferred tax assets if it is more likely than not these items will either expire
before the Company is able to realize their benefits, or that future realization
is uncertain.

The Company has implemented Statement
of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.
Income tax liabilities computed according to the United States and Peoples
Republic of China (PRC) tax laws are provided for the tax effects of
transactions reported in the financial statements and consists of taxes
currently due plus deferred taxes related primarily to differences between the
basis of fixed assets and intangible assets for financial and tax reporting. The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will be either taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future income taxes. A valuation
allowance is created to evaluate deferred tax assets if it is more likely than
not that these items will either expire before the Company is able to realize
that tax benefit, or that future realization is uncertain.

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

The Company is subject to United
States Tax according to Internal Revenue Code Sections 951 and 957. Corporate
income tax is imposed on progressive rates in the range of: -

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

| | (r) | 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. The Company transferred
      $2,445,262 from retained earnings to statutory reserves during 2010. PRC
      laws prescribe that an enterprise operating at a profit, must appropriate,
      on an annual basis, an amount equal to 10% of its profit. Such an
      appropriation is necessary until the reserve reaches a maximum that is
      equal to 50% of the enterprises PRC registered capital.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (s) | 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.                                                                                                                                                                                                               

F-13

---

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

| |                                        |  |            |  |  |            | 
| | -------------------------------------- |  | ---------- |  |  | ---------- | 
| |                                        |  | 12/31/2010 |  |  | 12/31/2009 | 
| | Year end RMB : US$ exchange rate       |  | 6.6118     |  |  | 6.8372     | 
| | Average yearly RMB : US$ exchange rate |  | 6.7788     |  |  | 6.8408     | 

| |     | The RMB is not freely convertible into foreign currency
      and all foreign exchange transactions must take place through authorized
      institutions. No representation is made that the RMB amounts could have
      been, or could be, converted into US Dollars at the rates used in
      translation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (t) | 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). The Company allows its customers to
      return products if they are defective. However, this rarely happens and
      amounts returned have been de minimis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | The Company gradually switched its sales model from
      direct sales to third party distributor model and issues 1% sales
      incentive to distributors. The Company modified it accounting policy for
      the recognition of revenue accordingly. Given the circumstances of how the
      Company conducts its incentive program, the Company books the payments
      settled in cash as a contra account to Gross Revenue, and includes the
      amount in its reported net revenue. The Company has considered the
      guidance in FASB ASC605-50 (EITF 01-9) and will account for
      its sales incentive program accordingly.                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (u) | Earnings per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | Basic earnings per share is computed by dividing net
      income by the weighted average number of shares of common stock
      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 potential dilutive securities during the year.
      During the years ended December 31, 2010, 81,155 warrants were issued to
      certain service providers. During the year ended December 31, 2009,
      1,334,573 stock options were granted to employees pursuant to the
      Companys equity incentive plan; 2,255,024 warrants were issued to
      investors in connection with a PIPE financing. These warrants and options
      could be potentially dilutive if the market price of the Companys common
      stock exceeds the exercise price for these securities.                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     | 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.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (v) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-14

---

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

| |     | The Companys financial instruments are cash and cash
      equivalents, accounts receivable, other receivable, advances to suppliers,
      advances to employees, bank loans and notes, accounts payable, other
      payable, dividend payable, accrued liabilities, and long-term liabilities.
      The recorded values of cash and cash equivalents, accounts receivable,
      other receivable, advances to suppliers, advances to employees, bank loans
      and notes, accounts payable, other payable, dividend payable and accrued
      liabilities approximate their fair values based on their short-term
      nature. The recorded values of long-term liabilities approximate their
      fair values, as interest approximates market rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (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 includes the
      foreign currency translation adjustment and unrealized gain or loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (y) | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | In June 2009, FASB issued FASB Statement No. 166,
      Accounting for Transfers for Financial Assets (FASB ASC 860 Transfers and
      Servicing) and FASB Statement No. 167 (FASB ASC 810 Consolidation), a
      revision to FASB Interpretation No. 46 (Revised December 2003),
      Consolidation of Variable Interest Entities (FASB ASC 810 Consolidation).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Statement 166 is a revision to FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities (FASB ASC 860 Transfers and Servicing), and
      will require more information about transfers of financial assets,
      including securitization transactions, and where entities have continuing
      exposure to the risks related to transferred financial assets. It
      eliminates the concept of a qualifying special-purpose entity, changes
      the requirements for derecognizing financial assets, and requires
      additional disclosures. Statement No. 166 (FASB ASC 860 Transfers and
      Servicing) must be applied as of the beginning of each reporting entitys
      first annual reporting period that begins after November 15, 2009, for
      interim periods within that first annual reporting period and for interim
      and annual reporting periods thereafter. Earlier application is
      prohibited. This Statement must be applied to transfers occurring on or
      after the effective date. The Company has evaluated and determined that
      there was no material impact on the Companys consolidated financial
      position or results of the operations.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     | Statement 167 is a revision to FASB Interpretation No. 46
      (Revised December 2003), Consolidation of Variable Interest Entities (FASB
      ASC 810 Consolidation), and changes how a reporting entity determines when
      an entity that is insufficiently capitalized or is not controlled through
      voting (or similar rights) should be consolidated. The determination of
      whether a reporting entity is required to consolidate another entity is
      based on, among other things, the other entitys purpose and design and
      the reporting entitys ability to direct the activities of the other
      entity that most significantly impact the other entitys economic
      performance. Statement No. 167 (FASB ASC 810 Consolidation) shall be
      effective as of the beginning of each reporting entitys first annual
      reporting period that begins after November 15, 2009, for interim periods
      within that first annual reporting period, and for interim and annual
      reporting periods thereafter. Earlier application is prohibited. The
      Company has evaluated and determined that there was no material impact on
      the Companys consolidated financial position or results of the
      operations.         

F-15

---

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

|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | On June 30, 2009, FASB issued FASB Statement No. 168,
      Accounting Standards Codification ( FASB ASC 105 Generally Accepted
      Accounting Principles) a replacement of FASB Statement No. 162 the
      Hierarchy of Generally Accepted Accounting Principles. On the
      effective date of this standard, FASB Accounting Standards Codification
      (ASC) became the source of authoritative U.S. accounting and reporting
      standards for nongovernmental entities, in addition to guidance issued by
      the Securities and Exchange Commission (SEC). This statement is effective
      for financial statements issued for interim and annual periods ending
      after September 15, 2009. If an accounting change results from the
      application of this guidance, an entity should disclose the nature and
      reason for the change in accounting principle in their financial
      statements. This new standard flattens the GAAP hierarchy to two levels:
      one that is authoritative (in FASB ASC) and one that is non-authoritative
      (not in FASB ASC). Exceptions include all rules and interpretive releases
      of the SEC under the authority of federal securities laws, which are
      sources of authoritative GAAP for SEC registrants, and certain
      grandfathered guidance having an effective date before March 15, 1992.
      Statement No. 168 is the final standard that will be issued by FASB in
      that form. There will no longer be, for example, accounting standards in
      the form of statements, staff positions, Emerging Issues Task Force (EITF)
      abstracts, or AICPA Accounting Statements of Position. The Company has
      adopted the new accounting standard and determined that there was no
      material impact on the Companys consolidated financial position or
      results of the operations.
|------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | In April 2010, the FASB issued an Accounting Standard
      Update (ASU) No.2010-13,Compensation-Stock Compensation (Topic 718):
      Effect of Denominating the Exercise Price of a Share-Based Payment Award
      in the Currency of the Market in Which the Underlying Equity Security
      Trades, which address the classification of a share-based payment award
      with an exercise price denominated in the currency of a market in which
      the underlying equity security trades. Topic 718 is amended to clarify
      that a share-based payment award with an exercise price denominated in the
      currency of a market in which a substantial portion of the entitys equity
      securities trades shall not be considered to contain a market,
      performance, or service condition. Therefore, such an award is not to be
      classified as a liability if it otherwise qualifies as equity
      classification. The amendments in this update should be applied by
      recording a cumulative-effect adjustment to the opening balance of
      retained earnings. The cumulative-effect adjustment should be calculated
      for all awards outstanding as of the beginning of the fiscal year in which
      the amendments are initially applied, as if the amendments had been
      applied consistently since the inception of the award. ASU 2010-13 is
      effective for interim and annual periods beginning on or after December
      15, 2010 and is not expected to have a material impact on the Companys
      consolidated financial position or results of the operations.                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|**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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

| |                                      |   | 12/31/2010 |   |   | 12/31/2009 |  
| | ------------------------------------ | - | ---------- | - | - | ---------- | -
| | Trade accounts receivable            | $ | 33,562,514 |   | $ | 23,293,362 |  
| | Less:Allowance for doubtful accounts |   | (335,902   | ) |   | (267,590   | )
| |                                      | $ | 33,226,612 |   | $ | 23,025,772 |  

| | Allowance for bad debt: |   | 12/31/2010 |   |   | 12/31/2009 |  
| | ----------------------- | - | ---------- | - | - | ---------- | -
| | Beginning balance       | $ | (267,590   | ) | $ | (127,967   | )
| | Additions to allowance  |   | (68,312    | ) |   | (139,623   | )
| | Bad debt written-off    |   | -          |   |   | -          |  
| | Ending balance          | $ | (335,902   | ) | $ | (267,590   | )

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

F-16

---

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

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

| |                                                       |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ----------------------------------------------------- | - | ---------- |  | - | ---------- | 
| | Advances to employees for purchase of
      materials | $ | -          |  | $ | 4,041,986  | 
| | Advances to employees for job/travel disbursements    |   | 764,725    |  |   | 627,006    | 
| | Amount due by a non-related enterprise                |   | 215,685    |  |   | 1,999,671  | 
| | Other non-related receivables                         |   | 512,440    |  |   | 1,772,128  | 
| |                                                       | $ | 1,492,850  |  | $ | 8,440,791  | 

Advances to employees for job/travel
disbursements consisted of advances to employees for transportation, meals,
client entertainment, commissions, and procurement of certain raw materials. The
advances issued to employees may be carried for extended periods of time because
employees may spend several months out in the field working to procure new sales
contracts or fulfill existing contracts.

Specifically, the company uses every
available employee to arrange purchases with desirable chestnut or other raw
material growers. However, because many of these growers are in rural farming
areas of China where traditional banking and credit arrangements are difficult
to implement, the Company must utilize cash purchases and also must contract for
its future needs by placing a good faith deposit in cash with the growers.
However none of these advances to employees for delivery to the growers on
behalf of the Company are personal loans to the employees. Advances to
employees for purchase of materials in other receivables are adjusted to
advances to suppliers as of December 31, 2010.

Related party receivable consisted of
the following as of December 31, 2010 and 2009:

| |            |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ---------- | - | ---------- |  | - | ---------- | 
| | Chen Si    | $ | 123,467    |  | $ | 541,245    | 
| | Lu Yundong |   | -          |  |   | 32,358     | 
| | Liu Gang   |   | -          |  |   | 29,513     | 
| |            | $ | 123,467    |  | $ | 603,116    | 

|   | Related party receivable represented advances issued by
      management for job or travel disbursement in the normal course of
      business. The receivable had no impact on earnings. As with other
      employees, officers sign notes when cash is issued to them as job or
      travel disbursement.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                              
|6. | INVENTORIES                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                              
|   | Inventories consisted of the following as of December 31,
      2010 and 2009:                                                                                                                                                                                                                               

| |                |   | 12/31/2010 |  |   | 12/31/2009 | 
| | -------------- | - | ---------- |  | - | ---------- | 
| | Raw materials  | $ | 18,128,883 |  | $ | 12,014,402 | 
| | Finished goods |   | 11,678,315 |  |   | 14,385,715 | 
| |                | $ | 29,807,198 |  | $ | 26,400,117 | 

|7. | PROPERTY, PLANT AND EQUIPMENT                                                                    
|-- | -------------------------------------------------------------------------------------------------
|   |                                                                                                  
|   | Property, plant, and equipment consisted of the following
      as of December 31, 2010 and 2009:

| |           |   | 12/31/2010 |  |   | 12/31/2009 | 
| | --------- | - | ---------- |  | - | ---------- | 
| | At Cost:  |   |            |  |   |            | 
| | Buildings | $ | 48,612,643 |  | $ | 29,181,372 | 

F-17

---

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

| | Landscaping, plant and tree         |   | 2,852,998  |   |   | 2,758,944  |  
| | ----------------------------------- | - | ---------- | - | - | ---------- | -
| | Machinery and equipment             |   | 9,544,910  |   |   | 7,783,775  |  
| | Office equipment                    |   | 501,977    |   |   | 466,411    |  
| | Motor vehicles                      |   | 420,020    |   |   | 357,902    |  
| |                                     | $ | 61,932,548 |   | $ | 40,548,404 |  
| | Less:Accumulated
      depreciation |   |            |   |   |            |  
| | Buildings                           |   | (2,729,161 | ) |   | (1,811,423 | )
| | Landscaping, plant and
      tree   |   | (23,775    | ) |   |            |  
| | Machinery and equipment             |   | (3,998,121 | ) |   | (3,226,015 | )
| | Office equipment                    |   | (312,872   | ) |   | (264,039   | )
| | Motor vehicles                      |   | (225,832   | ) |   | (230,341   | )
| |                                     |   | (7,289,761 | ) |   | (5,531,818 | )
| |                                     |   |            |   |   |            |  
| | Construction in Progress            |   | 17,452,220 |   |   | 6,263,821  |  
| |                                     | $ | 72,095,007 |   | $ | 41,280,407 |  

|   | Construction in progress is mainly comprised of capital
      expenditures for construction of the Companys new corporate campus,
      including offices, factories, and staff dormitories located at Junan
      Hongrun. Capital commitments for the construction are immaterial for the
      two years above.                                                                                                                                                                                                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Landscaping, plants, and trees accounts for the orchards
      that the Company has developed for agricultural operations. These orchards
      as well as the young trees which were purchased as nursery stock are
      capitalized into fixed assets. The depreciation is then calculated on a
      30-year straight-line method when production in commercial quantities
      begins. The orchards have begun production in small quantities and the
      Company has accounted for depreciation commencing July 1, 2010.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|8. | LAND USE RIGHTS, NET                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   | Land use rights consisted of the following as of December
      31, 2010 and 2009:                                                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                     |   | 12/31/2010 |   |   | 12/31/2009 |  
| | ----------------------------------- | - | ---------- | - | - | ---------- | -
| | Land use rights, at cost            |   | 5,509,925  |   |   | 4,359,423  |  
| | Less:Accumulated
      amortization |   | (632,487   | ) |   | (487,876   | )
| |                                     | $ | 4,877,438  |   | $ | 3,871,547  |  

All lands are owned by the government
in China. Land use rights represent the Companys purchase of usage rights for a
parcel of land for a specified duration of time, typically 50 years. The land
use rights are then amortized over the period of usage. Amortization expense for
the years ended December 31, 2010 and 2009 were $144,611 and 202,538,
respectively.

|9. | SHORT-TERM BANK LOANS
|-- | ---------------------

Short-term bank loans consisted of the
following as of December 31, 2010 and 2009:

F-18

---

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

|                                                              |  | Remark |  |   | *12/31/2010* |  |   | 12/31/2009 | 
|------------------------------------------------------------- |  | ------ |  | - | ------------ |  | - | ---------- | 
|Loans from Junan County Construction Bank,                    |  |        |  |   |              |  |   |            | 
| Interest rate at 5.346% per
      annum due1/18/2010        |  |        |  | $ | -            |  | $ | 212,075    | 
| Interest rate
      at 5.346% per annum due 1/24/2010       |  |        |  |   | -            |  |   | 144,796    | 
| Interest rate at 5.346% per
      annum due 1/28/2010       |  |        |  |   | -            |  |   | 153,572    | 
| Interest rate
      at 5.346% per annum due 3/8/2010        |  |        |  |   | -            |  |   | 153,571    | 
| Interest rate at 5.346% per
      annum due 3/25/2010       |  |        |  |   | -            |  |   | 153,572    | 
| Interest rate
      at 5.346% per annum due 1/22/2010       |  |        |  |   | -            |  |   | 394,899    | 
| Interest rate at 5.346% per
      annum due 1/10/2010       |  |        |  |   | -            |  |   | 394,898    | 
| Interest rate
      at 5.346% per annum due 1/12/2010       |  |        |  |   | -            |  |   | 475,340    | 
| Interest rate at 5.841% per
      annum due 12/27/2010      |  |        |  |   | -            |  |   | 716,667    | 
| Interest rate
      at 5.346% per annum due 9/1/2010        |  |        |  |   | -            |  |   | 1,170,073  | 
| Interest rate at 5.346% per
      annum due 1/7/2010        |  |        |  |   | -            |  |   | 1,462,587  | 
| Interest rate
      at 5.610% per annum due 1/6/2011        |  |        |  |   | 128,558      |  |   | -          | 
| Interest rate at 5.841% per
      annum due 1/14/2011       |  |        |  |   | 483,983      |  |   | -          | 
| Interest rate
      at 5.610% per annum due 1/28/2011       |  |        |  |   | 3,223        |  |   | -          | 
| Interest rate at 5.841% per
      annum due 3/4/2011        |  |        |  |   | 393,236      |  |   | -          | 
| Interest rate
      at 5.841% per annum due 9/9/2011        |  |        |  |   | 1,209,958    |  |   | -          | 
|                                                              |  |        |  |   |              |  |   |            | 
|Loan from Junan County Agriculture
      Bank,                |  |        |  |   |              |  |   |            | 
| Interest rate at 7.965% per
      annum due 8/23/2010       |  |        |  |   | -            |  |   | 1,608,846  | 
| Interest rate
      at 7.965% per annum due 9/22/2010       |  |        |  |   | -            |  |   | 1,447,961  | 
| Interest rate at 6.804% per
      annum due 3/3/2010        |  |        |  |   | -            |  |   | 1,462,587  | 
| Interest rate
      at 7.965% per annum due 11/22/2010      |  |        |  |   | -            |  |   | 643,538    | 
| Interest rate at 6.804% per
      annum due 3/11/2010       |  |        |  |   | -            |  |   | 2,193,881  | 
| Interest rate
      at 6.804% per annum due 3/08/2010       |  |        |  |   | -            |  |   | 1,755,104  | 
| Interest rate at 7.965% per
      annum due 3/17/2010       |  |        |  |   | -            |  |   | 3,363,950  | 
| Interest rate
      at 6.903% per annum due 3/30/2011       |  |        |  |   | 95,284       |  |   | -          | 
| Interest rate at 7.434% per
      annum due 8/23/2011       |  | A      |  |   | 1,512,447    |  |   | -          | 
|                                                              |  |        |  |   |              |  |   |            | 
|Loan from Junan County Industrial and Commercial
      Banks, |  |        |  |   |              |  |   |            | 
| Interest rate
      at 5.346% per annum due1/8/2010         |  |        |  |   | -            |  |   | 438,776    | 
| Interest rate at 5.346% per
      annum due1/14/2010        |  |        |  |   | -            |  |   | 541,157    | 
| Interest rate
      at 5.346% per annum due1/25/2010        |  |        |  |   | -            |  |   | 614,287    | 
| Interest rate at 3.240% per
      annum due 3/15/2010       |  |        |  |   | -            |  |   | 463,640    | 
| Interest rate
      at 5.100% per annum due 1/18/2011       |  |        |  |   | 756,224      |  |   | -          | 
| Interest rate at 5.100% per
      annum due 1/20/2011       |  |        |  |   | 756,224      |  |   | -          | 
| Interest rate
      at 5.100% per annum due 1/26/2011       |  |        |  |   | 1,134,336    |  |   | -          | 
| Interest rate at 5.100% per
      annum due 2/8/2011        |  |        |  |   | 635,228      |  |   | -          | 
| Interest rate
      at 5.100% per annum due 2/22/2011       |  |        |  |   | 1,240,207    |  |   | -          | 

F-19

---

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

| Interest rate
      at 4.860% per annum due 3/15/2011               |  | B |  |  | 1,134,336 |  |  | -         | 
|--------------------------------------------------------------------- |  | - |  |  | --------- |  |  | --------- | 
|                                                                      |  |   |  |  |           |  |  |           | 
|Loan from Junan County Agricultural
      Financial Institution,      |  |   |  |  |           |  |  |           | 
| Interest rate at 10.939% per
      annum due 1/22/2010              |  |   |  |  | -         |  |  | 1,170,070 | 
|                                                                      |  |   |  |  |           |  |  |           | 
|Loan from Linyi Commercial Bank,                                      |  |   |  |  |           |  |  |           | 
| Interest rate
      at 9.293% per annum due 1/19/2010               |  |   |  |  | -         |  |  | 658,164   | 
| Interest rate at 8.496% per
      annum due 12/21/2010              |  |   |  |  | -         |  |  | 687,416   | 
| Interest rate
      at 11.340% per annum due 12/16/2010             |  |   |  |  | -         |  |  | 1,462,587 | 
| Interest rate at 11.340% per
      annum due 12/14/2010             |  |   |  |  | -         |  |  | 1,462,587 | 
| Interest rate
      at 11.510% per annum due 1/21/2011              |  | C |  |  | 680,601   |  |  | -         | 
| Interest rate at 11.676% per
      annum due 12/15/2011             |  | C |  |  | 680,601   |  |  | -         | 
|                                                                      |  |   |  |  |           |  |  |           | 
|Beijing Miyun County Shilipu Rural                                    |  |   |  |  |           |  |  |           | 
|Financial Institution,                                                |  |   |  |  |           |  |  |           | 
| Interest rates at 7.434% per
      annum due 1/20/2010              |  |   |  |  | -         |  |  | 1,462,587 | 
| Interest rates
      at 6.903% per annum on demand                  |  |   |  |  | -         |  |  | 2,778,915 | 
|                                                                      |  |   |  |  |           |  |  |           | 
|China Merchants Bank, Beijing,                                        |  |   |  |  |           |  |  |           | 
| Interest rate at 5.310% per
      annum on demand                   |  |   |  |  | -         |  |  | 731,294   | 
|                                                                      |  |   |  |  |           |  |  |           | 
|Loan from China Agricultural Bank, Luotian Branch                     |  |   |  |  |           |  |  |           | 
| Interest rate
      at 6.372% per annum due 8/25/2010               |  |   |  |  | -         |  |  | 1,901,363 | 
| Interest rate at 6.372% per
      annum due 9/12/2011               |  |   |  |  | 1,134,336 |  |  | -         | 
|                                                                      |  |   |  |  |           |  |  |           | 
|Bank of Beijing,                                                      |  |   |  |  |           |  |  |           | 
| Interest rate
      at 6.903% per annum due 7/29/2010               |  |   |  |  | -         |  |  | 292,517   | 
| Interest rate at 6.672% per
      annum due 10/28/2011              |  |   |  |  | 302,489   |  |  | -         | 
|                                                                      |  |   |  |  |           |  |  |           | 
|East West Bank (Formerly United Commercial Bank),
      China Branch, |  |   |  |  |           |  |  |           | 
| Interest rate
      at 5.494% per annum due 1/14/2011               |  | D |  |  | 897,052   |  |  | 1,050,137 | 
|                                                                      |  |   |  |  |           |  |  |           | 
|HSBC Miyun Branch,                                                    |  |   |  |  |           |  |  |           | 
| Interest rate
      at 6.804% per annum due 4/08/2010               |  |   |  |  | -         |  |  | 292,517   | 
| Interest rate
      at 5.840% per annum due 6/09/2011               |  | E |  |  | 302,489   |  |  | -         | 
| Interest rate
      at 6.372% per annum due 6/29/2011               |  |   |  |  | 983,091   |  |  |           | 

F-20

---

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

| Interest rate
      at 6.804% per annum due 4/8/2011    |  | E |  |   | 302,489    |  |   | -          | 
|--------------------------------------------------------- |  | - |  | - | ---------- |  | - | ---------- | 
|                                                          |  |   |  |   |            |  |   |            | 
|Shenzhen Development Bank,                                |  |   |  |   |            |  |   |            | 
| Interest rate at 5.576% per
      annum due 12/29/2010  |  |   |  |   | -          |  |   | 1,462,587  | 
| Interest rate
      at 5.310% per annum due 9/14/2011   |  |   |  |   | 756,224    |  |   | -          | 
|                                                          |  |   |  |   |            |  |   |            | 
|China Development Bank,                                   |  |   |  |   |            |  |   |            | 
| Interest rate at 5.841% per
      annum due 6/27/2011   |  | F |  |   | 3,024,895  |  |   | -          | 
|                                                          |  |   |  |   |            |  |   |            | 
|Luotian Agricultural Development Bank,                    |  |   |  |   |            |  |   |            | 
| Interest rate
      at 0.670% per annum due 12/11/2010  |  |   |  |   | 113,433    |  |   | 109,694    | 
|                                                          |  |   |  |   |            |  |   |            | 
|Luotian Sanliqiao Credit Union,                           |  |   |  |   |            |  |   |            | 
| Interest rate at 6.300% per
      annum due 11/5/2011   |  |   |  |   | 756,224    |  |   | -          | 
|                                                          |  |   |  |   |            |  |   |            | 
|Beijing Rural Commercial Bank, Shilibao Branch,           |  |   |  |   |            |  |   |            | 
| Interest rate
      at 7.434% per annum due 8/10/2011   |  |   |  |   | 2,571,161  |  |   | -          | 
|                                                          |  |   |  |   |            |  |   |            | 
|China Agricultural Bank, Shandong
      Branch            |  |   |  |   |            |  |   |            | 
| Interest rate at 7.2280% per
      annum due 12/27/2011 |  |   |  |   | 1,512,447  |  |   |            | 
|                                                          |  |   |  |   |            |  |   |            | 
|Shandong Junan Rural Credit Union                         |  |   |  |   |            |  |   |            | 
|Interest rate at 9.1155% per annum due 2/07/2011         |  |   |  |   | 1,209,958  |  |   |            | 
|Beijing International Trust Co., Ltd., (BITIC)          |  |   |  |   |            |  |   |            | 
| Interest rate
      at 6.600% per annum due 12/14/2011  |  |   |  |   | 453,734    |  |   | -          | 
|                                                          |  |   |  | $ | 25,164,469 |  | $ | 35,488,212 | 

|    | The short-term loans, which are denominated in the
      functional currency Renminbi (RMB), were primarily obtained for general
      working capital.                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                               
|    | Remark:                                                                                                                                                                       
|    |                                                                                                                                                                               
|    | A: A parcel of 12,726 square meters land use right and an
      8,162 square meters building was used as collateral for this loan.                                            
|    |                                                                                                                                                                               
|    | B: Accounts Receivable in the amount of $1,650,000 was
      used as collateral for this loan
      C: Machinery of $857,737 was used as collateral for these
      two loans.
|    |                                                                                                                                                                               
|    | D: A parcel of 19,507 square meters land use right, owned
      by Sishui Xinlu, was used as collateral for this loan.                                                        
|    |                                                                                                                                                                               
|    | E: Machinery and equipment was used as collateral for
      this loan.
      F: A land of 25,463 square meters was used as collateral                                         
|    |                                                                                                                                                                               
|10. | NOTES PAYABLE                                                                                                                                                                 
|    |                                                                                                                                                                               
|    | Notes payable consisted of the following as of December
      31, 2010 and 2009:                                                                                              

F-21

---

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

| |                                 |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ------------------------------- | - | ---------- |  | - | ---------- | 
| | Junan County Construction Bank, |   |            |  |   |            | 
| |  due at 1/26/2011              | $ | 378,112    |  | $ | -          | 
| |  due at
      1/30/2011        |   | 846,971    |  |   | -          | 
| |                                 |   |            |  |   |            | 
| | Qingdao Evergrowing Bank,       |   |            |  |   |            | 
| |  due at 6/13/2011              |   | 3,024,895  |  |   | -          | 
| |                                 | $ | 4,249,977  |  | $ | -          | 

|    | Certain notes payable, as indicated above, do not have a
      stated rate of interest. These notes are payable on demand to the
      Companys creditors.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                            
|11. | TAXES PAYABLES                                                                                                                                             
|    |                                                                                                                                                            
|    | Taxes payable consisted of the following as of December
      31, 2010 and 2009:                                                                           

| |                                  |   | 12/31/2010 |  |   | 12/31/2009 | 
| | -------------------------------- | - | ---------- |  | - | ---------- | 
| | Value added tax payable          | $ | 377,562    |  | $ | 328,608    | 
| | Corporate income tax payable     |   | 2,808,466  |  |   | 1,842,751  | 
| | Employee payroll tax withholding |   | 5,096      |  |   | 3,449      | 
| | Property tax payable             |   | 38,819     |  |   | 12,279     | 
| | Stamp tax payable                |   | 4,679      |  |   | 359        | 
| | Sales tax payable                |   | 76         |  |   | -          | 
| | Land use tax payable             |   | 24,943     |  |   | 41,260     | 
| | Import tariffs                   |   | 6,861      |  |   | 6,635      | 
| |                                  | $ | 3,266,502  |  | $ | 2,235,341  | 

|12. | ACCRUED EXPENSES AND OTHER PAYABLE                                                                                 
|--- | -------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                    
|    | Accrued expenses and other payables consisted of the
      following as of December 31, 2010 and December 31, 2009:

| |                                 |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ------------------------------- | - | ---------- |  | - | ---------- | 
| | Accrued salaries and wages      | $ | -          |  | $ | 500,390    | 
| | Accrued utility expenses        |   | 24,825     |  |   | 263,492    | 
| | Accrued interest expenses       |   | 38,353     |  |   | 9,264      | 
| | Accrued transportation expenses |   | 472,836    |  |   | 344,841    | 
| | Other accruals                  |   | 110,683    |  |   | 184,860    | 
| | Business and other taxes        |   | 479,850    |  |   | 2,344,746  | 
| | Disbursement payable            |   | 177,543    |  |   | 2,750,547  | 
| | Accrued staff welfare           |   | 31,857     |  |   | 24,352     | 
| |                                 | $ | 1,335,947  |  | $ | 6,422,492  | 

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

F-22

---

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

| |                                                             |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ----------------------------------------------------------- | - | ---------- |  | - | ---------- | 
| | Loans from Luotian Agricultural
      Development Bank      |   |            |  |   |            | 
| |  Interest rate at 2.100% per annum due 12/11/2011          |   | 26,468     |  |   | -          | 
| |                                                             |   |            |  |   |            | 
| | Loans from East West Bank (Formerly United
      Commercial |   |            |  |   |            | 
| | Bank), China Branch                                         |   |            |  |   |            | 
| |  Interest rate at 5.494% per annum due 1/14/2011           |   | 192,467    |  |   | -          | 
| |                                                             |   |            |  |   |            | 
| |                                                             | $ | 218,935    |  | $ | -          | 

Non-current portions of long-term debt
consisted of the following as of December 31, 2010 and 2009:

| |                                                             |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ----------------------------------------------------------- | - | ---------- |  | - | ---------- | 
| | Loans from Luotian Agricultural
      Development Bank      |   |            |  |   |            | 
| |  Interest rate at 2.100% per annum due 12/11/2011          |   | -          |  |   | 25,595     | 
| |                                                             |   |            |  |   |            | 
| | Loans from East West Bank (Formerly United
      Commercial |   |            |  |   |            | 
| | Bank), China Branch                                         |   |            |  |   |            | 
| |  Interest rate at 5.494% per annum due 1/14/2011           |   | -          |  |   | 269,278    | 
| |                                                             |   |            |  |   |            | 
| | Loans from Deutsche Investitions-und                        |   |            |  |   |            | 
| | Entwicklungsgesellschaft mbH (DEG)                        |   |            |  |   |            | 
| |  Interest rate at 5.510% per annum due 9/16/2016           |   | 5,030,930  |  |   | -          | 
| |                                                             | $ | 5,030,930  |  | $ | 294,873    | 

The Companys loan with DEG will be
repaid in semi-annual installments beginning September 15, 2012. The loan was
collateralized with the following terms:

| | (a.) | Create and register a first ranking mortgage in the
      amount of about USD 12,000,000 on its land and building in favor of DEG.                                                                                                              
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b.) | Undertake to provide a share pledge of Mr. Si Chen shares
      in the sponsor in the amount of about USD 12,000,000 and being the
      majority shareholder in the sponsor in form and substance satisfactory to
      DEG                    
| | (c.) | The total amount of the first ranking mortgage as
      indicated in the Loan Agreement (Article 12(1)(a)) and the value of the
      pledged shares of Mr. Si Chen (Loan Agreement (Article 12(1)(a))) should
      be at least USD 24,000,000.
| | (d.) | Undertake to provide a guarantee from the Shareholder in
      form and substance satisfactory to DEG                                                                                                                                           

|14. | CAPITALIZATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Dating back to May 3, 2007, the Company underwent a
      reverse-merger and a concurrent financing transaction that resulted in
      24,923,178 shares of outstanding common stock that remained unchanged
      until through December 31, 2007. In connection with the financing, the
      Company also issued 1,037,858 and 489,330 warrants to the PIPE investors
      and placement agent, respectively. During 2008, several holders of
      warrants issued in connection with the financing transaction exercised
      their rights to purchase shares at the prescribed exercise price. The
      holders of the warrants exercised the right to purchase a total of 360,207
      shares; however, because the holders did not pay in cash for the warrants,
      110,752 of those shares were cancelled as consideration in lieu of the
      warrant holders paying in cash. Ultimately, 249,455 of new shares were
      issued to those who exercised their warrant. The Company also made an
      adjustment to its outstanding share count for rounding errors as result of
      the split and reverse splits made at the time of the reverse merger. The
      number of shares in the adjustment was an addition of seven shares. The
      Company believes the adjustment of seven shares is immaterial to both
      prior and current earnings per share calculation. As detailed in the table
      below, the total number of outstanding shares at December 31, 2010 was
      31,419,709.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | During the year 2009, the Company issued 56,393 shares of
      stock to its employees and vendors and 5,011,169 shares to investors. The
      Company issued 1,334,573 stock options to employees on July 28, 2009.
      1,753,909 shares of Series A warrants and 501,115
shares of Series B warrants were issued to investors on October 28, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-23

---

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

During the year 2010, the Company
issued 2,000 shares to a service provider on February 10, 2010 and 81,155
warrants to various service providers on January 5, 2010. The Company issued to
investors 3,440,800 shares at an agreed price of $2.80 per share for a PIPE
financing on September 10, 2010. This financing brought $8,955,730 net proceeds
to the Company. The Company issued 5,000 shares to its employee on 9/23/2010.
731,707 shares of restricted stock were issued to the owner of Shandong
Greenpia, Mr. Ji Zhenwei on September 24, 2010 as part of acquisition cost. The
total number of shares issued and outstanding is 34,419,709 as of December 31,
2010.

During the year 2010, the Company
transferred 5,161,176 from retained earnings to additional paid up capital and
2,445,262 from retained earnings to statutory reserve. These transfers are to be
used for future company development, recovery of losses and increase of capital,
as approved, to expand production or operations.

American Lorain Corporation
Capitalization Reconciliation Table

| |                                                        |  | Par value authorized |  |  | Issuance date |  |  | Shares outstanding | 
| | ------------------------------------------------------ |  | -------------------- |  |  | ------------- |  |  | ------------------ | 
| | Common stock at 1/1/2009                               |  | 200,000,000          |  |  |               |  |  | 25,172,640         | 
| | New shares issued to employees and vendors during 2009 |  |                      |  |  | Various dates |  |  | 56,393             | 
| | New shares issued to PIPE investors                    |  |                      |  |  | 10/28/2009    |  |  | 5,011,169          | 
| | New shares issued to service provider during 2010      |  |                      |  |  | 2/10/2010     |  |  | 2,000              | 
| | New shares issued to PIPE investors                    |  |                      |  |  | 9/10/2010     |  |  | 3,440,800          | 
| | New shares issued to employee                          |  |                      |  |  | 9/23/2010     |  |  | 5,000              | 
| | New shares issued as acquisition
      consideration   |  |                      |  |  | 9/24/2010     |  |  | 731,707            | 
| | Common stock at 12/31/2010                             |  |                      |  |  |               |  |  | 34,419,709         | 

| |                                                            |  | Number of warrants |  |  |               |  |  |                 | 
| | ---------------------------------------------------------- |  | ------------------ |  |  | ------------- |  |  | --------------- | 
| | Warrants and options                                       |  | or options         |  |  | Issuance date |  |  | Expiration date | 
| | Warrants issued to investors in 2007 PIPE                  |  | 1,037,858          |  |  | 5/3/2007      |  |  | 5/2/2010        | 
| | Warrants issued to placement agent in 2007 PIPE            |  | 489,330            |  |  | 5/3/2007      |  |  | 5/2/2010        | 
| | Employee stock options                                     |  | 1,334,573          |  |  | 7/28/2009     |  |  | 7/27/2014       | 
| | Warrants issued to investors in 2009 PIPE - Series A       |  | 1,753,909          |  |  | 10/28/2009    |  |  | 4/28/2015       | 
| | Warrants issued to investors in 2009 PIPE -
      Series B |  | 501,115            |  |  | 10/28/2009    |  |  | 10/28/2012      | 
| | Issued to service provider A during 2010                   |  | 50,722             |  |  | 1/5/2010      |  |  | 1/2/2014        | 
| | Issued to service provider B during 2010                   |  | 20,289             |  |  | 1/5/2010      |  |  | 1/2/2014        | 
| | Issued to service provider C during 2010                   |  | 10,144             |  |  | 1/5/2010      |  |  | 1/2/2014        | 
| | Total warrants and options                                 |  | 5,197,940          |  |  |               |  |  |                 | 

|15. | NON-CONTROLLING INTERESTS                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                           
|    | The non-controlling interest represents the 19.8% equity
      of Shandong Lorain held by the Shandong Economic Development Investment
      Corporation, which is a state-owned interest.

F-24

---

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

|16. | SALES BY PRODUCT TYPE                                                                            
|--- | -------------------------------------------------------------------------------------------------
|    |                                                                                                  
|    | Sales by categories of product consisted of the following as of
      December 31, 2010 and 2009:

| | Category         |   | 12/31/2010  |  |   | 12/31/2009  | 
| | ---------------- | - | ----------- |  | - | ----------- | 
| | Chestnut         | $ | 101,165,457 |  | $ | 89,117,729  | 
| | Convenience food |   | 56,751,766  |  |   | 34,623,978  | 
| | Frozen food      |   | 26,259,344  |  |   | 23,030,735  | 
| | Total            | $ | 184,176,567 |  | $ | 146,772,442 | 

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

| | Country        |   | 12/31/2010  |  |   | 12/31/2009  | 
| | -------------- | - | ----------- |  | - | ----------- | 
| | Australia      | $ | 327,087     |  | $ | 162,213     | 
| | Belgium        |   | 2,979,263   |  |   | 4,093,828   | 
| | Canada         |   | 57,088      |  |   | -           | 
| | Chile          |   | 18,126      |  |   | -           | 
| | China          |   | 135,028,823 |  |   | 103,504,689 | 
| | Denmark        |   | 16,221      |  |   | -           | 
| | France         |   | 910,881     |  |   | 973,620     | 
| | Germany        |   | 920,178     |  |   | 454,225     | 
| | Hong Kong      |   | 470,434     |  |   | 594,533     | 
| | Indonesia      |   | 172,118     |  |   | -           | 
| | Israel         |   | 426,437     |  |   | -           | 
| | Japan          |   | 19,649,089  |  |   | 18,898,539  | 
| | Kuwait         |   | 165,499     |  |   | -           | 
| | Malaysia       |   | 2,177,511   |  |   | 944,475     | 
| | Netherlands    |   | 1,558,792   |  |   | 251,870     | 
| | Philippines    |   | 314,125     |  |   | -           | 
| | Poland         |   | 185,264     |  |   | -           | 
| | Saudi Arabia   |   | 144,216     |  |   | 1,156,734   | 
| | Singapore      |   | 862,862     |  |   | 2,373,203   | 
| | South Korea    |   | 9,816,362   |  |   | 11,030,072  | 
| | Spain          |   | 540,546     |  |   | 279,851     | 
| | Taiwan         |   | 1,910,243   |  |   | 492,147     | 
| | United Kingdom |   | 2,609,928   |  |   | 571,247     | 
| | United States  |   | 2,915,474   |  |   | 854,348     | 
| | Yemen          |   | -           |  |   | 136,848     | 
| | Total          | $ | 184,176,567 |  | $ | 146,772,442 | 

F-25

---

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

|17. | INCOME TAXES                                                                                                                                                                   
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                
|    | All of the Companys operations are in the PRC, and in
      accordance with the relevant tax laws and regulations of PRC, the
      corporate income tax rate is 25%.         
|    |                                                                                                                                                                                
|    | The following tables provide the reconciliation of the
      differences between the statutory and effective tax expenses for the years
      ended December 31, 2010 and 2009.

| |                                 |   | 12/31/2010 |   |   | 12/31/2009 |  
| | ------------------------------- | - | ---------- | - | - | ---------- | -
| | Income attributed to PRC        | $ | 26,384,934 |   | $ | 19,976,285 |  
| | Loss attributed to US*          |   | (1,306,185 | ) |   | (444,606   | )
| | Income before tax               |   | 25,078,749 |   |   | 19,531,679 |  
| |                                 |   |            |   |   |            |  
| | PRC Statutory Tax at 25% Rate   |   | 5,906,670  |   |   | 4,422,546  |  
| | Effect of tax exemption granted |   | (76,199    | ) |   | (199,841   | )
| | Income tax                      | $ | 5,830,472  |   | $ | 4,222,705  |  

Per Share Effect of Tax
Exemption

| |                                           |   | 12/31/2010 |  |   | 12/31/2009 | 
| | ----------------------------------------- | - | ---------- |  | - | ---------- | 
| | Effect of tax exemption granted           | $ | 76,199     |  | $ | 199,841    | 
| | Weighted-Average Shares Outstanding Basic |   | 31,507,044 |  |   | 26,075,413 | 
| | Per share effect                          | $ | 0.002      |  | $ | 0.008      | 

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

| |                                        |   | 2010   |  |   | 2009    | 
| | -------------------------------------- | - | ------ |  | - | ------- | 
| | U.S. federal statutory income tax rate | $ | 35%    |  | $ | 35.00%  | 
| | Lower rates in PRC, net                |   | -10%   |  |   | -10.00% | 
| | Tax holiday for foreign investments    |   | -1.75% |  |   | -3.38%  | 
| | The Companys effective tax rate       | $ | 23.25% |  | $ | 21.62%  | 

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

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

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

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

F-26

---

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

|18. | EARNINGS PER SHARE                                                       
|--- | -------------------------------------------------------------------------
|    |                                                                          
|    | Components of basic and diluted earnings per share were
      as follows:

| |                                                                  |   | 12 months    |  |   | 12 months    | 
| | ---------------------------------------------------------------- | - | ------------ |  | - | ------------ | 
| |                                                                  |   | ended        |  |   | ended        | 
| |                                                                  |   | December 31, |  |   | December 31, | 
| |                                                                  |   | 2010         |  |   | 2009         | 
| |                                                                  |   |              |  |   |              | 
| | Basic Earnings Per Share Numerator                               |   |              |  |   |              | 
| | Net Income                                                       | $ | 17,839,463   |  | $ | 14,408,112   | 
| |                                                                  |   |              |  |   |              | 
| | Income Available to
      Common Stockholders                    | $ | 17,839,463   |  | $ | 14,408,112   | 
| |                                                                  |   |              |  |   |              | 
| | Diluted Earnings Per Share Numerator                             |   |              |  |   |              | 
| | Income
      Available to Common Stockholders                    | $ | 17,833,959   |  | $ | 14,408,112   | 
| |                                                                  |   |              |  |   |              | 
| | Income Available to Common Stockholders on
      Converted Basis | $ | 17,833,959   |  | $ | 14,408,112   | 
| |                                                                  |   |              |  |   |              | 
| | Original Shares:                                                 |   |              |  |   |              | 
| | Additions from Actual Events                                     |   |              |  |   |              | 
| | -Issuance of Common Stock                                        |   | 31,507,044   |  |   | 26,075,413   | 
| | Basic Weighted Average Shares Outstanding                        |   | 31,507,044   |  |   | 26,075,413   | 
| |                                                                  |   |              |  |   |              | 
| | Dilutive Shares:                                                 |   |              |  |   |              | 
| | Additions from Potential Events                                  |   |              |  |   |              | 
| | Exercise of Investor Warrants & Placement Agent
      Warrants   |   | 22,638       |  |   | -            | 
| | Exercise of Employee & Director Stock
      Options              |   | 674,873      |  |   | 189,381      | 
| | Diluted Weighted Average Shares Outstanding:                     |   | 32,204,555   |  |   | 26,264,794   | 
| |                                                                  |   |              |  |   |              | 
| | Earnings Per Share                                               |   |              |  |   |              | 
| | - Basic                                                          | $ | 0.57         |  | $ | 0.55         | 
| | - Diluted                                                        | $ | 0.55         |  | $ | 0.55         | 
| |                                                                  |   |              |  |   |              | 
| | Weighted Average Shares Outstanding                              |   |              |  |   |              | 
| | - Basic                                                          |   | 31,507,044   |  |   | 26,075,413   | 
| | - Diluted                                                        |   | 32,204,555   |  |   | 26,264,794   | 

|19. | SHARE BASED COMPENSATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | On July 27, 2009, the Companys Board of Directors
      adopted the American Lorain Corporation 2009 Incentive Stock Plan (the
      Plan). The Plan provides that the maximum number of shares of the
      Companys common stock that may be issued under the Plan is 2,500,000
      shares. The Companys employees, directors, and service providers are
      eligible to participate in the Plan.                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | For the year ended December 31, 2009, the Company
      recorded a total of $166,346 of shared based compensation expense. The
      Company issued warrants that upon exercise would result in the issuance of
      1,334,573 common shares. These stock options vest over three years, where
      33.33% vest annually. The expense related to the stock options was
      $107,375. The Company also recorded expense of $58,971 for the issuance of
      56,393 common shares to participants, respectively. The common shares
      vested immediately.

F-27

---

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

Given the materiality and nature of
share based compensation, the entire expense has been recorded as general and
administrative expenses.

During the period ended December 31,
2010, the Company recorded a total of $890,209 stock option and its related
general and administrative expenses.

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

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


No tax benefit has yet to be accrued or
realized. For the period ended December 31, 2010 the Company has yet to
repatriate its earnings, accordingly it has not recognized any deferred tax
assets or liability in regards to benefits derived from the issuance of stock
options.

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

| | Weighted-average fair value of grants: | $ | 1.5955 | 
| | -------------------------------------- | - | ------ | 
| | Risk-free interest rate:               |   | 2.01%  | 
| | Expected volatility:                   |   | 5.11%  | 
| | Expected life in months:               |   | 42.00  | 

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

| | From     |  | To         |  |   | Lease payment | 
| | -------- |  | ---------- |  | - | ------------- | 
| | 1/1/2011 |  | 12/31/2011 |  | $ | 84,259        | 
| | 1/1/2012 |  | 12/31/2012 |  |   | 84,259        | 
| | 1/1/2013 |  | 12/31/2013 |  |   | 87,536        | 
| | 1/1/2014 |  | 12/31/2014 |  |   | 92,685        | 
| | 1/1/2015 |  | 12/31/2015 |  |   | 92,685        | 
| | 1/1/2016 |  | 12/31/2016 |  |   | 92,685        | 
| | 1/1/2017 |  | 12/31/2017 |  |   | 92,685        | 
| | 1/1/2018 |  | 8/9/2018   |  |   | 56,641        | 
| |          |  |            |  | $ | 683,435       | 

The outstanding lease commitment as of
December 31, 2010 was $683,435.

F-28

---

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

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

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

|    | The outstanding lease commitment as of December 31, 2009
      was $767,567.
|--- | ----------------------------------------------------------------------------
|    |                                                                             
|20. | RISKS                                                                       

| | A. | Credit risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Since the Companys inception, the age of account
      receivables have been less than one year indicating that the Company is
      subject to minimal risk borne from credit extended to customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | B. | Interest risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The company subject to the interest rate risk when their
      short term loans become due and require refinancing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | C. | 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 changes in the political, economic, and
      legal environments in the PRC.                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | 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.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | D. | Environmental risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | The Company has procured environmental licenses required
      by the PRC government. The Company has both a water treatment facility for
      water used in its production process and secure transportation to remove
      waste off site. In the event of an accident, the Company has purchased
      insurance to cover potential damage to employees, equipment, and local
      environment.                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | E. | Inflation Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Management monitors changes in prices levels.
      Historically inflation has not materially impacted the companys financial
      statements; however, significant increases in the price of raw materials
      and labor that cannot be passed on the Companys customers could adversely
      impact the Companys results of operations.                                                                                                                                                                                                                                                                                                                                    

F-29

---

AMERICAN LORAIN CORPORATION

CONDENSED FINANCIAL STATEMENTS

DECEMBER 31, 2010 AND 2009

(Stated in US Dollars)

---

AMERICAN LORAIN CORPORATION

|CONTENTS                                                      | PAGES    
|------------------------------------------------------------- | ---------
|REPORT OF INDEPENDENT REGISTERED PUBLIC
      ACCOUNTING FIRM | S-1      
|BALANCE SHEETS                                                | S-2      
|STATEMENTS OF INCOME                                          | S-3      
|STATEMENTS OF CASH FLOWS                                      | S-4      
|STATEMENTS OF STOCKHOLDERS EQUITY                            | S-5      
|NOTES TO FINANCIAL STATEMENTS                                 | S-6 - S-9

---

REPORT OF REGISTERED INDEPENDENT PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying condensed balance sheets of
American Lorain Corporation as of December 31, 2010 and 2009 and the related
condensed statements of income, stockholders' equity and cash flows for the
years then ended. These condensed financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
condensed 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 condensed 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 condensed financial statements referred to
above present fairly, in all material respects, the financial position of
American Lorain Corporation as of December 31, 2010 and 2009 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.

|San Mateo, California | Samuel H. Wong & Co., LLP   
|--------------------- | ----------------------------
|March 21, 2011        | Certified Public Accountants

S-1

---

|AMERICAN LORAIN CORPORATION     
|--------------------------------
|CONDENSED BALANCE SHEETS        
|AS OF DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)          

|                                                                                                                                                                                  |  | Note |  |   | At December 31, |   |   | At December 31, |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | - | --------------- | - | - | --------------- | -
|ASSETS                                                                                                                                                                            |  |      |  |   | 2010            |   |   | 2009            |  
|Current assets                                                                                                                                                                    |  |      |  |   |                 |   |   |                 |  
|Cash and cash equivalents                                                                                                                                                         |  | 2(d) |  | $ | 8,646           |   | $ | 6,056           |  
|Intercompany receivables                                                                                                                                                          |  | 3    |  |   | 2,404,451       |   |   | 190,000         |  
|Related party receivables                                                                                                                                                         |  | 4    |  |   | 67,523          |   |   | 69,037          |  
|Prepaid expenses                                                                                                                                                                  |  |      |  |   | -               |   |   | 34,375          |  
|Prepaid taxes                                                                                                                                                                     |  |      |  |   | -               |   |   | 33,028          |  
|Deferred tax asset                                                                                                                                                                |  | 5    |  |   | -               |   |   | 151,166         |  
|Total current assets                                                                                                                                                              |  |      |  | $ | 2,516,620       |   | $ | 483,662         |  
|                                                                                                                                                                                  |  |      |  |   |                 |   |   |                 |  
|Non-current assets                                                                                                                                                                |  |      |  |   |                 |   |   |                 |  
|Investments in subsidiaries                                                                                                                                                       |  | 6    |  |   | 43,172,816      |   |   | 34,634,945      |  
|TOTAL ASSETS                                                                                                                                                                      |  |      |  | $ | 45,689,436      |   | $ | 35,118,607      |  
|                                                                                                                                                                                  |  |      |  |   |                 |   |   |                 |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                              |  |      |  |   |                 |   |   |                 |  
|Current liabilities                                                                                                                                                               |  |      |  |   |                 |   |   |                 |  
|Wage payable                                                                                                                                                                      |  |      |  | $ | 7,941           |   | $ | -               |  
|Other payables                                                                                                                                                                    |  |      |  |   | 15,000          |   |   | -               |  
|Intercompany payables                                                                                                                                                             |  | 7    |  |   | 137,261         |   |   | 113,261         |  
|Accrued liabilities                                                                                                                                                               |  |      |  |   | 80,000          |   |   | -               |  
|Total current liabilities                                                                                                                                                         |  |      |  | $ | 240,202         |   | $ | 113,261         |  
|                                                                                                                                                                                  |  |      |  |   |                 |   |   |                 |  
|TOTAL LIABILITIES                                                                                                                                                                 |  |      |  | $ | 240,202         |   | $ | 113,261         |  
|                                                                                                                                                                                  |  |      |  |   |                 |   |   |                 |  
|STOCKHOLDERS EQUITY                                                                                                                                                              |  |      |  |   |                 |   |   |                 |  
|Preferred Stock, $.001 par value, 5,000,000
      shares authorized; 0 shares issued and outstanding at December 31, 2010
      and 2009, respectively                            |  |      |  |   | -               |   |   | -               |  
|Common stock, $0.001 par value, 200,000,000 shares
      authorized; 34,419,709 and 30,240,202 shares issued and outstanding as of
      December 31, 2010 and 2009, respectively |  |      |  | $ | 34,420          |   | $ | 30,240          |  
|Additional paid-in capital                                                                                                                                                        |  |      |  |   | 47,210,306      |   |   | 35,268,603      |  
|Retained earnings                                                                                                                                                                 |  |      |  |   | (1,795,492      | ) |   | (293,440        | )
|TOTAL STOCKHOLDERS EQUITY                                                                                                                                                        |  |      |  | $ | 45,449,234      |   | $ | 35,005,403      |  
|                                                                                                                                                                                  |  |      |  |   |                 |   |   |                 |  
|TOTAL LIABILITIES AND
      STOCKHOLDERS EQUITY                                                                                                                                  |  |      |  | $ | 45,689,436      |   | $ | 35,118,607      |  

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

S-2

---

|AMERICAN LORAIN CORPORATION               
|------------------------------------------
|CONDENSED STATEMENTS OF INCOME            
|FOR YEARS ENDED DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)                    

|                                    |  |          |  |   | December 31, |   |   | December 31, |  
|----------------------------------- |  | -------- |  | - | ------------ | - | - | ------------ | -
|                                    |  | **Note** |  |   | 2010         |   |   | 2009         |  
|                                    |  |          |  |   |              |   |   |              |  
|Net revenues                        |  |          |  | $ | -            |   | $ | -            |  
|Cost of revenues                    |  |          |  |   | -            |   |   | -            |  
|Gross profit                        |  |          |  | $ | -            |   | $ | -            |  
|                                    |  |          |  |   |              |   |   |              |  
|Operating expenses                  |  |          |  |   |              |   |   |              |  
|Selling and marketing expenses      |  |          |  |   | -            |   |   | -            |  
|General and administrative expenses |  |          |  |   | 1,350,886    |   |   | 444,663      |  
|Total operating expenses            |  |          |  |   | (1,350,886   | ) |   | (444,663     | )
|                                    |  |          |  |   |              |   |   |              |  
|Operating income/(loss)             |  |          |  | $ | (1,350,886   | ) | $ | (444,663     | )
|                                    |  |          |  |   |              |   |   |              |  
|Interest income                     |  |          |  |   | -            |   |   | 57           |  
|                                    |  |          |  |   |              |   |   |              |  
|Loss before tax                     |  |          |  | $ | (1,350,886   | ) | $ | (444,606     | )
|                                    |  |          |  |   |              |   |   |              |  
|(Income tax)/ Deferred tax benefit  |  |          |  |   | (151,166     | ) |   | 151,166      |  
|                                    |  |          |  |   |              |   |   |              |  
|Net loss                            |  |          |  | $ | (1,502,052   | ) | $ | (293,440     | )
|                                    |  |          |  |   |              |   |   |              |  
|Earnings Per Share                  |  |          |  |   |              |   |   |              |  
|-Basic                              |  |          |  |   | (0.05        | ) | $ | (0.01        | )
|-Diluted                            |  |          |  |   | (0.05        | ) |   | (0.01        | )
|                                    |  |          |  |   |              |   |   |              |  
|Weighted average shares outstanding |  |          |  |   |              |   |   |              |  
|-Basic                              |  |          |  |   | 31,507,044   |   |   | 26,075,413   |  
|-Diluted                            |  |          |  |   | 32,204,555   |   |   | 26,518,515   |  

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

S-3

---

|AMERICAN LORAIN CORPORATION               
|------------------------------------------
|CONDENSED STATEMENTS OF CASH FLOWS        
|FOR YEARS ENDED DECEMBER 31, 2010 AND 2009
|(Stated in US Dollars)                    

|                                                          |   | December 31, |   |   | December 31, |  
|--------------------------------------------------------- | - | ------------ | - | - | ------------ | -
|                                                          |   | 2010         |   |   | 2009         |  
|Cash flows from operating activities                      |   |              |   |   |              |  
|Net loss                                                  | $ | (1,502,052   | ) | $ | (293,440     | )
|Stock and share based compensation                        |   | 890,210      |   |   | 166,398      |  
|Decrease/(increase) in intercompany receivables           |   | (2,250,450   | ) |   | (190,000     | )
|Decrease/(increase) in intercompany
      receivables     |   | 1,514        |   |   | (69,037      | )
|Decrease/(increase) in prepaid expenses                   |   | 34,375       |   |   | (34,375      | )
|Decrease/(increase) in prepaid taxes                      |   | 33,028       |   |   | (33,028      | )
|Decrease/(increase) in deferred tax asset                 |   | 151,166      |   |   | (151,166     | )
|Increase/(decrease) in wage payable                       |   | 7,941        |   |   | -            |  
|Increase/(decrease) in other payables                     |   | 15,000       |   |   | -            |  
|Increase/(decrease) in intercompany
      payables        |   | 24,000       |   |   | 113,261      |  
|Increase/(decrease) in accrued liabilities                |   | 80,000       |   |   | -            |  
|Net cash used in operating activities                     |   | (2,515,268   | ) |   | (491,387     | )
|                                                          |   |              |   |   |              |  
|Cash flows from investing activities                      |   |              |   |   |              |  
|Investments in subsidiaries                               |   | (8,537,871   | ) |   | (10,422,504  | )
|Net cash used in investing activities                     |   | (8,537,871   | ) |   | (10,422,504  | )
|                                                          |   |              |   |   |              |  
|Cash flows from financing activities                      |   |              |   |   |              |  
|Issue of common stock                                     |   | 11,055,729   |   |   | 10,919,947   |  
|Net cash provided by/(used in) financing
      activities | $ | 11,055,729   |   | $ | 10,919,947   |  
|                                                          |   |              |   |   |              |  
|Net Increase of Cash and Cash Equivalents                 |   | 2,590        |   |   | 6,056        |  
|                                                          |   |              |   |   |              |  
|Cash and cash equivalentsbeginning of year               |   | 6,056        |   |   | -            |  
|                                                          |   |              |   |   |              |  
|Cash and cash equivalentsend of year                     | $ | 8,646        |   | $ | 6,056        |  
|Supplementary cash flow information:                      |   |              |   |   |              |  
|Interest received                                         |   | -            |   |   | 57           |  
|Interest paid                                             |   | -            |   |   | -            |  
|Income taxes paid                                         | $ | -            |   | $ | -            |  

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

S-4

---

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

|                                     |  | Number     |  |   |        |  |   | Additional |   |   |            |   |   |            |  
|------------------------------------ |  | ---------- |  | - | ------ |  | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                     |  | Of         |  |   | Common |  |   | Paid-in    |   |   | Retained   |   |   |            |  
|                                     |  | Shares     |  |   | Stock  |  |   | Capital    |   |   | Earnings   |   |   | Total      |  
|Balance, January 1, 2009             |  | 25,172,640 |  | $ | 25,172 |  | $ | 24,187,019 |   |   | -          |   | $ | 24,212,191 |  
|Issuance of share based compensation |  | 56,393     |  |   | 57     |  |   | 166,341    |   |   | -          |   |   | 166,398    |  
|Issuance of common stock for cash    |  | 5,011,169  |  |   | 5,011  |  |   | 12,002,150 |   |   | -          |   |   | 12,007,161 |  
|Issuance cost of common stock        |  |            |  |   |        |  |   | (1,086,907 | ) |   | -          |   |   | (1,086,907 | )
|Net loss                             |  | -          |  |   | -      |  |   | -          |   |   | (293,440   | ) |   | (293,440   | )
|Balance, December 31, 2009           |  | 30,240,202 |  | $ | 30,240 |  | $ | 35,268,603 |   | $ | (293,440   | ) | $ | 35,005,403 |  
|                                     |  |            |  |   |        |  |   |            |   |   |            |   |   |            |  
|Balance, January 1, 2010             |  | 30,240,202 |  | $ | 30,240 |  | $ | 35,268,603 |   | $ | (293,440   | ) | $ | 35,005,403 |  
|Issuance of share based compensation |  | 7,000      |  |   | 7      |  |   | 890,203    |   |   | -          |   |   | 890,210    |  
|Issuance of common stock for cash    |  | 3,440,800  |  |   | 3,441  |  |   | 9,630,800  |   |   | -          |   |   | 9,634,241  |  
|Issuance cost of common stock        |  | -          |  |   | -      |  |   | (678,567   | ) |   | -          |   |   | (678,567   | )
|Acquisition of a new company         |  | 731,707    |  |   | 732    |  |   | 2,099,267  |   |   | -          |   |   | 2,099,999  |  
|Net loss                             |  | -          |  |   | -      |  |   | -          |   |   | (1,502,052 | ) |   | (1,502,052 | )
|Balance, December 31, 2010           |  | 34,419,709 |  | $ | 34,420 |  | $ | 47,210,306 |   | $ | (1,795,492 | ) | $ | 45,449,234 |  

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

S-5

---

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

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

| | (a) | Organization History of American Lorain Corporation
      and its subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | American Lorain Corporation (the Company or ALN) is a
      corporation incorporated on February 4, 1986 and was formerly known as
      Millennium Quest, Inc. 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. On May 3, 2007, the Company entered into a share
      exchange agreement. On November 12, 2009, the Company filed a statement of
      merger in the state of Nevada to transfer the Companys jurisdiction from
      Delaware to Nevada.                                                                                                                  
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | 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 Company owns 100% of ILH.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | ALN owns 100% of the equity of International Lorain
      Holding Inc. (ILH). ILH is a Cayman Islands company incorporated on
      August 4, 2006 and was wholly-owned by Mr. Hisashi Akazawa until May 3,
      2007. ILH presently has two direct wholly-owned subsidiaries, Junan
      Hongrun and Luotian Lorain, and three indirectly wholly-owned subsidiaries
      through Junan Hongrun, which are Beijing Lorain, Dongguan Lorain, and
      Shandong Greenpia Foodstuff Co., Ltd. (Shandong Greenpia).                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (b) | Business Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     | Prior to May 3, 2007, when ALN completed a reverse merger
      with ILH, ALN did not engage in any active business operations other than
      in search and evaluation of potential business acquisition target.
      Currently, ALN mainly serves as holding company of its subsidiaries
      through the reverse-merger.                                                                                                                                                                                                                                                                                                                                                                                                                                            

|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. These financial
      statements have been prepared without consolidating the Companys
      subsidiaries which constitutes a departure from GAAP.     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (b) | 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.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (c) | Economic and political risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | The Companys subsidiaries operate 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.                                                                                                                                                                                                                                                                                                                                                                                    

S-6

---

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

| |     | The Companys subsidiaries 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 subsidiaries 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (d) | Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company considers all highly liquid investments
      purchased with original maturities of three months or less to be cash
      equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (e) | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company accounts for income tax using an asset and
      liability approach and allows for recognition of deferred tax benefits in
      future years. Under the asset and liability approach, deferred taxes are
      provided for the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting
      purposes and the amounts used for income tax purposes. A valuation
      allowance is provided for deferred tax assets if it is more likely than
      not these items will either expire before the Company is able to realize
      their benefits, or that future realization is uncertain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Companys subsidiaries are subject to PRC tax laws.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (f) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (g) | Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Companys financial instruments are cash and cash
      equivalents, intercompany receivables, related party receivables, prepaid
      expenses, prepaid taxes and related party payables. The recorded values of
      cash and cash equivalents, related party receivables, prepaid expenses,
      prepaid taxes, intercompany receivables and related party payables
      represent approximate their fair values based on their short-term nature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (h) | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | On June 30, 2009, FASB issued FASB Statement No. 168,
      Accounting Standards Codification ( FASB ASC 105 Generally Accepted
      Accounting Principles) a replacement of FASB Statement No. 162 the
      Hierarchy of Generally Accepted Accounting Principles. On the effective
      date of this standard, FASB Accounting Standards Codification (ASC)
      became the source of authoritative U.S. accounting and reporting standards
      for nongovernmental entities, in addition to guidance issued by the
      Securities and Exchange Commission (SEC). This statement is effective for
      financial statements issued for interim and annual periods ending after
      September 15, 2009. If an accounting change results from the application
      of this guidance, an entity should disclose the nature and reason for the
      change in accounting principle in their financial statements. This new standard
flattens the GAAP hierarchy to two levels: one that is authoritative (in FASB
ASC) and one that is non-authoritative (not in FASB ASC). Exceptions include all
rules and interpretive releases of the SEC under the authority of federal
securities laws, which are sources of authoritative GAAP for SEC registrants,
and certain grandfathered guidance having an effective date before March 15,
1992. Statement No. 168 is the final standard that will be issued by FASB in
that form. There will no longer be, for example, accounting standards in the
form of statements, staff positions, Emerging Issues Task Force (EITF)
abstracts, or AICPA Accounting Statements of Position. The Company has adopted
the new accounting standard and determined that there was no material impact on
the Companys consolidated financial position or results of the operations.

S-7

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

In April 2010, the FASB issued an
Accounting Standard Update (ASU) No.2010-13,Compensation-Stock Compensation
(Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment
Award in the Currency of the Market in Which the Underlying Equity Security
Trades, which address the classification of a share-based payment award with an
exercise price denominated in the currency of a market in which the underlying
equity security trades. Topic 718 is amended to clarify that a share-based
payment award with an exercise price denominated in the currency of a market in
which a substantial portion of the entitys equity securities trades shall not
be considered to contain a market, performance, or service condition. Therefore,
such an award is not to be classified as a liability if it otherwise qualifies
as equity classification. The amendments in this update should be applied by
recording a cumulative-effect adjustment to the opening balance of retained
earnings. The cumulative-effect adjustment should be calculated for all awards
outstanding as of the beginning of the fiscal year in which the amendments are
initially applied, as if the amendments had been applied consistently since the
inception of the award. ASU 2010-13 is effective for interim and annual periods
beginning on or after December 15, 2010 and is not expected to have a material
impact on the Companys consolidated financial position or results of the
operations.

|2. | INTERCOMPANY RECEIVABLES                                                                   
|-- | -------------------------------------------------------------------------------------------
|   |                                                                                            
|   | Intercompany receivables consisted of the following as of
      December 31, 2010 and 2009:

| |                                   |   | 2010      |  |   | 2009    | 
| | --------------------------------- | - | --------- |  | - | ------- | 
| | Shandong Lorain Co., Ltd.         |   | 190,000   |  |   | 190,000 | 
| | Junan Hongrun Foodstuff Co., Ltd. |   | 2,250,450 |  |   | -       | 
| |                                   | $ | 2,440,450 |  | $ | 190,000 | 

|   |                          
|-- | -------------------------
|3. | RELATED PARTY RECEIVABLES

Related party receivables consisted of
the following as of December 31, 2010 and 2009:

| |         |   | 2010   |  |   | 2009   | 
| | ------- | - | ------ |  | - | ------ | 
| | Chen Si |   | 67,523 |  |   | 69,037 | 
| |         | $ | 67,523 |  | $ | 69,037 | 

|4. | DEFERRED TAX ASSET                                                                                                                                                                                                                                                                                                              
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                 
|   | The Company has a net operating loss of 1,502,052 and
      444,606 during the years of 2010 and 2009. As the Company accounts for
      income tax using an asset and liability approach and allows for
      recognition of deferred tax benefits in future years, so the deferred tax
      asset is calculated as following:

| |                          |  | Taxable Income |  |  | Taxable Income Not |  |   |                    | 
| | ------------------------ |  | -------------- |  |  | ------------------ |  | - | ------------------ | 
| | Tax Rate                 |  | Over           |  |  | Over               |  |   | Deferred Tax Asset | 
| | 15%                      |  | 0              |  |  | 50,000             |  | $ | 7,500              | 
| | 25%                      |  | 50,000         |  |  | 75,000             |  |   | 6,250              | 
| | 34%                      |  | 75,000         |  |  | 100,000            |  |   | 8,500              | 
| | 39%                      |  | 100,000        |  |  | 335,000            |  |   | 91,650             | 
| | 34%                      |  | 335,000        |  |  | 10,000,000         |  |   | 37,266             | 
| | Deferred Tax Asset Total |  |                |  |  |                    |  | $ | 151,166            | 

S-8

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

|   | Since the Company re-domiciled its jurisdiction from
      Delaware to Nevada and the Company has not implemented a plan to have any
      business transactions within the United States, the deferred tax asset was
      reversed and no allowance was made.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                
|6. | INVESTMENT IN SUBSIDIARIES                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                
|   | Investment consisted of the following as of December 31,
      2010 and 2009:                                                                                                                                                                                  

| |                                    |   | 2010       |  |   | 2009       | 
| | ---------------------------------- | - | ---------- |  | - | ---------- | 
| | International Lorain Holding, Inc. |   | 43,172,816 |  |   | 34,634,945 | 
| |                                    | $ | 43,172,816 |  | $ | 34,634,945 | 

|   | ALN made investments to Junan Hongrun Foodstuff Co., Ltd.
      during the year after the financing transaction of American Lorain
      Corporation from a private placement.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                               
|7. | INTERCOMPANY PAYABLES                                                                                                                                                         
|   |                                                                                                                                                                               
|   | Intercompany payables consisted of the following as of
      December 31, 2010 and 2009:                                                                                      

| |                           |   | 2010    |  |   | 2009    | 
| | ------------------------- | - | ------- |  | - | ------- | 
| | Shandong Lorain Co., Ltd. |   | 137,261 |  |   | 113,261 | 
| |                           | $ | 137,261 |  | $ | 113,261 | 

S-9

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